Friday, April 10, 2009

Larry Summers Offers U.S. Chamber Rationale for Health Care Reform

During his interview at the Economic Club of Washington, White House Senior Economic Adviser Larry Summers made a case for health care reform. He cited the need to control the "most rapidly growing component of labor costs."

I heard this logic two years ago from Triad Hospitals CEO Denny Shelton. Shelton just sold his firm, pocketing over $40 million. Yet in a Peter G. Peterson kind of way, Denny didn't want to pay more in taxes to cover children. In a more noble move, he did offer to pay for his Medicare coverage. Shelton went on to start up Legacy Health Partners.

Billionaire Pete Peterson, co-founder of the Blackstone Group, is on a crusade to cut federal entitlement spending, specifically social security and health care. Treasury Chief Tim Geithner recently kow towed to Pete at a Council on Foreign Relations meeting. Tim joked that fiscal doves have fled, that everyone is now a fiscal hawk.

What does this portend for health care reform? Business clearly wants to shed responsibility for the pesky health insurance benefit. The government will do more, but temporarily. Fiscal conservatism means the individual will garner greater responsibility for health care.

Yet, health insurance is Act III. A long Act I had businesses shifting the cost of retirement to the employee over a period of decades. They froze defined benefit plans, substituting 401(k)'s and 403(b)'s. When the economy imploded, retirement matches were quickly frozen.

Act II was substituting cheap foreign labor for American workers. Over 2 million U.S. jobs migrated to the cheap siren call of low Asian wages. CEO incentive compensation soared.

But back to Act I, the Obama team wants laws requiring automatic enrollment in IRA and 401(k) plans. Expect something similar in health care, a requirement to purchase health care coverage. The fight is on over who pays. The other struggle is shaping reforms to benefit for-profit vs. nonprofit healthcare.

In the photo Larry Summers walks next to Carlyle Group co-founder David Rubenstein. Carlyle invests in for-profit health care companies. They range from MultiPlan, a PPO with a cost management division, to LifeCare, a long term acute care hospital provider, to ManorCare, a huge nursing home company. Did David plug a version of reform to Larry, one that benefits his health care portfolio?

Private health care has insider access to the Obama Health Care reform team. Health Czar Nancy-Ann DeParle is a private equity underwriter (PEU) like Mr. Rubenstein. Her board pay was over $550,000 in 2007 and her stock holdings/sales from private healthcare firms are over $7 million. She sits on the board of Denny Shelton's Legacy Health Partners. While Nancy-Ann already said "I'm in business," President Obama officially unveiled the White House Health Care Reform office just yesterday.

Health care deform is in play. Pay attention folks. The signs from Larry Summers and Nancy-Ann DeParle are worrisome. The devil will be in the details.

How quickly will America dive to the lowest global common denominator on worker pay/benefits? How tough will financial regulation really be, if it leaves out PEU's and their foreign friends, sovereign wealth funds? How will the big money boys strong arm world governments to continue dropping corporate income and capital gains taxes?

Those who have more, don't want to pay. War has been fought for less. Leadership is absent, replaced by greedership and bleedership. Pete Peterson proves that with nearly every speech. President Obama's team reinforces the point with his U.S. Chamber of Commerce lingo on health reform. Hold on tight. It could be a very rough ride.