We Can Make it Work, Honest! by Pat Conrad MD

“One seldom recognizes the devil when he is putting his hand on your shoulder.”-  Albert Speer

When the real estate market crashed in 2008, popular outcry was somewhat muted when it came to blaming Fannie Mae/Freddie Mac. As the financial credit and investment structure teetered, the folks quick to (correctly) blame Lehman Bros. didn’t spend too much time worrying over the federal regulations that had encouraged such gross misbehavior.

So now UnitedHealth Group, Inc. is floating a very public trial balloon threatening to pull out of ObamaCare. Bloomberg says, ” UnitedHealth Group Inc. is scaling back marketing efforts for plans it’s selling this year under the Affordable Care Act, and may quit the market entirely in 2017, because the business has proven to be more costly than expected.”

But wait, hang on, this can’t be right! The Motley Fool reported in April, “UnitedHealth Group, Inc. topped forecasts, with revenue and earnings per share up 13 and 33%, respectively, year over year. The company also raised its full-year revenue outlook by $2 billion to $143 billion … The stock is up 50% over the past year, and 20% year to date, making it the best-performing stock in the Dow Jones Industrial Average.”

So all was well, no worries. The Supreme Court turned another somersault to protect ObamaCare this summer and conjured up new definitions to protect federal subsidies for exchange patients, keeping the pipeline of tax dollars to Big Insurance open. And USAToday said in June: “Insurance giant UnitedHealth Group reported stronger profit and revenue for the second quarter of 2015 while speculation continues that the company is pursuing a bid to acquire rival Aetna…UnitedHealth recorded net earnings of $1.59 billion for the quarter, up 13% compared to the same period a year earlier. Total revenue increased 11% to $36.263 billion.”

So how can UnitedHealth even think about pulling out? Even as medical costs continue to rise, participants in federal exchanges have (apparently) been charging too little. ObamaCare was supposed to remedy this by reimbursing exchange plans for any losses, yet so far has paid only $0.13 on the dollar (welcome to government medicine, Big Insurance). We’ve all read the numerous published complaints from the major insurance players wailing that increasing costs will necessitate major premium increases next year. Why would a company with major profits, federal subsidies (even if insufficient), and a chance to grab larger market share leave? “The insurer announced losses of $425 million on ObamaCare plans, and CEO Stephen Hemsley said, “We cannot sustain these losses,” and “we saw no indication of anything actually improving.” While the Republicans continue to explore the frontiers of timidity, “A bailout would benefit insurers and the Democratic Party, which is desperate to cover up the health law’s failure.”

The CEO and governing board of UnitedHealth aren’t stupid, probably evil, but not stupid. They knew all along that ObamaCare was a massive wealth transfer scheme, and therefore unsustainable (ahem, like Medicare), and they jumped in to get a share of easy money while the gettin’ was good. I think there are three possibilities:

1. UnitedHealth entered the health exchange having already seen the writing on the wall, in full knowledge that they would acquire potential long-term liabilities for short-term gain, and were prepared all along to pull out when the balance sheet started to tip.
2. They aren’t leaving. This is merely ostentatious hand wringing to scare their clients, the media, and to put political pressure on the administration to come up with another bailout, paid for by you and I.
3. All of the above.

In 1965, the government sold an unsustainable program to addle-headed voters, and doctors signed a deal with the devil for easy cash. The decades of misbehavior by the medical community was encouraged by the paths of risk and reward laid down by Uncle Sugar. For two decades leading up to the ’08 recession, the federal government though community re-investment acts and Freddie/Fannie largesse increasingly encouraged bad loans to people of flimsy or no credit, leading to the gross misbehavior of mortgage-backed securities sales by banks, and the collapse and subsequent bailout of Lehman Bros. and AIG. And now under the good offices of the Affordable Care Act, Big Insurance is nakedly colluding with Big Government to rip off all of us off AGAIN. And far too many of us will clamor for even more government intervention to fix the problem.