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As corporate America cools off to President Obama's proposed health care "reform," the White House is being forced to turn to the traditional bottom rung of the health care political ladder, physicians. And if past is prelude to present, the reception is likely to be very cold.
Mr. Obama is headed home on Monday, but the welcome is uncertain in at least one place, the American Medical Association's (AMA) national convention, where the president is expected to present his case for "reform" to physicians. To be sure, the AMA is not what it used to be, with its membership having fallen to 250,000, as it has failed to stem the encroachment of the practice of medicine by managed care and government control over the last decade.
Yet, it's still a symbol, and it is looked upon by outsiders as medicine's voice in the U.S. That means that whatever happens in Chicago will be worth keeping an eye on.
Here's where things stand. The government and corporate America complain about "rising" health care costs. Yet, these rising costs are misleading as hospitals, drug companies, and equipment manufacturers have steadily increased costs as well as having received rising reimbursements throughout the years, while physicians have at best received flattening payments.
So, by most accounting, the so called "rising" costs have come from venues outside the physician's offices. And it is here where Obama sees an opportunity. There are two major carrots that he will be dangling over the doctors.
First, he has proposed to cut reimbursement to hospitals, drug makers, and insurance companies that do business with Medicare, while softly hinting that physician reimbursement won't be hit as hard.
Second, Mr. Obama is hinting that he would work toward making changes in malpractice insurance laws. According to The New York Times: "Mr. Obama has been making the case that reducing malpractice lawsuits — a goal of many doctors and Republicans — can help drive down health care costs, and should be considered as part of any health care overhaul, according to lawmakers of both parties, as well as A.M.A. officials."
This is classic divide and conquer politics, take from one group and give to the other, at least while you're trying to get something done. But as usual, the devil is in the details. And the details are not likely to be very good toward anyone.
For one thing, it's not certain what Obama means when he talks about malpractice insurance changes. And it's not certain where the cuts to reimbursements for drug companies and hospitals will come from.
More important will be what the small print says, as lawmakers, and the president will try almost certainly add loopholes to any health care legislation, giving the government lots of wiggle room to change, ammend, or even renegue on any agreements.
The financial markets are starting to sense taht health care reform is about to become Obama's first big test. And that his presidency may eventually be defined by what he does here, barring, of course, the potential for a 9/11 type event making everything else that he does moot.
Chart Courtesy of StockCharts.com
The S & P 500 has been in a consolidation pattern over the last several weeks. But as time has passed, and the White House has shown its heavy handedness in handling the subprime mortgage crisis, and the GM and Chrysler banrkuptcies, it's clear that this administration says one thing and in many cases does whatever it wants, which should make patients, doctors, nurses, drug companies, equipment makers, health insurers, and even hospital maintenance staffs and housekeepers, quite wary of what's coming down the pike.
Conclusion
Mr. Obama is going to the doctor today, figuratively and literally to some degree, as he speaks in front of the American Medical Association.
He will hint at some things that sound appealing, and will be looking for support. But, we suspect, that just as corporate America has suddenly become less helpful and cooperative, so will the physicians, despite promises of "reform" to malpractice lawsuits, and of stable reimbursement.
Many physicians we speak to on a regular basis are either winding down their practices, establishing alternative ways to get paid, such as offering cash based programs, or making investments that will make their offices more independent from hospitals, Medicare, and third party payors in general.
Medical school is no longer the draw for the bright stars that it used to be. And fewer physicians are making themselves available to the very ill or to any kind of work that requires intense after hours work.
These are trends that are now well established and that are not likely to change in the face of more uncertainty from Washington.
And the smart money is very resistant to putting big money to work in health care. Biotech, drug, and hospital stocks are all flat for the year. This is especially glaring when the Nasdaq Composite is up nearly 18% as of last Friday.
Our point is not to beat the drum for health care, or for physicians. Our point is to note that the political landscape is changing and that the change has already influenced the markets and will likely do so more as time passes and the focus on health care as the source of funding the government's deficits via higher taxes and reduced services will increase.
Politics is, after all, a mechanism for dividing the available resources. And the major resource at this point is money. Health care is a cash cow, and the White House wants to raid the larder in order to support its political agenda. The effects on the markets are not likely to be very beneficial.
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