NBR Transcript-October 7, 2009
Wednesday, October 07, 2009CBO Puts a Multi-Billion Dollar Price Tag on Health Care Reform
SUSIE GHARIB: The price tag for health care reform: $829 billion over the next 10 years. That's the calculation from the Congressional Budget Office released late today. The number is based on the CBO's analysis of the Senate Finance Committee's health care proposal, known as America's healthy future act. According to the CBO, the bill would reduce the budget deficit by $81 billion. That's good news for President Obama who promised he would not sign any health reform plan that added to the deficit. The CBO also said the sweeping overhaul would cut the number of uninsured Americans by 29 million over the next decade. The report clears the way for the Senate Finance Committee to vote on the measure and that could come as early as Friday.
SUSIE GHARIB: Joining me now to talk more about health care reform, Trevor Fetter, chief executive of Tenet Healthcare. The company owns and operates about 50 hospitals across the country. Mr. Fetter, welcome to NIGHTLY BUSINESS REPORT.
TREVOR FETTER, PRES. & CEO, TENET HEALTHCARE: Susie, thanks for having me here tonight.
GHARIB: Let me start off by just asking you, what do you think of this latest legislation for health care reform?
FETTER: It certainly is a step in the right direction. As you know, hospitals across America are the places where the uninsured are treated, generally in our emergency rooms. Even people with insurance have a hard time paying for the services that we offer to them. So it is certainly a step in the right direction to cover more Americans than are covered today. We'd just like to see even more be covered under this legislation.
GHARIB: So much of the health care debate has focused on the price tag for reform and who's going to foot the bill. But does this legislation really have fundamental reform? Does it fix the American health care system?
FETTER: I wouldn't say that it fixes the American health care system although everyone in America would have a different view about what fixing the system would mean. What it does do is cover more Americans, although I said not all about 91 percent of residents who are here under the CBO projection. And it also requires significant sacrifices on the part of hospitals and other participants in the health care system. Almost every industry sector is touched in some way by the cuts that are part of the bill that generate savings.
GHARIB: You run a lot of hospitals. What would be the sacrifices that you're going to have to make?
FETTER: The hospital industry stepped up very early and offered cuts in different forms of funding that we receive, in exchange principally for expanded coverage of Americans with health insurance. Right now it's an unsustainable problem for us, that so many of our patients either have no insurance and are unable to make any payment at all or have insurance that has very high deductibles or co-pays where they can't afford those obligations that they have taken on whether they know it or not.
GHARIB: Getting access for everyone, that's been a great goal of this health care reform aspect of it. But in the end, bottom line, are consumers getting value for their health care dollars?
FETTER: Well, I think consumers do get value because they get a very safe environment. They get the best available technology in the world. They get the most advanced medicines and devices. But it is very expensive. There's an expensive regulatory structure. There's expensive administrative costs. In our company of 60,000 people, 4,000 of them work in preparing bills and trying to collect on those bills. That's an awfully high administrative burden. Then of course there's litigation expense. All those things, I think there's further work to do down the road.
GHARIB: Tenet is a for-profit hospital. So from a business perspective, is this health care reform bill bottom line -- good for your bottom line or not?
FETTER: Well, I think it remains to be seen. The projections that have been put out there which show that over a 10-year period this is a net positive for hospitals, but don't forget hospitals have been picking up the entire cost of treating the uninsured and the under insured for quite some time. So we would say it's a step in the right direction, certainly doesn't fully reimburse us for the cost of treating those people and there still will be a significant number of uninsured in this country if this is the bill that's passed.
GHARIB: So if you could make just one change that would have the biggest impact on quality and efficiency in the health care system, what would it be?
FETTER: I think there are a lot of issues in the supply chain, for example. We pay more than any other country in the world for some of the supplies, the pharmaceuticals that we use. We also have very onerous regulations that could be simplified. And there's a lot that we can do to enhance the quality of care and efficiency within U.S. hospitals. That's well-known by the industry.
GHARIB: All right. Thank you so much for coming on the program and sharing your thoughts. We really appreciate it.
FETTER: Susie, thanks for having me.
GHARIB: My guest tonight, Trevor Fetter, CEO of Tenet Healthcare.
Once Passed When Will Health Care Reform Kick In?
PAUL KANGAS: The clock starts ticking when health care reform finally makes it through Congress and is signed into law by the president. The bill will bring sweeping changes to our health care system. As Stephanie Dhue reports, the question now is when will we see those changes?
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: If a comprehensive health care reform bill were signed into law today, it would take time for the benefits to kick in. But lawmakers like Michigan Democrat Debbie Stabenow are eager to speed up the process.
SEN. DEBBIE STABENOW (D) MICHIGAN: It's a phase in. Part of this involves just being able to put in place the administrative structure to get things done, but it is very important that we get things done as quickly as possible. People need action now.
DHUE: Under the Senate Finance Committee proposal, people with pre- existing conditions who have been denied insurance would be immediately eligible for a high risk pool and get subsidies for coverage. Two years down the line, small businesses would get tax credits to provide employee health insurance. In four years the insurance exchanges should be up and running. With that comes tax credits for low-income Americans to purchase health insurance. In five years there would be a tax penalty for individuals who do not buy coverage and Medicaid would be expanded. Health policy advisor Julius Hobson expects lawmakers to add benefits that can start before the 2012 presidential election, much like when a Republican- led Congress added the prescription drug benefit to Medicare.
JULIUS HOBSON, SR. POLICY ADVISOR, BRYAN CAVE: When the Medicare drug bill was enacted, there was some delay in that process. It was enacted in 2003, but some of the benefits began to hit for people in 2004, so that they could see something was coming and it certainly enhanced Republicans in the 2004 election. I would expect Democrats to do the same kinds of things.
DHUE: Some of the things lawmakers are considering include closing the coverage gap, known as the donut hole in Medicare prescription drug coverage and giving early retirees access to Medicare. Senator Jack Reed says some reforms may not take as long as expected.
SEN. JACK REED (D) RHODE ISLAND: There are states that already move very quickly. Massachusetts has their statewide health care plan. I think they would be very eager to move into the exchange and they would have basically some of the foundation already in place.
DHUE: But even if a comprehensive reform bill pass these year, that may not be the end. Experts say lawmakers are likely to revisit reform before the 2012 election to fix any problems that may crop up. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
One on One with Nobel Laureate Paul Krugman
SUSIE GHARIB: The big topic at the White House today: jobs and the economy. President Obama met with top congressional lawmakers to talk about ways to stimulate the economy. No official word on proposals that came out of that meeting but the possible options include a tax credit for companies that create new jobs and extending jobless benefits. Earlier this week the Obama administration said it has no plans for a second stimulus package. So what's the solution to getting Americans working and the economy growing again? That's what I asked Paul Krugman today, the Nobel prize winning economist and professor of economics at Princeton.
PAUL KRUGMAN, ECONOMICS PROFESSOR, PRINCETON UNIVERSITY: We need lots more -- don't call it stimulus if that's a bad word, but we need lots more government action to create and preserve jobs. Because we stepped back a couple of paces from the edge of the abyss, but that's a long way from having an actual recovery and the job situation still looks dismal for a long ways ahead.
GHARIB: There's some talk in Washington about offering companies that create jobs a tax credit and also extending jobless benefits. Would that do the trick?
KRUGMAN: No, but it would help. I mean extending jobless benefits is absolutely necessary because we're now reaching a point where long-term unemployment is on the rise. We got to have benefits. We can't just let the people fall off the edge and it also puts some purchasing power in the hands of people so at least helps sustain the economy. The job credit is not -- there are a lot of pros and cons but on balance, it's a good thing. If I was up to me I'd probably have a new WPA, but it's not going to happen. So the jobs credit is helpful.
GHARIB: Are you against some kind of second stimulus package is that we just can't afford it. So what's the next best option?
KRUGMAN: That is just not true. It's a deep misunderstanding. First of all, the stimulus package, although it costs money up front, it also helps the economy and so some of the money comes back to you fairly quickly in tax revenues and then it also helps avoid long-term damage to the economy. So really not doing those stimulus packages on an adequate scale, is being penny wise and pound foolish on a grand scale.
GHARIB: So in your view when does the U.S. economy recover?
KRUGMAN: Technically the recession is probably over. GDP is probably growing. Industrial production is growing. So we're no longer in a situation where everything is falling, but gosh, we don't have anything that feels like a recovery until not only jobs start growing, but jobs start growing enough to make a dent in the unemployment rate. And we won't be fully recovered until the unemployment rate is back down to something like 5 percent, which at this point is in the remote of the future. We have no idea when that's going to happen.
GHARIB: JPMorgan just came out with a report and they said it's going to take four years for the economy to recover all the jobs that have been lost in this recession. Does that sound about right to you or is that too long?
KRUGMAN: No, that sound about right. I mean this is a financial crisis-led recession. Financial crisis -- recessions are the result of financial crisis are very persistent. Four years is not an unusual number in this case. I mean it took us almost that long to recover all the jobs that were lost in the 2001 recession and that was a much milder affair. So this -- it used to be four years. What I worry about is that we could be looking at a much longer period than that, that we could be looking at a lost decade. That's not my central forecast, but it a real and not negligible possibility.
GHARIB: So are you saying that it's possible that the economy could nose dive from here?
KRUGMAN: No, I don't see a nose dive. But a possibility that the recovery will lose momentum, maybe even a double dip, so we have a second recession, although probably not a severe one. Those are all very real. You try and tell me where a strong recovery will be coming from in the middle of next year. It's very hard to tell that story and it's awfully easy to tell a story where the recovery kind of sputters.
GHARIB: So where do you stand on this whole double dip recession debate?
KRUGMAN: I think it's a little bit less than even odds but it's not that much less. We got an inventory bounce, is a big part of our growth. That will go away. The stimulus will peak early next year. So that will start to fade out. So we have to, if we're not going to have a double dip, something else has to come along and it's not sure that something will.
GHARIB: So if the job situation is going to be bleak for a while, what does that mean about consumer spending?
KRUGMAN: Consumer spending has got almost everything running against it. Half this country is feeling the effects of the joblessness, directly or through people close to them. This is not a small thing. Yes, consumers come roaring back, maybe. There's -- certainly look at individual things. You look at consumer durables and current rates of sale are sort of not replaceable rates. So at some point people start to buy new cars just because their things wear out. But I can't see how a strong consumer recovery is even possible.
GHARIB: If President Obama asks for your advice, what would you tell him is the most important thing he needs to do right now to fix the economy?
KRUGMAN: If I had a single thing that I want most of all it would be a That's where we're having a totally gratuitous cutbacks, should not be happening. They're doing double damage. They're both depressing the economy and they're scarring our future because we're losing education. We're losing all these things that are terribly important for people. So I would push for another round of aid to those state and local governments. That would be my top priority.
GHARIB: Professor Krugman, thank you so much for your time, a pleasure talking to you. KRUGMAN: Thank you.
"Money File" -The Fed's Economic Exit Strategy
SUSIE GHARIB: In the "Money File" tonight, the Fed's delicate balance. Here's Eric Schurenberg, editor in chief at cbsmoneywatch.
ERIC SCHURENBERG, EDITOR-IN-CHIEF, CBSMONEYWATCH.COM: Federal Reserve governors have been making a lot of speeches lately about exit strategy. For some random reason, that made me flash back to the most famous exit line in English literature, Shakespeare's stage direction exit, pursued by bear. Needing to end a scene in one script, Shakespeare conjured up a bear and had the animal chase the character offstage. Now if only it were that easy for Ben Bernanke. The Fed has pumped trillions of dollars into the economy, as you know, but eventually it will have to stop propping up business. That will take exquisite timing. If the Fed exits too early, it will smother the new recovery in its crib. If it waits too long, it will ignite inflation. The Fed also needs guts. Turning off the cash flow is sure to be very unpopular. But even if the Fed has perfect timing and courage, it will still need help from another institution not known for either: Congress. Congress, you remember, is spending $800 billion to fund recovery. How likely are our representatives to cut off the money when unemployment is still high and lobbyists everywhere want them to keep spending? In their speeches, the Fed governors have been at pains to reassure us they have the right stuff to exit without inflation, Congress not so much. And here's the Shakespearean part. If the Fed or Congress or both keep the stimulus up too long and bring back inflation, the stock market will have no trouble conjuring up a bear to end the scene. I'm Eric Schurenberg.
Paul Kangas' Stocks in the News
PAUL KANGAS: A bright, shiny surprise from Alcoa late today. The aluminum giant kicked off the start of earnings season reporting its first profit in a year. For the third quarter, Alcoa earned $0.04 a share, much better than the loss of $0.09 that Wall Street was expecting. Revenues were up 9 percent from the previous quarter, but still down a third from the same period a year ago. Alcoa's chief executive said cost cutting and other steps left the company with more than $1 billion in cash on hand. Klaus Kleinfeld (ph) also sees demand for aluminum increasing in the United States and China, after falling drastically last year. Well, Wall Street was wary ahead of those results. Stocks opened in retreat with profit takers cashing in on recent gains. By 10:00 a.m. the Dow posted a 32 point loss with the NASDAQ off 4 points. A fledgling rally was quashed by a stronger dollar and nervousness ahead of Alcoa's results. At noon the Dow was off 45 points and the NASDAQ down 2 points. This afternoon however, a strong auction for 10-year Treasury notes helped turn many of the losses into gains by the final bell, but the Dow still closed down 5.67 at 9725.58. The NASDAQ however was up 6.76 ending at 2110.33. Standard & Poor's 500 Index added 2.86 to close at 1057.58. In the bond market, the 10-year note gained 20/32 to 103 22/32, putting the yield at 3.19 percent.
Big board volume leader on 66 million units is a new issue, Banco Santander (BSBR) of Brazil. Six hundred million units offered in an IPO priced at $13.40 a unit, opened at $13.30, down and then got back to the offering price of $13.40 and then slumped near the close to $13.01 with a $0.39 loss.
Citigroup (C) a $0.03 drop.
Bank of America (BAC) gained $0.35.
General Electric (GE) an $0.08 advance.
Pfizer (PFE) dropped $0.09.
AT&T (T) a $0.56 loss.
But JPMorgan Chase (JPM) moving up $0.79.
Motorola (MOT) a $0.12 advance.
Alcoa (AA) closed up $0.31 and then after hours, the stock got a little over $15 a share when the company reported those third quarter earnings, not a loss as expected.
Vonage Holdings (VG) was up $0.56, big percentage move there. It's one of the Internet phone service firms that AT&T will allow on its 3G network for iPhone.
Monsanto (MON) losing $1.30. The problem here, a fourth quarter loss of $0.43 a share, bigger than the $0.31 loss a year ago and worse than the Street estimate for a $0.29 per share loss.
ConocoPhillips (COP) was up $1.29. The company is trimming its 2010 capital budget and it's going to sell $10 billion in assets over the next two years to bolster its balance sheet.
Acuity Brands (AYI) which is in the lighting equipment business, up $2.50, $0.68 in fourth quarter earnings, down from $1.02 last year, but $0.11 better than the Street was expecting.
Estee Lauder (EL) up $1.64. Piper Jaffray issued an "over weight" rating, sees the company improving along with mall traffic.
Group 1 Automotive (GPI) up $1.81. Wells Fargo says that it's its top choice in the auto retailing sector because it has such a solid balance sheet.
Avis Budget (CAR) down $0.78. The company plans an offering of $250 million in convertible senior notes, a bit of dilution potential there.
And then Talbots (TLB) up $1.58, nice move there. FBR Capital boosted its price target to $13 a share.
And Freeport-McMoran C&G (FCX) up another $3.17 after a good gain yesterday. Gold was up another $4.70 an ounce in New York today to $1044.40 an ounce, another record high.
Apple (AAPL) topped the NASDAQ actives with a gain of $0.24.
And then came Google (GOOG) up $18.80. Google CEO says the worst of the advertising recession is over. Meanwhile, Goldman Sachs issued a "buy" on Google, mainly because of its improving revenue growth outlook.
Then came another new issue today, Verisk Analytics (VRSK). The story here, 858, let's make it 85.2 million shares offered at $22. It's in the insurance risk analysis business, opened at $27.01, the high of the day $28.97, backed off a little bit, still a very nice debut.
Research in Motion (RIMM) up $0.89.
Baidu (BIDU) jumped $12.80.
Cisco Systems (CSCO) $0.26 advance there.
Intel (INTC) a $0.12 gain.
Microsoft (MSFT) slipped a penny.
And then Oracle (ORCL) with a $0.03 advance.
amazon.com (AMZN) a $3.06 gain. The company is cutting the price of its Kindle electronic reader in overseas markets.
And those are the stocks in the news tonight.
