Obama's Backroom Healthcare Deals Need Explaining from Mish's Global Economic Trend Analysis

http://globaleconomicanalysis.blogspot.com/2009/08/obamas-backroom-healthcare-deals-need.html

With $900 billion to a $trillion dollars or more at stake, and everyone wanting three shares of the health care pie (while giving up nothing), it should not come as a surprise that 'Special interests' play both sides in health fight

"We have the American Nurses Association, we have the American Medical Association on board," Obama told the weekend crowd in Grand Junction, Colo. "We have an agreement from drug companies to make prescription drugs more affordable for seniors. ... The AARP supports this policy."

The drug makers went first in making a deal with the White House, agreeing to pick up $80 billion in additional costs over the next decade to help defray the expenses of the legislation. The American Hospital Association agreed to shoulder an additional $155 billion.

In exchange, both won assurances the White House would protect them against attempts in Congress to seek additional cuts in their projected Medicare and Medicaid payments.

The American Medical Association's key issue was different. Doctors hope the legislation will allow them to avoid a looming 21 percent cut in payments under Medicare. The cost to the government for that would be about $230 billion over a decade.

Obama also agreed to require individuals to purchase insurance, reversing a position he held during his campaign. "My thinking on the issue of mandates has evolved. And I think that that is typical of most people who study this problem deeper," he said.

Health Care Sweeteners

It's easy to get buy-ins when you give away the farm. Obama brags about the buy-ins but does not state the costs. Pharmaceutical manufacturers certainly smell the gravy train as noted in Drugmakers Ramp Advertising Campaign For Health Care Reform.

The more promotion there is for this package the more leery of it you should be. The reason the AMA, AARP, and now PhRMA are all lining up behind healthcare reform is because everyone of them has been bought out by sweeteners.

While everyone is concerned about rationing, I am concerned about lack of rationing. What incentives does anyone have to hold down costs?

Certainly big PhRMA has to be thinking more drugs will be prescribed or they would not have a huge ad campaign going while pledging $80 billion in lower drug costs. Here are two key questions: Is it really $80 billion? And what did the Administration give up in return?

Huge Giveaways In White House Deal With Big Pharma

In case you missed it, please read the Huffington Post article Internal Memo Confirms Big Giveaways In White House Deal With Big Pharma.

A memo obtained by the Huffington Post confirms that the White House and the pharmaceutical lobby secretly agreed to precisely the sort of wide-ranging deal that both parties have been denying over the past week.

The memo, which according to a knowledgeable health care lobbyist was prepared by a person directly involved in the negotiations, lists exactly what the White House gave up, and what it got in return.

It says the White House agreed to oppose any congressional efforts to use the government's leverage to bargain for lower drug prices or import drugs from Canada -- and also agreed not to pursue Medicare rebates or shift some drugs from Medicare Part B to Medicare Part D, which would cost Big Pharma billions in reduced reimbursements.

In exchange, the Pharmaceutical Researchers and Manufacturers Association (PhRMA) agreed to cut $80 billion in projected costs to taxpayers and senior citizens over ten years. Or, as the memo says: "Commitment of up to $80 billion, but not more than $80 billion."



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Obama is walking a tightrope here. He wants to keep PhRMA from opposing the bill, and benefits by having its support, which now includes a $150 million advertising campaign. That's a fortune in politics -- more than Republican presidential candidate John McCain spent on advertising during his entire campaign -- but it's loose change in the pharmaceutical business.

What's The Real Deal?

"This memo isn't accurate and does not reflect the agreement with the drug companies," said White House spokesman Reid Cherlin.

If the health care deal as portrayed by the Huffington Post is inaccurate, then why doesn't the administration tell us what the real deal is? This is a big credibility issue. Obama is involved in a mudfight and one of the reasons is he refuses to say what is in the health care bill or should be in the bill. Instead all he does is bitch about misconceptions while working out secret backroom deals that he will not disclose.

Citizens want to know "What's the real deal?' It's a good question, and one that deserves truthful answers. Instead, the administration responds by slinging more mud.

This was a very damning leak printed by the Huffington post.

Scope For Fraud Increases

The more money you throw at a problem, the bigger the scope for fraud. $900 billion is a lot of scope for fraud. Consider Medicaid. The New York Times reports New York Medicaid Fraud May Reach Into Billions.

It was created 40 years ago to provide health care for the poorest New Yorkers, offering a lifeline to those who could not afford to have a baby or a heart attack. But in the decades since, New York State's Medicaid program has also become a $44.5 billion target for the unscrupulous and the opportunistic.

School officials around the state have enrolled tens of thousands of low-income students in speech therapy without the required evaluation, garnering more than $1 billion in questionable Medicaid payments for their districts. One Buffalo school official sent 4,434 students into speech therapy in a single day without talking to them or reviewing their records, according to federal investigators.

New York's Medicaid program, once a beacon of the Great Society era, has become so huge, so complex and so lightly policed that it is easily exploited. A computer analysis of several million records obtained under the state Freedom of Information Law revealed numerous indications of fraud and abuse that the state had never looked into.

"It's like a honey pot," said John M. Meekins, a former senior Medicaid fraud prosecutor in Albany who said he grew increasingly disillusioned before he retired in 2003. "It truly is. That is what they use it for."

New York's Medicaid program is by far the most expensive and most generous in the nation. It spends far more - now $44.5 billion annually - than that of any other state, even California, whose Medicaid program covers about 55 percent more people. New York's Medicaid budget is larger than most states' entire budgets, and it spends nearly twice the national average - roughly $10,600, more than any other state - on each of its 4.2 million recipients, one in every five New Yorkers.

That generosity was born of good intentions when Gov. Nelson A. Rockefeller signed the program into law in 1966, following the state's tradition of creating big antipoverty programs. But Medicaid has become far more than the child of that altruism, having morphed into an economic engine that fuels one of the state's biggest industries, leaving fraud and unnecessary spending to grow in its wake.

The New York Times article is a stunning 8 pages long filled with example after example of fraud.

Did it occur to anyone that we need to cleanup existing fraud before working out secret backroom deals and throwing another $900 billion into the honey pot? I guess not.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.