The Shell Game

In New York, where I grew up, we knew that in a "shell game" a token was hidden by one of three shells, and no matter how good or confident you were when you put down your money, you never could guess which shell was hiding the token and you never beat the operator who was able, by sleight of hand, to divert your attention from what was really going on.

Today, while our primary focus is on our national depression, "health care reform" is dangled before us as a distraction. What is hiding under the shell is the likelihood of severe disruptive disabling inflation, as our nation's printing presses run overtime to compensate for the financial industry's greed-induced collapse of our economy. As painful as a depression may be over the next year, it will not be as destructive to our health care system and our citizenry, as the run-away inflation which looms ahead.

Persons now able to pay for their Medicare copayments and supplemental insurance, employers whose cash flows support employee insurance plans, and the self-insured, along with Medicaid programs, will be particularly vulnerable to inflationary pressures. Many of the Medicare-covered population, on fixed pension payments, will not have incomes which keep pace with health care cost inflation, copayments and Medigap insurance premiums: they will be wiped-out. Employers, facing escalating inflationary pressures, will be incentivized to retain (rather than spend) investible cash from business operations to survive, and will have to either borrow at crushing interest rates (causing a sharp contraction in profitability as premiums cut into profits) or forgo providing health insurance as an employee benefit. The self-insured will have to devote an increased share of their resources to health care costs and insurance premiums and, like the fixed-income Medicare population, run the risk of seeing their financial resources destroyed. States' revenues will not be able to keep pace with skyrocketing Medicaid costs.

Some credit card issuers have reduced the credit lines of many of their customers, which will wipe-out a resource which these customers have depended upon to finance health care services. Some credit card companies have sharply increased interest rates to levels worthy of organized crime syndicates, while their collaborators in Congress have protected the credit card industry by making bankruptcy discharge of credit cards debts for health care services unavailable. If you don't have insurance, or if you face a large co-payment, your credit is constricted, interest rates are exorbitant and you have big health care bills for serious illness, what will you do?

During the 1980s inflation (under Carter - 22% interest rates!), insurers held on to their cash and were slow to pay insured health care bills because they wanted to maximize the return from the float on their money, I predict that health care providers will be under significant financial pressure and those with significant bond obligations may not survive. General Motors may be the model for the health care industry.

You may not have entered this "shell game" voluntarily, but your life, savings and health care will be at risk. Pay attention and plan accordingly.