Thursday, March 18, 2010

President Obama's Health Care Plan: A Well-Crafted Stroke of Genius

I think President Obama’s Health Care Plan is very well designed and by far the pinnacle point of his Presidency.

Everyone will quibble with certain parts of it, but I really liked every one of the many changes that he made.

I would have liked to see the hospitals pony up more money, but after the very bright and savvy Kathleen Sebelius sees the windfall profits and/or frivolous spending increases reported by many of the hospitals start trickling in, I trust that she’ll take the proper actions to further reduce health care costs.

And wow, the publicly-held hospitals have really knocked the ball out of the park on their recently released 2009 earnings increase of a massive 56%. This is nearly double the very strong core 2009 earnings increase of 29%, registered by the publicly-held health insurance industry.

The six large publicly-held hospital corps are:
***HCA (stock doesn't trade but it files with the SEC)
***Community Health Systems
***Universal Health Systems
***Tenet Health Systems
***Health Management Associates
***Lifepoint Hospitals

These six hospital corps operated about 470 hospitals and generated Total Revenues of $64 bil in 2009. They increased their core pretax profits from $2.3 bil in 2008 to $3.6 bil in 2009, up an incredible 56% in 2009, in a year marred in a deep recession, with a substantial rise in the number of unemployed, in the number of uninsured, and in the number of underinsured. In comparison, the core pretax profit of these six publicly-held hospitals increased by 9% in 2008, another just horrific year for the US economy.

As a percentage of total revenues, these six publicly-held hospitals generated Core Pretax Income as a Percentage of Total Revenues of an exceptionally strong 5.6% in 2009, as compared to 3.9% in 2008.

With these very impressive numbers, it is pretty clear that it is not only the Health Insurance Industry that is cleaning up on the backs of the unfortunate, and now financially-destitute, sick patients.

And when the new Health Care Plan totally kicks in, these hospital industry numbers are going to be substantially even more impressive, due to the very effective lobbyists of the Big Hospital Industry.

In comparison, here are the six largest publicly-held health insurance companies:
***United Health Group
***Coventry Health Care

These six health insurance companies were flying to the moon in 2007, when their core pretax profit as a percentage of total revenues was an incredibly high 8.9%. In comparison, the six publicly-held hospital stocks had a much lower 4.0% similar ratio in the same year.

However, since then, the public hospital industry has really closed this 4.9% profit margin gap with the health insurance industry.

In 2008, the public hospital companies had a core pretax profit increase of 9%, whereas the public health insurance companies had a 38% profit decrease.

And then in 2009, the public hospital companies had a core pretax profit increase of 56%, whereas the public health insurance companies had a 29% core profit increase (exclusive of the huge business sale gain recorded by Wellpoint in 2009).

Thus, in 2009, the public health insurance industry generated core pretax profits of 6.1% of total revenues, only slightly ahead of the 5.6% registered by the public hospital stocks.

The key point here is how can a country permit so many of its citizens to not have health insurance and to go bankrupt due to health sickness, when at the same time, both the health insurance and hospital industries are registering such incredibly high profits?

I submit that incredible financial greed is not just on Wall Street but also in the top corporate offices of both the health insurance companies and the hospital organizations.

And it's not just the publicly-held hospitals that are infested with this incredible are the non-profit hospitals, whose investment treasure chests are ballooning with the Obama Presidency-driven upward explosion of the stock market in the past year.

I'll make a prediction. When the final 2009 numbers are in for the Non-profit hospitals, their aggregate profit bottom-line margins (i.e. core net income as a percentage of total revenues) will exceed that of both the publicly-held hospital industry and of the public health insurance industry. But yet the US Congress will not touch the hospitals, except favorably, either because they are not financially savvy enough to understand their strong economic performance, or because they are paying back the hospitals for their campaign contributions.

On another point, I used to be a huge public option fan. In theory, the public option sounds so great. But with the ineffectiveness of so many US government organizations, such as the IRS, the SEC and the bank examiners, I have changed my mind here.

The key point is that if we had the public option and its federal employees operated like IRS audit, SEC and financial institution federal employees do, a portion of the country's health care system would be in very serious trouble. It's a close call, but I don't think the public option is worth the risk.

President Obama is again way ahead of the curve on this. While he prefers the public option, presciently he knows that with his health care plan, the country will still have massive health care improvement, even without the public option.

I think the Congress should incorporate into President Obama’s health care plan whatever the Republicans add that improves the product. Then, if the US Senate decides to filibuster this health care proposal, it will be time to move this on through budget reconciliation. And the end product should substantially reduce the US deficit (hey, the $1.3 trillion deficit reduction projected over the next 20 years, that is now in the Pres' proposal.....Whoa, that is what I call a deficit reduction!)

Shortly thereafter, the country needs to take up a true Jobs Bill, one that creates, by CBO scoring, millions of private sector long-term jobs at reasonable cost, and which also substantially reduces the US deficit. After the health care bill is passed, new jobs created will switch many uninsured to insured status through company provided health care plans, and this will substantially aid the CBO scoring on the Jobs Bill, by reducing the overall cost of the new health care plan.

Next step should be a massive Mortgage Crisis Financial Relief Bill, one that puts a huge dent in the massive underwater mortgage problem, and does so at reasonable cost, and which also substantially reduces the US deficit.

With those above three initiatives successfully enacted in short order, the US government, which has been derailed for the past nine years, will then be back on track.