The President Wants You to Get Rich on Obamacare

By Adam Davidson
The New York Times Magazine, October 30, 2013

(Tom) Scully was scheduled to deliver the keynote address at an event hosted by the Potomac Research Group, a Beltway firm that advises large investors on government policy (tag line: “Washington to Wall Street”).

When Scully finally began his speech, he noted that the prevailing narrative among Republicans — assuming that many in the room were, like him, Republican — was incorrect. “(Obamacare) is not a government takeover of medicine,” he told the crowd. “It’s the privatization of health care.”

Scully then segued to his main point, one he has been making in similarly handsome dining rooms across the country: No matter what investors thought about Obamacare politically — and surely many there did not think much of it — the law was going to make some people very rich.

A couple of years ago, Scully identified his best bet. NaviHealth, the company he co-founded, is designed to streamline an enormous but often overlooked corner of the health care market that, many studies conclude, is the most financially wasteful: post-acute care, or the treatment of patients (mostly seniors) after hospitalization for surgery or serious illness.

Scully has a simple way of describing what NaviHealth — and much of the Affordable Care Act — brings to medicine. “It’s called capitalism,” he told me. “Which doesn’t exist in health care, really.”

In 2001, after George W. Bush appointed Scully the administrator of what would soon be known as the Centers for Medicare and Medicaid Services, he at last began to implement his ideas. Scully focused on designing and executing Medicare Part D, which opened one corner of government-provided health care — pharmaceuticals — to market forces. This created a new role for a previously relatively obscure business, the pharmacy benefit manager, or P.B.M., which streamlined prescription-drug services. Express Scripts, a once modest Midwestern company, used economies of scale to lead the effort in shifting seniors from expensive name-brand drugs into generics. According to Fortune, it is now the 24th-largest company in America.

By the time Medicare Part D went into effect in 2006, Scully, who was by then in the private sector, put his theory to the test. He invested in a smaller P.B.M., MemberHealth, which grew, in three years, from $6 million in revenue to $1.2 billion. “It was a hockey stick,” he recalls. “It took off like a rocket.” When the A.C.A. was near passage, Scully hoped to repeat the success. Once he and his partners at Welsh, Carson realized no one else had seen the potential in post-acute care, he thought he had another MemberHealth on his hands. “That’s what I expected with NaviHealth,” he told me. “I felt the same way: we would take off like a rocket.”

On the morning that Congress finalized the deal that would reopen the government and defeat — for a few weeks, at least — the latest Republican effort to derail Obamacare, I visited Scully in his New York office. Scully then began a set speech I had heard many times about how Republicans don’t understand the new health care law, that it’s actually more, not less, capitalistic than anything that came before.

Whether all this money flowing from Washington to Wall Street will benefit the rest of us is another question. Glenn Hubbard, the pre-eminent economist who helped devise George H. W. Bush’s health plan with Scully, told me that the cost of the A.C.A. will far outpace any possible efficiencies. Dean Baker, an economist at the progressive Center for Economic and Policy Research, told me that a government-run single-payer plan would be far more beneficial.

http://www.nytimes.com/2013/11/03/magazine/the-president-wants-you-to-ge…

Former CMS administrator Thomas Scully has been a major player in injecting more capitalism into health care. This article describes his mindset, including the fact that he intends to get his share of the mega-wealth that health care privatization is creating.

Look at some of the trends:

* Medicare + Choice was established to allow private insurers to compete with Medicare with the goal of eventually transforming our public Medicare program into a market of private health plans.

* When the insurers couldn’t compete, Medicare + Choice was replaced with Medicare Advantage – a scheme designed to overpay private insurers by 14% in order to give them an “advantage” in the Medicare marketplace – with the intent of eventually displacing traditional Medicare.

* The Medicare Part D drug plan was designed to use private pharmacy benefit managers – diverting a massive amount of taxpayer funds to the capitalists, while prohibiting government negotiation of fair drug prices.

* The architects of the Affordable Care Act rejected a government single-payer solution and set up exchanges of private insurance plans that would siphon off more taxpayer dollars to pay for the private sector’s wasteful administrative excesses.

* Although the widely discussed “public option” would have had little impact since it would not have changed our basic, fragmented health financing infrastructure, nevertheless, even it was rejected as allowing too much of a government role in a health insurance market that the pro-market capitalists wanted to control completely.

*  As a token tossed to the public option advocates, co-ops were authorized in the Affordable Care Act. These organizations – to be managed by representatives of the patients – were poisoned by a model that saddled them with massive intolerable debt service that would make it impossible to compete with the private insurers, not to mention that they are prohibited from marketing their product to the public. Competition is fine when the private sector is given unfair advantages over government programs, but, in the minds of these capitalists, it is unfair to allow a government or even quasi-government program to compete against the private sector. The government cheats by unfairly providing greater efficiency and value. Medicare’s administrative costs are 1.4% whereas the Affordable Care Act grants private insurers 15% to 20% administrative costs including profits.

* The Affordable Care Act also gave a great boost to consumer-directed health care – a concept of expanding the role of marketplace decisions in the purchasing of health care. By establishing a low actuarial value in the benchmark plans in the insurance exchanges – the patient pays a greater percentage of health care costs out of pocket primarily through high deductibles – much needed regulatory oversight is being replaced with the flawed theory that price decisions in the marketplace will bring health care costs under control.

* Under the false theory that government austerity measures are required to stimulate a thriving market by limiting taxation, Medicare and Social Security remain under threat by those who would privatize these programs through measures such as Medicare vouchers.

We need to understand what Scully is trying to say: The law is going to make some people very rich. Is that what we what from the most expensive and most dysfunctional health care system of all wealthy nations? We have been warned.

Dean Baker got only one line in this very long article: a government-run single-payer plan would be far more beneficial. That should be our take-home message.