Mish's Global Economic Trend Analysis

Who's to Blame for Rising Healthcare Costs?
Is it a Mistake to Criticize Republicans?
Nonsense from NBER on Odds of Double-Dip

Who's to Blame for Rising Healthcare Costs?

Posted: 28 Aug 2010 05:20 PM PDT

In response to Another Atlas Shrugs - Small Business Owners Chime In I received still more emails from business owners regarding healthcare costs.

In contrast to the CEO of a healthcare consulting company who blames Obama, a CEO Therapist in New York, says healthcare insurers are the problem.

"Therapist CEO" writes ....

Hello Mish,

I'm a long time reader of you blog. Thanks for keeping some sanity in an otherwise economically insane world.

I'm writing in response to your post regarding small business owners, specifically the letter from "Healthcare CEO".

I am also a small business owner. I share many of the same difficulties that he discussed. One point he made did surprise me though, when he mentioned that he didn't "blame the insurers too much". On that point I couldn't disagree more.

As a small business owner, I have been feeling the pinch of ever rising healthcare premiums; our premiums went up 26% last November and I can't imagine what they will be this year when we renew. I have another perspective though. The small business that I am in is physical therapy; I own two outpatient clinics in New York. Over the past year while health insurance premiums have been going through the roof, I have watched insurers do one more thing to help their bottom line. They have shifted payment for healthcare to the patient, in some cases entirely.

As an example, here in New York, there are some Oxford and Blue Cross Blue Shield plans that by contract "reimburse" $50 per physical therapy visit. Here's the kicker. The patients co-pay has been raised from $15-$25 per therapy visit to $50 per therapy visit, so what the patient pays is all we get. The insurance companies pay nothing additionally.

This is what insurance companies "sell" as insurance for these elevated premiums and I don't know how that's even legal. It's a joke when patients come in and present their insurance card like that provides them any benefit at all. The insurance companies also still have the audacity to require us to submit continued requests for them to authorize care, and in many cases they won't give us that authorization even though they aren't paying a dime for the service (yes, we are currently in the process of exiting some of these contracts).

The way I see it, the insurance industry has taken advantage of the turmoil in Washington to stick it to patients and healthcare providers. While we still can't buy drugs from overseas, and we still can't buy insurance across states lines, at least we can stick it to healthcare providers to "cut healthcare costs". Providers don't share the same strength in lobbyists so we're doomed to be the goats.

This shift to high co-pays ($50/visit three times per week is high) coming on during a depression has taken a toll on patient volume. Furthermore, many private insurers have been decreasing what they pay us overall. In New York, workers comp and no fault cases have paid us the same rate for care since 1996. The only other avenue for us to make money is Medicare, and CMS (the body who controls Medicare/Medicaid) is proposing cuts of over 40% by January. If these cuts go through I'm out of business and so are many other ancillary healthcare providers and primary care physicians throughout this country of ours. I know these things happen to businesses during times like these, but these changes to providers of healthcare are being jammed down our throats by the unrestrained insurance industry. The whole thing is a mess and while I do place blame on the idiots in Washington, I also blame the opportunistic insurance industry.

We'll try to survive be transitioning to a more cash based model (good luck in this economy) and diversifying our business, but I'm aware that unless someone reigns in the insurance industry, I'll probably be flipping pizzas this time next year. The bigger question is what happens if the network of private healthcare delivery simply collapses from an inability to remain solvent? This as we bring on board an additional 35 million newly "insured". Good luck with that one.

Keep up the good work. We can't get accurate news assessments from the mainstream press anymore, so thanks again.

Signed,
Therapist in New York

So Who's To Blame?

Obama
Congressional Republicans
Democrats
Insurers
Public Unions
State Government

President Obama just wanted a bill. He did not really give a damn what was in it, as long as it did not upset public unions. Moreover, Obama sold the youth vote right down the river. There is nothing but pain for them.

Public unions do not give a damn about healthcare costs because they and their families pay next to nothing with deductibles that are next to nothing. Taxpayers pick up the cost.

Democrats also did not want to upset the unions.

Republicans refused to allow competition between states or cheaper drugs coming in from Canada.

State governments pander to unions and also act to restrict competition.

The insurers bribed both parties to get what they wanted out of the legislation.

Fresh Blood

In short, there was nothing in the bill to reduce costs.

It should not be surprising at all that costs are still going up, especially as the insurers have fresh blood from those Obama sold down the river to get the legislation passed.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Is it a Mistake to Criticize Republicans?

Posted: 28 Aug 2010 12:11 PM PDT

In Schwarzenegger on Public Pensions and the Cost of the "Protected Class", I placed a considerable portion of blame for California's mess on the governor.

In response to the above article, "Poor House" wrote ....

Mish, you are continuing a big mistake of many "independents". That is blaming Republicans for not stopping the Democrat/Socialist take over.

Poor House, you are simply wrong. It is important to be fair, and "Mr. California" wanted to float a freaking half-trillion dollar bond proposal in 2007. That proposal was sheer fiscal lunacy.

Schwarzenegger Sound Bites

$42.7 billion in general obligation bonds issued last year is "only the foot in the door, to whet the appetite."
It will take $500 billion to "rebuild California the way it ought to be".
$500 billion is "too big for people to digest, so you don't talk about that" even though he is talking about it.
California needs $500 billion even though it has "done tremendously with the revenue increases".
California will not issue less debt even if the economy slows.
California "could face lower tax revenues" but he opposes tax hikes.

His proposal was fiscal insanity. Moreover, Schwarzenegger failed to take the pension and union issue seriously, until now.

It is very important to lay out expectations of what the country needs. That means criticizing failed policies of both parties, and praising politicians who get it correct, like governor Chris Christie and Representative Ron Paul.

That is also why

We need to send the right message, not praise undeserving Republicans simply because they are Republicans. I would gladly endorse Democrats if they preached the right message. We need to support policies not parties!

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Nonsense from NBER on Odds of Double-Dip

Posted: 28 Aug 2010 10:24 AM PDT

There is a lot of nonsense from the mouths of Jackson Hole participants, especially Bernanke and the NBER. Bloomberg highlights the latter in Jackson Hole Debate on Recession Risk Shows Bernanke Challenge.

Economists who decide when recessions begin and end in the U.S. are divided over the odds of a renewed downturn, underscoring the challenge faced by Federal Reserve Chairman Ben S. Bernanke as he vows the Fed "will do all that it can" to sustain growth.

"There's still a significant risk, maybe one chance in three, that there will be a double dip," said Harvard University Professor Martin Feldstein, who sits on the Business Cycle Dating Committee of the National Bureau of Economic Research. Fellow panel member and Princeton University Professor Mark Watson said those odds are "way too high" and puts them instead at "one in 10 or maybe one in 20."

In a paper written with Harvard's James Stock, Princeton's Watson concluded that the U.S. inflation rate by the second quarter of next year is "expected to drop" 0.5 percentage point from the second quarter of this year as disinflation forces build.

Stock nevertheless said the economy will keep growing, while Watson, another member of the NBER committee, said a renewed recession is "quite unlikely" because of the absence of a major shock. The NBER committee in April issued a statement that it was too soon to declare an end to the recession that began in December 2007.

Disingenuous NBER

How the hell can the NBER put odds of a double-dip at 5% to 33% without having declared the end to the last recession?

Of course, as I have pointed out a number of times, that could make sense if the 2007 recession was still not over. However, that is not what the NBER is suggesting above.

If we want to discuss odds, I believe there is about a 65% chance 3rd quarter GDP is negative!

Will the 4th quarter be any better? Why? Stimulus will have run its full course by then. Note that stimulus was supposed to peak in the 2nd or 3rd quarter, yet 2nd quarter GDP came in at a "red hot" 1.6%.

For discussion of 2nd quarter GDP please see Market Cheers 1.6% Growth; Treasuries Hammered; What's Next?

Can stimulus peak with GDP flat to negative? It appears that way, so what does that portend for next year? Nonetheless Harvard University Professor Martin Feldstein says the odds of a double-dip are "one in 10 or maybe one in 20", in other words 5% to 10%.

Do these guys have a clue about how to formulate odds? If the odds are that low, why can't they declare the end of the recession?

There has been a lot of nonsense from Jackson Hole. Add discussion of double-dip odds to the list.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Mish's Global Economic Trend Analysis

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