Sunday, November 15, 2009
House Health Care Reform Bill
The analysis I did looks at what will really happen to business and individual coverage, and is not generally covered here. But what is covered here are the changes to Medicaid, Medicare and the new CLASS coverage (a high-risk pool).
The bottom line:
- Over 200 billion of the Medicare savings are bogus, because they have to do with the cuts to primary care providers and will be substantially reversed in another bill now pending.
- The balance of the Medicare savings (about 300 billion) are ridiculous, and this report gently points that out, predicting that the cuts to institutional payments are not possible, and would end in Medicare patients not being served. See page 8, and look at the footnote.
- CLASS ( the new high-risk pool) is unsustainable and will contain adverse selection features such that it is DOA and likely to require significant federal funding as long as coverage is provided.
- The provisions associated with Medicare Advantage (the Medicare HMO program) would pretty much destroy the plans - most of the enrolled users would shift out.
We don't have that trillion. This will of course not prevent Congress from promising to spend it, but the point is that we won't be able to borrow that trillion either.
The small banks mostly believe we are in a depression. It's not even discussed or debated much; here is a quote from Mary Beth Guard of Bankers Online discussing current issues:
The change of administration, shifts in power and influence in Congress, the throes of an economic depression and an ongoing process at the Federal Reserve Board to review and revise Truth in Lending rules have formed the "perfect storm" for regulatory upheaval in several areas, not the least of which is the open end portions of Regulation Z.Mr. Muddle-Through, John Mauldin, who is neither a wacky optimist nor a doom-and-gloomer is heading toward capitulation in his last newsletter. I would recommend reading that one, because it is heavy on data, especially the tax gap. He now believes that we are doomed to a double-dip in 2011 unless the scheduled tax increases are terminated.
Rosenberg is even more negative, especially on the heading of unemployment. I still think we cap out at about 11%. Rosenberg is willing to look at 12-13%.
So I am now something of a middle-of-the roader; that hideous fried egg is still cooking on the reality range, and what that means is that either we bite the bullet and cut down the size of government quickly, or we end up doing it slowly with a much deeper total contraction.
I'm quite depressed over my interim conclusions. I went out to gossip around with farmers, grocers and other small business owners, and they all seem dourly pessimistic. I am afraid that ag loans will become the next casualty of this downturn. Worse yet, the best-case for the global economy is losing the positive end of the possibility branches. Japanese capacity utilization is still only about two-thirds; I don't know quite how they get out of this.
I still have Q3 growth in the mid 2% range, and Q4 about half a percentage point above, and then I see it sagging again. But I need one more month's worth of data to be able to pin that range down.
I'll post more as I pull this stuff together.
And I do not care if Obama bows to the Japanese emperor, although it is a gross violation of US tradition, based in our founding national precepts, if he would only start bowing to reality. If we do not take our medicine ASAP, we could easily be looking at a double-digit GDP loss by the end of several more negative cycles - and that is net!
This is the exhaust-the-possibilities part.
Sadly, this was never true. But now we've got an executive and legislature filled with folks who believe that reality must bend to their good intentions.
Personally, I'm already exhausted by the possibilities.
CF - My guess is we see another electoral turnover (described by politicians as terrorism, it seems) at the ballot boxes in the next two cycles. It may be that we have to throw out half the incumbents before we get some people who are functional in there.
Unfortunately, that seems a rather exact description of the underlying philosophy, which is a perversion of the Judeo-Christian principle that only dealing with reality IN AN ETHICAL FASHION gets a society anywhere. Ethics combined with reality-avoidance don't do it. Recognizing reality but not dealing with it ethically doesn't do it.
I don't mean to be snide about Christianity (I am one, after all), but it does seem as if Christians can drift into this mindset rather easily, whereas Jewish thought tends to be more concentrated on dour realities and less concentrated on messianic utopias. However I believe that American Jews voted for Obama by a rather large majority, so maybe we were all just enjoying the last sweet song of Disneyworld before having to return to the workaday world.
There is remarkable pessimism on the streets about economics and business prospects. I have mentally dubbed this the wood-stove economy, and it will not generate jobs growth, that's for sure.
That said, we will always be able to do what is possible. It's just that the possibilities become more unpleasant the longer we dither.
Check out this article, "Fearing pay cuts as the new normal". This is what has me much more in Rosenberg's camp. I know many people here in Dallas, TX that have had to find new jobs in the last year and only 1 of approx 14 managed to find a job paying more than what their old job paid. Most took a significant (15%-20%) cut. People I know that have an open position say it has been at least 10 years since they have seen such a high quality of applicants. I can remember 2000 when I had applicants no show on a job interview and wouldn't even bother to call and cancel.
Karl Denninger at Market Ticker points out the the retail numbers are, shall we say, optimistic because they don't count store that went out of business.
If you do want to feel good, just listen to CNBC. Except for Santelli, most feel we are living in the "best of all possible worlds".
I liked the line about "bowing to reality". I just doubt it is going to happen. The Democrats are focused on national health care regardless of what it does to health care, the economy, or the job situation. Until they believe that a national health care bill is impossible, it will be their only focus. Until then, they will talk about deficits and jobs, but it will amount to only talk.
Grasshoppers and ants come to mind as well as fiddles and Rome.
BTW, my captcha for this post is taxangst. Was that planned?
I notice that the TIPS 5-yr (real) yield is falling fast. It is barely positive at .33%. Unlike in other preiods, though, the inflation spread is rising.
What does the falling real yield tell us? Either that the economy won't grow, or that the Fed will keep buying 5yr Treasuries to finance the deficit, or, more likely, both...