Who’s Managing the Risk?

- Lisa Smyser

When all the bailouts were happening, everyone told us that there was not enough risk management, and therefore too many risky decisions were made and the assumptions did not prove to be true. We thought we learned those lessons. Now here we are getting ready to pass this massive Healthcare legislation effort that will have the government take over one-sixth of our economy in one fell swoop.

Forget the fact that we have no money to pay for it. Ignore the tricks and deception being used to pass it. Look past all those deals and bribes and new taxes that will be imposed on every citizen in the country (and I won’t even mention the coverage for illegal aliens here). Yes, let’s look past all that and just look at the legislation itself.


People always learn how to exploit the loopholes in processes to get what they want, and they are using the Congressional Budget Office (CBO) to do it this time. Until now, the CBO was regarded as the most fair, well respected, and non-partisan office that could provide objective budget information so that legislators could clearly understand the impact of what they were voting on. The problem is that they can only assess the budgetary numbers for the data that is put before them. They don’t ask a lot of questions or challenge assumptions, even if they highly doubt that those assumptions will happen. So, who’s managing the risk?

Our current majority leadership team has presented legislation that will add 30 million people to the healthcare rolls. It will subsidize low-income and no-income earners. It will cost $1 TRILLION to implement, which might be okay if we had trillions of dollars in reserve somewhere waiting for a rainy day. But we are BROKE! Our fearless ‘leaders’ want us to believe this is an investment that will reap rewards over time. It will reportedly save us $138 billion over a decade, so says the CBO, again based on what was put before them.

Even if we take that at face value and accept the CBO score, has anyone assessed the risk in this legislation? What is the probability that hundreds of millions of dollars will actually be recovered and booked through the elimination of waste and fraud in the Medicare system? And what would it realistically cost to administer a system to eliminate that fraud? And what about the trillions of dollars in unfunded Medicare and Medicaid costs? Are those not considered healthcare in the big picture?

Has anyone considered the human element in all these changes? We learned through the Laffer Curve, that higher taxes will drive taxable income underground, and that large assessments yield less revenue because the impact of taxes changes people’s economic behavior. People will begin to transact in cash to avoid booking transactions and paying tax on them. That’s what happened in Greece as taxes began to increase rapidly. Look at the number of people in our own congress who have fallen short of paying taxes, and we haven’t seen the big increases yet! Can we really count on all those tax dollars that are estimated?

So again I ask, where is the risk assessment in this legislation? What will happen when there isn’t enough money – by a very wide margin – to pay for these services? What if even a few of these large assumptions don’t prove true? What impact will it have, and what will have to happen to resolve it? What rainy day fund can be tapped to make up the difference? Is the plan to blame that on someone else later or just hope it doesn’t happen? It’s all quite irresponsible if you ask me. It’s just another large hedge fund being constructed, and we have all invested in it by default. What do you think the return on investment will be?

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