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Apologies for bearish call gone sour, and a new Obama plan that is not a plan and not new.



June 13, 2009 – Comments (13)

My Iran election call has proved wrong. Though I did not underestimate the effectiveness of "yes we can" rhetoric, I forgot that what matters is not how many votes you get, but how you count these votes. If seems for now that the "democtatization" of Iran has been postponed, which is good for oil prices, but increases risks to my Dow 14000 call. 

The news de jour: the new plan for health care reform, which is not a plan, and is not new.

First we learn that the demagogue has "found" savings in the amount of 313 billion. Oh, really? Last time I checked, he was about to run a debt of 100% of GDP by the end of this year. It's reassuring to know that a debt junkie who'd just maxed out all his 20 credit cards has found some "savings" to afford a new limo. America's creditors will be happy to hear that.

But that 313 billion part almost sounds like a distraction when you think about the main issue. For those who still don't get the point: the US spends 2 times more on healthcare than normal countries that have a one-payer system. The Illinois demagogue has decided to "reform" this abomination, and as a result, the new abomination that he envisages is going to cost $1 trillion more. Now, that's what I call a great reform plan. 

But I am digressing, which is too bad because this new 313 billion announcement deserves attention on its own merits. How can I skip, for example, this beautiful sentence in the news release: "White House officials insisted the new savings were rock-solid, but also acknowledged they had yet to settle on a specific mechanism to achieve lower prescription drug costs that make up nearly one-quarter of the new savings." 

Don't you feel jelous? I do. If I could only learn to speak in these phrases: "player zloj insisted his savings for a new limo were rock-solid, but also acknowledged he had yet to find a specific way to come up with the cash that makes up nearly one-quarter of the price of the car".

Or how about this: "the latest announcement signaled that the White House had met its obligation to identify funding sources for a broad-based effort to make health insurance more affordable and more widely available. "

If only pigs had wings. "More affordable" is a fine way to describe an insurance whose price has just risen by a whole $1 trillion. But let's get to gory details. "The bulk of the new $313 billion in savings would come from cutting or reducing the growth of payments to hospitals, medical equipment manufacturers and laboratories". Yes, I appreciate that Orszag has a masterful command of the language, but how about some more specifics, for instance, how much will come from "cutting" and how much from "reducing the growth"?There is a difference between "cutting" and "reducing the growth": the former means you are paying less, while the latter means you're paying more. 

What about the other $110 billion that is "slated to come from reducing reimbursements to take account of what Orszag described as the ability of providers to improve their efficiency"? To translate that from Obama-speak into conventinal English, it means that Obama has looked at the graph that showed exponentially increasing costs, and ordered his aides: "take that curve and move it down for me". Let us say that the people who drew the politically incorrect graph were all wrong, and let us sketch another graph, the one that we like more. 

13 Comments – Post Your Own

#1) On June 13, 2009 at 10:57 PM, finabuddy (84.16) wrote:

You are on the mark. There is a great opinion piece in the WSJ from Friday on these healthcare "savings". His whole quality and decreased cost is all on shaky grounds. And of course, the only broad reliable data comes from Medicare. And Medicare is its own beast with costs that vary for a variety of reasons (some of which are Congress paying rural areas more to try and increase quality). The bottom line is more tests, better doctors, etc are more expensive and as the US gets more tests, gets, older, and less healthy, care becomes more expensive and increases every year. Obama has a bunch of yes men and is trying to use the same "yes we can" talking points that got him elected to socialize with a large government payor and cut payments to providers. Reality is to cut costs, you have to cut quality, reduce doctor fee-for-service, cut profit margins at the more efficient managed care companies (which promotes less efficiency), try to lean on generic drugs over branded, to name a few off the top of my head. This is dishonest retoric coming out of the White House. 1600 is either full of yes men trying to prove Obama's idea or they are trying a backdoor way to cut up medicare, and/or start a large gov't payor.

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#2) On June 14, 2009 at 12:31 AM, uclayoda87 (28.69) wrote:

Universal Health Care – The Final Solution to the Social Security and Medicare Problems

April 29, 2009 – Comments (22) | RELATED TICKERS: HMA , THC , MDTH


I have updated my blog with links and quotes from the WJS concerning the administration's health care proposal.  It will be interesting to see how the Congress addresses the President's health care proposal, given that the 2010 congressional election are a year and a half away.  Will the Democrats in the Congress put their political careers on the line to support the President?  if the President gets his way and the new health care model becomes a nightmare, will the Democrats try to blame Bush?  These last two years would be quite entertaining if it wasn't so tragic.

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#3) On June 14, 2009 at 12:58 AM, Ewok82 (28.71) wrote:

I can't wait for President Obama's news conference announcing how many lives were saved with his new health care plan.  He could make this statement before any plan is even enacted since this number will mean as much as the number of jobs saved with his new stimulus plan.

Clinton's moto was:  It's the Economy, Stupid!

Obama's moto is:   Americans are Gullible and Stupid!

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#4) On June 14, 2009 at 1:27 AM, starbucks4ever (93.20) wrote:


Obama is not so stupid. He will give HMOs another trillion, wait 3 months, and then when something positive happens that he had nothing to do with, for instance, when Lipitor patent expires, he will claim the credit for cheap generic cholesterol pills, and the sheeple will give him the credit for that. And then for the next 7 years he will keep rinsing and repeating, claiming credit for every new drug, every new hospital built, every new piece of equipment installed, etc., and the sheeple will believe it's all because of his great healthcare plan even though the whole plan is just a $1 trillion sugar pill.

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#5) On June 14, 2009 at 2:10 AM, Ewok82 (28.71) wrote:

I think people will remember that they don't like HMOs, although I'm not sure that they will remember why.  Still, President Obama giving money to HMOs would likely come with major strings attached, so I don't know how many HMOs would want to take the government money.  Would HMOs assume that they would get a better deal than the banks and US automakers?

I do agree that anything good that may happen in health care will be credited to President Obama and anything bad will be blamed on the insurance companies, hospitals, and doctors.

I also agree with uclayoda87 that the politics of health care reform may slow the President's plan.  And if the health care changes don't go well then the political spin needed to keep Democratic control of the Congress may be even beyond the abilities of the President's team.

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#6) On June 14, 2009 at 8:34 AM, devoish (73.48) wrote:

So, you guys are all sure the problem is Governments influence on the insurance industry, not the insurance industrie's influence on government?

It is hard for me to believe that the character of a legislator is more corrupted by campaign donations in the thousands, than an insurance executives character is by income in the millions.

And yet, here are all these posts.

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#7) On June 14, 2009 at 9:25 AM, finabuddy (84.16) wrote:

I was writing a longer response to devoish, but if you insist on living in a simple world where the only thing that matters to you is the degree to which you perceive the system is "corrupt" please consider this:

Would the system be more or less corrupt to have beaucrats deciding out to spend the $700 billion for Medicare/medicad as it is currently or the $2.2 trillion + if Obama takes over healthcare for the entire US? Then layer on that the $2.2 trillion will have to be cut which means there will be immediate losers that go out of business. 

Business may not be in favor right now in the court of popular opinion, but that doesnt mean we need to agree with Obamas half baked healthcare ideas. And lets all remember why HMOs are unpopular in our culture...because they have to spend less on care than they bring in as revenue. Do you think the gov't is going to be any different as a payor if Obamas goal is to cut costs? Unrationed high quality care does not work with the goal of cutting costs but providing the same care and to everyone. There are places that are more efficent in handling care, but it isnt because they have a secret formula that only Obama can unlock with his new govn't payor. This is a much bigger complicated issue.

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#8) On June 14, 2009 at 10:54 AM, devoish (73.48) wrote:

Government delivers a better product.

More efficiently than corporate America.


Kicking the privates insurance model butts, in fact.

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#9) On June 14, 2009 at 11:40 AM, devoish (73.48) wrote:


President Obama's healthcare plan is not worth crap unless it contains a public option not designed by the private insurance companies.

H.R. 676 is the best option for all Americans except those in the healthcare insurance industry. And even they get first opportunity to retrain as caregivers.

All the fears that are attributed to what might happen if "Government Runs Healthcare" are already happening in the private insurance model.

Long waits... while you wait for the insurance companies authorization.

Denial of care... because care you require is denied on page thirty seven of the plan you chose. Or page seventy eight. Or "pre-exising", because the insurer is not responsible to check for "pre-exisitng" before they start taking your payments. Or even if they do, you are still handed of to the Government at taxpayer expense anyway.

High Costs of Government Inefficiency... Yet every socialized plan costs much less.

And last, and probably most important of all.

The Private Insurance model is guaranteed by the United States Taxpayer anyway. Should your insurer invest your payments unwisely, say in CDO's or RMBS and lose money instead of making it, the United States Taxpayer will pick up the expense of the promised insurance coverage. Regardless of whether or not Insurance Company executives return the income from million dollar salaries and options.

Let me know how you predict that will play out.

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#10) On June 14, 2009 at 12:03 PM, starbucks4ever (93.20) wrote:


Corruption is more of a character trait than a function of income. One can be very corrupt while receiving a very small amount of bribes.  

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#11) On June 14, 2009 at 1:48 PM, Alex1963 (27.90) wrote:

1st of all, I agree with  devoish 

2nd : "Obama has a bunch of yes men" No, he doesn't.

"The Illinois demagogue has decided to "reform" this abomination, and as a result, the new abomination that he envisages is going to cost $1 trillion more. Now, that's what I call a great reform plan. "

Huh? Forget your unfortunate and IMO wrong headed choice of adjectives with "abomination" and "demagogue" What source or orifice did that figure come from? The Cato Institute?

Irregardless, the way to properly valuate the "cost" is on the overall net savings vs the current system. This is complicated and that's partly why an overhaul is going to be very tough to get thru. Anyone's estimates of savings or increased total net cost will be just that-estimates. And you can't look at this over a few years or even a decade IMO you have to look at it in terms of the next 20 years at least. I know this is hard for us short term thinking americans and particularly investors so focused on the next couple of quarterly results. Or is anyone here seriously advocating to leave this health care morass as is? Should an inefficient company forgo an expensive restructuring because it'll take years to recoup the outlay before they achieve improved long term efficiency and sustainablilty? Should they bow to the short term perspective of the minority of shareholders who can't see past the next couple quarters? Those who can't see that when you are losing money sometimes the answer is to spend it. Becuase in this case the majority of shareholders voted for a candidate who promised this years ago and if anything this economic crisis has exacerbated the need. Even conservative critics of the plan on one hand use the long term rising cost of health care to criticize the stimulus while simultaneously arguing that any sigificant overhaul will be too costly. We, the "sheeple" see thru this. 

Then there is the quality question. Somthing is not "expensive" if you get a bigger bang for each buck. I assume none of you skeptics apply this same reasoning to your stock picking and prefer penny stocks of unsustainable companies simply because they are "cheaper" at face value. I used to get this same hogwash argument years ago when I gave up buying american cars. The loudest proponents for me to "buy American" then were then many of the same people arguing now that "zombie" companies should be allowed to fail. The same short sighted consumers (IMO) who bought american crap year after year thereby propping up arrogant & stupid companies (with not an ounce of social or environmental responsibility) when had more people done what me and millions others did by buying actual quality then maybe GM Ford & others would have gotten the message & had time to adjust and become viable. (My 1st Toyoata I bought in the 80's was used and from a guy who worked at a GM plant BTW) So I should continue to throw my money & support at a failed institution or system simply because it's american? Not because it's better or offers a product which meets my needs but because it reflects the stupid, short sighted, corrupt unsustainability of a truly american institution-like the U.S. health care system? Gve me a break! I was happy to expand my shopping outside the US for a car and I'll happily do the same for healthcare. I have no loyalty to a corrupt, short sighted and irresponsible system just because it festered on american soil. Or is favored by Dems or Repubs. But the very fact that conservatives, the AMA & big business are lining up to derail this process is all the proof I need that whatever they tell me I need is definitely something I don't. Consider it a very reliable contrary investment signal these days IMHO. Now when I see repubs & conservatives moving past their "No can Do" phase and this apparent non-strategy of hoping for failure in order to recapture political currency I will happily set aside my own cynicism. But for now I frankly don't trust their motivations. And I loath the fearmongering tactics.The tv ads featuring the older couple & brought to us by a millionaire former health care mogul turned "consultant" with a felony record.  I certainly don't trust big health care or the AMA. My question is why in the world would anyone?

"if the President gets his way and the new health care model becomes a nightmare, will the Democrats try to blame Bush?"

Who gives a rat's *ss! If it's a success will any of you cynics give him and congress any credit? Or will you find a way to continue citicizing? Or somehow credit Republicans? I could point out that a major contributing cost to our current mess is Bush's ill concieved prescription drug fiasco. Talk about pandering to "sheeple" (I hate that word) Or is that too insensitive of me? Or was that plan a democrat's failing?

And who cares about credit? I'll give it to the republicans if it'll help get an overhaul thru. I could get damn about who get's credit. I don't think most americans care. They just want results, for pete's sake! 

Here's my prediction: Obama will sell his plan to the majority of Americans. It will include the single pay option. Franken will be confirmed as the 60th Democaratic senator. Meaningful reform will pass with the continued support of a majority of americans. Oddly the world and america as we know it will not end as a result. And sadly, for some, this will continue to be absolutely intolerable.


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#12) On June 14, 2009 at 3:17 PM, Alex1963 (27.90) wrote:


I have read some good stuff from you in the past but this latest is just off the rails, IMO

 "Corruption is more of a character trait than a function of income. One can be very corrupt while receiving a very small amount of bribes."

What is your point? You can see this isn't a refutation of the point, right? All you've done is said "they are both corrupt" I agree. So now what? I'm for campaign reform to address this issue. Where do you stand? And God forbid some yahoo won't be arguing that our current system of representational bribery should also remain unchanged because a) it's American, b) that's the way it's been for years, c) it's good for business d) Whatever plan Obama proposes (I predict he will in a year or so. Again to massive popular support) isn't republican enough.

One can still get wet standing in the rain pretending to be Seattle weatherman and insisting it'll be sunny in 6 months. Or that we'll see DOW 14,000 by December. 


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#13) On June 14, 2009 at 5:30 PM, starbucks4ever (93.20) wrote:


You don't need to convince me that the system needs a dramatic overhaul, such as a single payer system and elimination of all HMOs. Having said that, it doesn't mean I am going to OK just any proposal on the grounds that it represents "change". It could well be a change in the wrong direction. Expanding coverage through HMOs is destined to fail. 

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