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Busch: Droppin' the Option

Senate Majority Leader Harry Reid said that they are close to getting "broad agreement" for health care reform. Reid says they have a plan to replace the "Public Option" component with a new national insurance plan offered by private insurers, and a chance for older Americans to "buy in" to Medicare according to Politico. The CBO still needs to score the changes to see if this new overall structure delivers what the Democrats want for reform, inclusion, and cost savings.

Healthcare coverage and the hastle of forms
Healthcare coverage and the hastle of forms

Remember, the reason why the United States is engaged in health care reform was to change the trajectory of the HC cost curve to slow or reduce it's upward path.

This concern emanated from the long term projections of the cost of health care, Medicare, and Medicaid. This reform was also done in the hopes of reducing costs for businesses so that they could remain competitive in the global marketplace. The process has now morphed into something that is concerned about abortion and making chain restaurants disclose how many calories are included in their fries.

One important business group is not happy about the direction. The National Federation of Independent Businessa non-profit, nonpartisan association that represents small businesses. Small businesses generate over 60% of new jobs in the United States. The NFIB finally weighed on health care reform and wrote a letter to Sen. Reid on the issue.

“When evaluating healthcare reform options, small business owners ask themselves two specific questions. First, will the bill lower insurance costs? Second, will the bill increase the overall cost of doing business? If a bill increases the cost of doing business or fails to reduce insurance costs, then the bill fails to achieve their No. 1 goal – lower costs. In both cases, the Patient Protection and Affordable Care Act (H.R. 3590) fails the small business test and, therefore, fails small business.”

“The Patient Protection and Affordable Care Act, which is short on savings and long on costs, is the wrong reform, at the wrong time and will increase healthcare costs and the cost of doing business.”

I bring this up because small business is exactly the group that President Obama targeted for help yesterday in his speech. "That's why it's so important that we help small business struggling to stay open, or struggling to open in the first place, during these difficult times. Building on the tax cuts in the Recovery Act, we're proposing a complete elimination of capital gains taxes on small business investment along with an extension of write-offs to encourage small businesses to expand in the coming year. And I believe it's worthwhile to create a tax incentive to encourage small businesses to add and keep employees, and I'm going to work with Congress to pass one.

"Now, these steps will help, but we also have to address the continuing struggle of small businesses to get loans that they need to start up and grow. To that end, we're proposing to waive fees and increase the guarantees for SBA-backed loans. And I'm asking my Treasury Secretary to continue mobilizing the remaining TARP funds to facilitate lending to small businesses."

So the government takeff and then the government giveff away? It's this bipolar government policy that makes small business cautious and not want to take the risk to begin hiring. This is the untold story of the process of health care reform and why the uncertainty costs jobs. If the CBO scores the new bill as too costly, then there may be hope that the Senate goes back and attempts to make the bill adhere to the original goals of cost reductions.

For the markets, I've said that any bill that included the public option was be a major negative for US equities and for the US dollar. With the exclusion of the the public option, this is will be a positive for both.

  • US Senate Democrats Reach Agreement on Health Plan

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Andrew B. Busch is Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch.