Fine Print - May 2010

Obamacare’s winners and losers
By G.D. Gearino

With the hyperventilation over health care having abated a bit — which is to say, now that we all understand civilization has neither been saved nor destroyed, that angels didn’t sing nor did evil triumph — let’s ponder how North Carolina’s capitalist pie might get resliced as a result. What follows is a list of the winners and losers in business. But because life is full of contrary tides, each of these predictions comes with a “however.” Also, those who make any investment decision based upon what’s stated below deserve whatever damage results to their personal fortunes. Remember, I’m the guy who wrote that Waffle House is the best and brightest of American business (Fine Print, May 2009).

Winner: Blue Cross and Blue Shield of North Carolina. What could be better than to have the federal government order citizens to buy what you’re selling? (The newspaper business would kill to have the government declare that an informed citizenry is so vital to democracy that everyone should be required to subscribe to the local rag.) Even better was the post-passage realization that an apparent loophole in the new law could let insurers wriggle out of covering some pre-existing conditions. However: Taxes totaling $70 billion will be levied on the industry, starting in 2014. And the government, in its boundless wisdom, made the penalty for not buying health insurance so laughably low that it practically invites people not to get coverage until they’re sick — thus encouraging the “death spiral.”

Loser: Bank of America Corp. The health-care bill is so fiscally responsible that it ultimately will reduce the deficit — at least that’s what they say. Still, the government feels the need to scramble for funds to pay for it, doing everything short of overturning Oval Office sofa cushions in search of change spilled from pockets of visiting heads of state. One measure has been to yank the federally funded student-loan program from banks and lend directly to college goers. Private lenders, BofA among them, collected $70 billion annually to administer the program. That easy money is gone. However: As BofA learned the hard way from TARP, the federal government is an expensive, high-maintenance date. It’s not a bad thing to go home early and alone.

Winners: North Carolina’s medical schools. Between Duke University, Wake Forest University, UNC Chapel Hill and East Carolina University, all of which are in the business of training physicians, the state is poised to meet the expected demand for more doctors. The American Academy of Family Physicians has predicted that an already tight supply of primary-care doctors will be made worse by Obamacare. It expects a shortage of 40,000 family doctors within 10 years. Needless to say, it’s always good to be a producer of a commodity in short supply. However (part one): Nobody wants to be a family doctor anymore. The Washington Post reports that in the 1950s, half of all physicians were family doctors. Today, 70% are specialists, largely because that’s where the money is. However (part two): Obamacare “does little” to curb unnecessary tests and procedures, the New York Times explained. The cost side of the health equation will have to be addressed someday, and when that day arrives, many medical specialties might be priced into intentional scarcity — meaning that family doctors could again flourish.

Loser: Biotech startups. Essentially the research-and-development arm of much of the health-care business, biotech might well suffer when the past-due notices on the national medical bill start to arrive and investment in technology is sacrificed as a cost-cutting measure. The pharmaceutical industry, which does its own R&D, and insurers got relatively sweet deals with the bill. But I’m not seeing where biotech got much love. However: Tar Heel biotech entrepreneurs have Dole Food mogul David Murdock on their side. He created the North Carolina Research Campus in Kannapolis, devoted to nurturing the state’s biotech industry. Better yet, the 87-year-old Murdock, a health nut, seems to believe he’s going to be around forever to look after his baby.

Winner: John Edwards. His political career is over, his marriage is on the rocks, and he has managed to make himself even more of a butt of jokes than Eliot Spitzer and Mark Sanford combined. Edwards is, basically, in exile. But he’s relatively young, and the best way for him to get his mojo back (not to mention putting some coin in his pocket) is to start suing doctors again. Congressional Democrats, who have long enjoyed the favor of trial lawyers, assiduously stepped around the issue of medical-malpractice reform as they crafted the health-care bill. The American Medical Association, which gave the bill a thumbs-up in a letter to Speaker of the House Nancy Pelosi, grumped that it nonetheless could be “further improved by reining in unnecessary costs through enactment of effective medical liability reforms.” In short, the path to the courthouse is unimpeded as ever for Edwards and his brothers and sisters in law. However: Jury awards may not contribute much to the ever-rising cost of health care, but the lawsuit-prevention medicine practiced by most doctors pushes up spending significantly. Once the federal government is picking up a bigger part of the country’s insurance tab, it could suddenly become a tort reformer. In that case, it’s wills and real-estate closings for Johnny.