Outside the Box

Jonathan Tepper on Obamacare

November 5, 2013

The Affordable Care Act is the single most contentious political action of my lifetime since the Vietnam War. It touches everyone in one way or another, and often in profoundly personal ways. Some see it is a godsend and others as an arrow aimed directly at the heart of the American experiment. Some will experience healthcare that is now available for themselves and their families for the first time, while others will experience the loss of a system that had served them well. The story in the Wall Street Journal this week of the cancer survivor Edie Littlefield Sundby, who lost her doctors and affordable care in the middle of a true life-and-death battle, is poignant. It turns out that not only can she not buy insurance that will cross state lines, she cannot buy insurance in California that will cross county lines!

As I highlighted a few weeks ago, the US system is dysfunctional, yet the potential for positive change is rather spectacularly illustrated by work done by Dr. Jeff Brenner in Camden, New Jersey. Basically, he found that 1% of the patients in Camden were responsible for 30% of hospitalization costs. Sometimes called super utilizers, high utilizers, or frequent fliers, these patients have complex medical conditions and often lack social services such as transportation or knowledge about how to use the health system most effectively. By some estimates, 5% of these patients account for more than 60% of all healthcare costs. This is a system that is so dysfunctional that it does not even work for those who are getting the care! There are scores of such opportunities throughout the healthcare system to reduce costs and improve services, so I write not of a bleak healthcare future, just a profoundly changing one.

Peggy Noonan writes compellingly today about the problematical rollout of Obamacare.

They said if you liked your insurance you could keep your insurance – but that's not true. It was never true! They said if you liked your doctor you could keep your doctor – but that's not true. It was never true! They said they would cover everyone who needed it, and instead people who had coverage are losing it – millions of them! They said they would make insurance less expensive – but it's more expensive! Premium shock, deductible shock. They said don't worry, your health information will be secure, but instead the whole setup looks like a hacker's holiday. Bad guys are apparently already going for your private information.

And now there are reports the insurance companies are taking advantage of the chaos of the program, and its many dislocations, to hike premiums. Meaning the law was written in such a way that insurance companies profit on it.

Today the Manhattan Institute released a report that shows that insurance premiums are going up an average of 41% in 49 states, although there are seven "blue" states where the costs go down. Go figure. New York sees a drop of 40%. The analysis of the HHS numbers shows Obamacare will increase underlying insurance rates for younger men by an average of 97 to 99 percent, and for younger women by an average of 55 to 62 percent. Worst off is North Carolina, which will see individual-market rates triple for women and quadruple for men. Older people acquire a large advantage over younger people in the insurance cost game.

And the rest of the world looks on and wonders what we are thinking. And how can we manage to do this so badly? Not just the roll-out – I mean, they don't understand our whole healthcare system. This weekend my Code Red coauthor, Jonathan Tepper, sent out a note that not only illustrates the confusion and dismay in much of the world about US healthcare policies but also gives us a true Outside the Box lesson in how not to design a healthcare system.

Jonathan is quite special. He speaks about five languages fluently with no accents and is a former Rhodes scholar, a wicked smart economist, and a good writer; and he seemingly works around the clock. While Jonathan is a US citizen, he is quintessentially European, having grown up in Europe, with much of his early life spent in Madrid, at a drug rehab center that his parents founded and directed. He mentions with a smile that his playmates as a young boy were drug addicts. His view of the US has a definite European flavor to it, and as you read this, think about it coming from the pen of a conservative European economist (there are a few!).

I left in the 19 links Jonathan provides as the sources for his thoughts, for those interested in a further deep-dive exploration. It will be interesting to see the comments, all of which I make a point of reading, by the way. If you can take the time to write to me, the least I can do is read.

I started this note in Cleveland, where I finished up a daylong health check-up with Dr. Mike Roizen, which went better than I had hoped. I asked frontline employees all day what they thought of the new healthcare law. I was not hearing happy thoughts, as many are concerned about their jobs. And then I dropped by to see my 96-year-old mother on the way home, and we talked about her healthcare. "I have not seen a doctor for a long time, but it's OK. I think all they do today is just make guesses anyway," she remarked – the state of healthcare from the point of view of the elderly.

The focus tonight is the future of healthcare. Dr. Mike West, CEO of Biotime, is in Dallas for a layover between flights, and we will catch up on the state of stem cell research and on my personal genome, which he arranged to get done – but more on that in a few weeks.

It is odd. We have made such progress on so many technological fronts, and the price of new tech keeps going down – except in healthcare. But then, politicians and lobbyists are involved, which I guess is part of Jonathan Tepper's point.

Have a great week and get some exercise, eat healthy, and invest wisely, because you are going to live a lot longer than you thought.

Your watching my apartment construction completion date keep slipping analyst,

John Mauldin, Editor
Outside the Box

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Jonathan Tepper on Obamacare

Dear friends, 

Please pardon this long email, but after reading endless drivel on Obamacare, I needed to write this.

I'm afraid almost all discussions on the left and right regarding the Affordable Care Act (ACA) miss some very basic things. So I hope this email will explain a few economic ideas and put them into perspective for you, whether you're on the left or right and whether…

Get Varying Expert Opinions in One Publication with John Mauldin’s Outside the Box
Every week, celebrated economic commentator John Mauldin highlights a well-researched, controversial essay from a fellow economic expert. Whether you find them inspiring, upsetting, or outrageous... they’ll all make you think Outside the Box. Get the newsletter free in your inbox every Wednesday.

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Richard Kellogg

Nov. 11, 2013, 9:02 p.m.

In reading “Jonathan Tepper on Obamacare”, I kept wondering what is the author’s point.  Having finished reading, I am still wondering.  Does he want healthcare as it was before 2008?  In pointing out how flawed the ACA is, Tepper is demonstrating a thorough grasp of the obvious.  And what is the alternative?  What amazes me is not how good the ACA is, but that we have a healthcare system at all.


Nov. 8, 2013, 8:22 a.m.

GREAT DISCUSSION OF ACA BY JONATHAN TEPPER. As a retired surgeon I agree that we should have universal health care and need to better control our ridiculous health care costs. You have to give Obama credit for at least trying to improve the current situation. Admittedly it will require some corrections and maybe some day if we are lucky our politicians will stop fighting and to the hard work to give us a health care system that we can all agree with as much as is the case in Europe.


Nov. 8, 2013, 8:06 a.m.

This was an excellent article and I agree generally!  I said generally because Tepper said the NHS in England was great. I have relatives in Ireland and it isn’t great. People die waiting and the shortage of nurses in England and Ireland is appalling. In-patient treatment is also bad where children and the elderly become so dehydrated they die. As long as the NHS services colds, tummy and headaches! broken bones you’re good. But more complicated cases you’re in you’re own. I have many antidotes but single payer is a monopoly too!  Once it becomes a law it then becomes political.  As long as you know someone is the system things get done while others are relegated to the queue.

Randy Roth

Nov. 7, 2013, 2:55 p.m.

I rarely post comments but this time I feel compelled because our individual deep emotional biases are probably blocking our digestion of the profoundness of Mr. Tepper’s essay.  While I’ve been part of the insurance industry now for about four decades, I still have not fully mastered the intricacies of all its elements and I will not pretend that I can offer complete solutions.  I do however applaud Mr. Tepper for bringing to the surface what few have done.

Mr. Tepper shocked me when in parentheses he referred to the 1945 McCarran-Ferguson Act.  During the last two presidential election debates, I hoped that someone would ask the candidates for their opinion about this congressional act.  None did!  Yet this Act gets to the heart of the emotional roadblocks to meaningful reform. As I understand it, the ACT provides that federal anti-trust laws will NOT apply to the business of insurance AS LONG AS STATES REGULATE IN THAT AREA.  This Act hence deals with federal versus state authority.  In today’s political environment, any questions of federal versus state authority often resurrect political emotions which date back to Civil War. These emotions then in turn become roadblocks impeding any meaningful reform!!!!

Both Mr.Mauldin and Mr. Tepper have proclaimed that our current healthcare system is dysfunctional and I must agree.  Mr. Tepper makes a strong argument that a root cause of this dysfunction is due to monopolies, oligopolies, and just lack of healthy competition among providers and insurers.  Now if this is accepted as a valid assertion, then it is obvious that individual state regulation has failed to sufficiently regulate in this arena.  As a result the ability to apply federal antitrust laws should come into play because of the “AS LONG AS THE STATES REGULATE” exemption provision.

There should be no question that healthcare involves tremendous revenues and also provides significant profits to some entities.  Those who profit from the current dysfunctional system will of course lobby to maintain it without any federal intervention.  Those who find themselves uninsured or unable to obtain affordable insurance will continue to cry for reform.  Our states must show that they can regulate the dysfunction.  If not, then our inept congress needs to revisit the Act they created in 1945 and either implement it or agree on how to revise it. .  I firmly believe that no meaningful reform will occur at either the state or federal level until underlying individual emotional biases and self-interest are set aside. 

Like Mr. Tepper, I don’t feel that the ACA is the solution.  However, for now, it is probably better than nothing for we simply cannot continue with the folly of the current dysfunctional system.  I can only hope that the apparent drawbacks of the ACA will finally force opposing parties to set aside their emotions plus self-interest and finally bring about bipartisan appropriate reform.

Shawn Heneghan

Nov. 7, 2013, 11:19 a.m.

My original hope with ACA mirrors the thoughts of the last paragraph. I had hope that it might work or might be amenable to changes that would allow it to work toward changes that could be beneficial. But. I believed more likely that the medical delivery complex would see what was coming (has now arrived) and create reasonable solutions.

Obviously neither of these is going to happen. ACA will be a failure not only because of its inherent flaws but because of the vast efforts of a few people that just refuse to accept anything the current president tries to do. And, no one is offering any real solutions to a problem that all agree needs a solution.

Matt Wilson

Nov. 7, 2013, 9:04 a.m.

ObamaCare is not really here to make things better. It’s here to make things equal. In this case equally worse, but that is irrelevant. It’s part of a broad transformation of America:

1. All outcome (individuals, groups or nations) should be no better or worse than any other.
2. Those who rise above the rest must have cheated in some way - you didn’t earn that. And if you didn’t earn it, then we can take it away.
3. Those who have fallen behind must have been victimized by those who have risen above. Let’s do the Robin Hood thing.

To fix the world’s problems, the following steps are being implemented in the US.

1. Since the US has risen above the rest, and created much of the world’s problems in the process, it’s military must be devastated and nuclear forces gutted. Welcome to sequestration and the nuclear zero crowd.

2. Internally there must be more redistribution of wealth so large differences in wealth disappear. ObamaCare is part of that process.

3. The US must be pulled down (more rising debt) and lead from behind so that internationally it is no better or worse than most other nations - an average nation. The proposed Carbon Tax redistribution to poorer countries is part of that process too.

I would like to suggest that people take a look at this article:

Wrecking ball, not train wreck: Obamacare is a breathtaking success story | World Tribune - http://goo.gl/bWf18n


Nov. 7, 2013, 12:36 a.m.

Excellent article - a wake up call, finally. A hundred years from today those who will be reading the history of the United States Of America will wonder aghast ...“why on Earth didn’t Boobus Americanus up-heave this rotten medical-industrial complex by massive boycott, legal actions, performance demands of their elected officials (including recall); whatever it takes. Conspiracy to commit fraud, gross criminal negligence and racketeering are the norm. And our elected officials in Washington (many of them, which is too many of them and which has certainly been enough of them) have become whores for which ever lobbyist for the medical/pharmaceutical/insurance industrial complex doles out the nicest “wink-wink” considerations come the next election campaign”.

But what is the most maddening for me is to see my own daughter and son-in-law now forced to delay plans to start a family due to this massive health care fraud and greed-rot. And this is also happening to ...how many hundreds of thousands???

This will end in a train wreck. And the sooner the better. And I mean not just the plan-scam, but the whole rotted American medical industrial complex. In the meantime, do as I have done - and I’m 63 years old. Study! Make the internet your resource and learn about alternative care & what is available that these %&&$$#$@ s do not want you to know. Just be aware that there is fraud there as well (and yea, some of it’s even been tactically placed!) And you will be as surprised with the wonders of seemingly miraculous treatments ...AND CURES!(that I myself have seen in person with my own eyes)as you will be enraged at the greed-rot of this stinking system which you have been so ignorantly calling “THE BEST IN THE WORLD”.

People ...wake up!!!


Nov. 6, 2013, 11:48 p.m.

Mr. Tepper’s view on what is good and workable health care may be suspect when one look’s at Investor’s business Daily article that published statistics from the United nations International Health Organization survey:percentage of men and women who survived a cancer five years after diagnosis:US 65% England 46% Canada 43% Percentage of patients diagnosed with diabetes who received treatment within 6 months: US 93% England 15% Canada 43% Percentage of seniors +65 who say they are in excellent health: US 12% England 2% Canada 6%. It goes on. Bad stats. For perspective Know about “Singularity” and read Ray Kurzweil’s Books

Nick Proferes

Nov. 6, 2013, 9:23 p.m.

A useful article, but just a start on all the issues with US health care.  I grew up in the US but have lived in Australia since 1970.  Comparing the two systems is easy since I have friends and relatives in both countries.  To cover all the issues would indeed take a book, but just a few:  the costs of medications, costs and resultant “over servicing” associated with malpractice, costs for procedures and hospital care, insurance monopolies and lack of effective competition across the US, A workable nexus between government and private cover, costs of paperwork between the providers and the insurance companies, the list goes on and on.  But, the bottom line is that medical procedures such as heart surgery, cancer surgery and treatment, hip replacement, etc. cost about ten times as much in the US as here and for no better outcomes.  A similar story on co-payments.  While the system here is far from perfect, and there is never enough money in it, the US one is totally dysfunctional and the ACA is the first baby step in getting some improvement. 

Calling it Obamacare speaks more to me of right wing politics than reality.  Its Congress’s baby, they wrote the legislation (with a lot of help from vested interests) and will be responsible for sorting out its flaws.  Like so many other critics, this article points out the flaws without offering much by way of alternatives.  Its well past time that Congress took some ownership for its own legislation and started addressing its flaws with meaningful and positive improvements.

marilyn kelly

Nov. 6, 2013, 5:41 p.m.

Mr Tepper says “For countries like Spain and the UK, a single-payer national system works. (I’ve lived in both countries almost all my life, and their healthcare systems work. The only time I’ve ever paid $250 for an aspirin was in a US hospital.)”

That’s because you are relatively young Mr Tepper - just wait. The UK NHS is a basket case.  Every few months there is another scandal with old people dying of neglect in NHS hospitals, usually covered in bed sores and their own feces.  As with all government scandals this is the tip of the iceberg.  Admittedly this partly a social problem.  If you are the last of your line or have uncaring or distant relatives - tough luck.  But healthcare should not be dependent on daily audits by outsiders.

I am considerably older than Mr Tepper and have lived through the final illnesses of a spouse and both parents under the NHS.  While excellent care is available, it is a lottery whether you will get or not.  Where are you in the country?  Do you know people within the system who will help you navigate?  But most of all: HOW OLD IS THE PATIENT?  I cannot emphasize this enough; death panels aka NICE do exist.  It’s not a secret. Any GP will tell you.  When my mother needed an MRI her doctor said it would take at least 3 months but when I asked if I could pay, he called me back with a 3 day appointment about 40 miles away.  Fine for me.

Mr Tepper says he never paid $250 for an aspirin - is he sure of that?  The NHS is funded from general revenues, it has been more than a generation since “contributions” were supposed to fund it.  The one benefit it does have is that there is no red tape as far as the patient is concerned.  One big problem is the availability of care.  The most wonderful insurance policy in the world is not going to help you if you are in constant pain from your hip & cannot even get an appointment with the orthopedist for 15 months (as happened to one of my friends).  Mr Tepper is too young to have faced this type of problem.  I wish him luck in the future.

If you live in the UK where I was born and raised, you will be subject to Government NHS propaganda from the moment you can understand English.
I’m sure Mr Tepper is an extremely intelligent man but that does not immunize him against brain washing.  Werner Von Braun was undoubtedly a genius - he was also a committed nazi.  Klaus Fuchs was an outstanding physicist - and a communist spy.

My theory is that the British are in denial about the NHS because to face facts is too disturbing.  No-one wants to lose a loved one and think they could have saved them with greater effort or expense. Talk about survivor guilt.

Nevertheless Tepper’s comments and bibliography are very helpful in understanding our healthcare problems.  Unfortunately by starting with what I believe to be a myth, he casts doubt on his judgement.

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