Premier CEO Expects Obamacare Replacement to Take Three Years

whether at the grocery store or the trading floor. Find the Bloomberg P and L Podcast on iTunes, SoundCloud and at Bloomberg dot com. President Trump just now, in his comments, reiterated his statement that he has said many times before that the best thing politically for Republicans to do would be just to allow Obamacare to fail because it will be a disaster with us to get a little bit more insight into what potentially are the problems and what

the disaster may have looked like. Is Susan divorce. She's CEO of Premiere, which advises healthcare systems across the country and has a really good vantage point to look across the US healthcare system Susan, We're so glad to have you today. So just to weigh in on that point, what are the main problems that President Trump is probably talking about when he calls Obamacare disaster that it would evolve into one should the Republicans not do anything to it.

Thanks so much, Lisa. I think what he's talking about is that healthcare and Obamacare, the Affordable Care Act, it's very costly, it limits choice in some ways for patients, and it's very complicated. And I think that he um. I think he believes that uh, consumers being more engaged in their health care and having a more free market competitive system will be more effective for consumers. But that doesn't sound like it is aaster. Where's the disaster part,

you know? I think the disaster part is really um probably embedded in just the overall total cost. The benefit plan design is pretty rich, the subsidies to Medicaid are pretty high, and so I think what he worries about is the impact to businesses, the impact to taxpayers for the cost of healthcare. Can we just step back for just a second, because I noted that Brad Wilson was introduced. He is the head of a Blue Cross Blue Shield in North Carolina. Which is where a premier is headquartered.

So you've got an ally or at least a colleague speaking with the president. Is healthcare a national issue or is it a state issue? Healthcare is actually delivered locally. It's even smaller than state or national because these health care systems in communities are there forever serving those populations, whether there's any payment or exchanges or Medicaid subsidy um. But I would say that the Trump administration would like

for it to be a more state based system. And part of the changes that we believe are coming are really around how do you empower the states to take more control of Medicaid? So talk a little bit about that, I mean, how would you? So? I think the plan is that if you could change the level of subsidy and in some ways have a fixed amount a cap or a block grant and give it to the states, you would then give the states the flexibility to decide

how best to take care of their Medicaid populations. But how does that jibe with this idea of allowing UH people are participate in a government sponsored health plan to go across state lines? I mean, how does that? How does that play into that whole discussion makes it harder. I mean what I call it fifty shades a healthcare I mean you will have fifty different programs, fifty different

measurement systems. If you're a provider, you're a doctor, or you're a health care system, and especially if you're a multi state health care system, you will have multiple different programs trying to essentially accomplish the same things. Well, let's just follow on with that topic, because it seems as though with the introduction of technology, greater information sharing and

the ability of people to be mobile. Right, if you want an operation and you know that the best result can be garnered from a hospital in Texas, and you happen to live in Illinois, um that should be or that maybe an option for you? Is there a better way to deliver healthcare on this scale and take advantage of the the cost savings. If only that worked, it

would be a much better way. The problem is we have to lift this iron curtain on data because there are so many limitations in the portability of data across multiple information information systems. It just doesn't work today. And that's not even a health care issue, not even a health care issue. So how would you do that? What what do you think if you would like to see

new legislation introduced in Congress? We need legislation introduced. There's already been some legislation introduced along with the twenty one Cures Act Century Cures Act, which really requires standards for healthcare. I mean, every other industry has had standards for transmitting information, privacy standards, security standards, reporting standards. We don't have it yet.

You know. Ultimately, this whole debate about Obamacare comes down to cost, right, I mean that's the that's the essential issue here. Is there a way to meaningfully reduce costs at a time when the US population is aging dramatically? Yeah? So at Premier we spend every day figuring out how do we improve quality and safety and lower the cost of healthcare. The demographics are are driving the cost up. The lack of coordination, coordination and the fragmentation of care

is driving cost up. The inability to exchange this information is driving cost up, and cost are growing at one to two percent faster rate than the GDP. That is not going to work, right, But is there a way to let's say, you did, uh, you know, streamline the data bullet I mean, like but I'm just trying to figure out. I mean, if we sort of follow a certain prescription with streamlining of the data, with you know, maybe I don't know if you would advocate for government

negotiation for prices, you know, pharmaceutical prices or not. I mean, that's a very touchy subject um. But are there ways to bring it down or is this just an inevitable inevitability of an aging population. Lots of ways to bring it down. And at Premiere where we we we process fifty billion dollars of supply chain spend by creating competitive friction between suppliers to drive the cost down. We work with healthcare systems to you know, reduce infections, reduce readmissions,

lower the length of stay in a hospital. We have just three and fifty hospitals that have been working together on this for several years. They alone have saved fifteen billion dollars. So there are lots of ways to do it. But you have to coordinate the care, you have to have anders for reporting, you have to enable providers to actually work together. Remove a bunch of the regulations and barriers, which I do think the Trump administration is intent on doing. Well.

We see a system in which will actually be able to know how much the healthcare costs. And I don't mean on a larger level, you know, billions, but in terms of an individual, a patient actually being able to know at the very least how much a procedure costs. Yeah. I think that part of the push for the Trump administration and the Republicans is to get consumers engaged. So if you have health care savings accounts, you start to

get transparency. Consumers start to demand transparency to the to the price of procedures and to the things that are being used and get involved in those decisions. So I think it's going to take a while, but I think that is definitely where the Republicans want to go. One thing that President Trump mentioned was Tom Price, Dr. Price, Head of Health and Human Services. What can doctors do

in this context? And is that also a challenge because you have the American Medical Association still is a state based program, right and you know many have said that of the cost of health care comes from the doctor's pen, so they really are the place where a lot of decisions are being made. We actually think this whole repeal and replace will take two to three years. It will have three steps. The first is the repeal with reconciliation,

The second is dr Price. He has a lot of regulatory flexibility, and the third will be several incremental bills to replace it over time. Have you been in touch with representatives who are drafting the new version of Obamacare? We have. We have a big Washington based UM office and we routinely meet with a lot of the Republicans and a lot of them. Do you get a sense of how cohesive the Republicans are when it comes to

a new proposal. There's a lot of discussion and debate, and it's what makes us at Premier think this is going to take time and it's going to be an incremental bills that they can build support for. What's the most controversial aspect. The most controversial aspect I think at this point is that you have Medicaid expansion for ten million people and the benefit plan design is rich and the subsidy is rich, and how how do you pull that back? How do you change that and how do

you get um some cost containment into that system? I think is a big challenge and the people who have expanded Medicaid have a hard time, you know, reducing it or taking it away the people who haven't expanded Medicaid can't maybe afford to expand Medicaid. So I think that's probably the toughest part of this. Well, it's interesting because that it ties back to Lisa's first question having to do with block grants and money flowing to the states.

What's the implication for Medicaid in that context. So, Brad Wilson, you mentioned from North Carolina NA. In North Carolina, they're taking two approaches. One is a managed care insurance approach. The other is a provider led healthcare system lead approach. If you give states a flat rate, a capt amount, a block grant, there's all kinds of flexibility for those

states to figure out how to coordinate that care. And so I think that is that that is the method that they will use to try to contain costs and get predictability to that line item. At the same time, some of this stuff has to be done at the federal level. Well, this is the problem with fifty different programs for Medicaid. If you had fifty different programs from Medicare, I mean actually managing that if you're a doctor, or you're a hospital, or you're a health system, it's it's

it's totally unmanageable. So I do think we need federal standards, federal framework. We need to make sure that patients are protected, transparency is their costs are predictable and managed, and so I think it is a combination of federal and state programs. Well, thank you very much for coming in and spending time with us and educating us all. Susan Davore is the chief exam ecorative of Premier the symbol p i NC

based in Charlotte, North Carolina. Thank you very much. I know this is going to be a topic that we're going to keep calling on your expertise in the future. Well, let's get more on what Warren Buffett said in his annual letter to shareholders on Saturday with Noah Bloyer. He is a Bloomberg reporter covering Berkshire Hathaway covering this letter and subsequent commentary from Warren Buffett. Noah, what was your

biggest takeaway from this letter? I think the biggest thing that that Buffett commented on here was just a tremendous amount of money that has been wasted on active management. Uh he he estimated conservatively that money managers, have you enough a hundred billion dollars over the last ten years on on fees that really didn't deliver returns um to beat the market. So that was that was far and

away his his his big takeaway from this one. So it doesn't warm Buffet have a one million dollar bet he will give one million dollars to charity if he can beat hedge fund managers by investing in a passive SMP five hundred index this year. Yeah, it's it's it's a ten year bet and it's coming to an end. He bet that. Uh, like you said, an m P five tracker from Vanguard could could beat um a basket of hedge funds, it was actually several funds of funds um,

and nine years into that bet, he's way ahead. It ends on December thirty one, and he basically declared in early victory. Now explain what warm Buffets position is on people who can actually outpace the market when it comes to returns. So, yeah, that's a great question. He did. He did throw that crowded bone. He said it's not impossible to do that. Obviously, Buffett himself as an example, and and he thinks that he can keep doing that.

At Berkshire he's not buying index funds for Berkshire. What um. What he did say though, is that it's incredibly difficult to identify people who can outperform over the long haul early on in their careers, because if you don't do it early in their careers, it's you're you're often going to miss out on that incredible performance that that those managers are going to have. You know, I found it compelling, aside from the passive and active debate that is quite

heated and topical. At the moment, I thought that Warren Buffett's optimism was somewhat surprising because Warren Buffett was a longtime supporter of Hillary Clinton, and he made no mention of President Trump. And he said that children born in America today have the brightest future ever and considered continued to reiterate his faith in the economy that even if there are hiccups, that it will keep chugging along. What

did you make of this? Well, actually, I thought that those passages were quite consistent with what he's what he said, um, and you know, he's he has expressed optimism about the prospects or business in America for a long long time. And you can go back to his letters, He's he's obviously been an incredible beneficiary of it um but but but so have lots of other people. And I think his point there really was to tell people that business

will do fine in America. We have a good economic system and it doesn't matter who's in the OPA office. You are right to point out that he was a big bactor of Hillary Clinton and policy wise lined up with her a lot more. But I think what Buffett was trying to do in this letter is remind people that over the history of America, business has done just fine.

Our capitalist system has worked very, very well, and and and he was reminding people that they shouldn't get too wrapped up maybe the doom and gloom of the moment. He also spoke, uh, sort of eloquently about his his vision for his position in the future, right, I mean,

he said that, you know, he's ready to go. He doesn't foresee retirement anytime soon, although he did say something that's you know, it's difficult to identify the things that he's going to be interested in, but he's always ready to take advantage of opportunities, right right, right, Yeah, I mean it's it's kind of incredible at eighty six. He just, I mean just this morning, said he increased his Apple steak.

It's now north of eighteen billion dollars. I mean, this is the guy whose clipped that he still uses the flip phone. Um so, uh yeah. I mean, there was nothing in the letter that suggested he's ready to hang up his police and you know, quite to the contrary, he Berkshire keeps evolving and he keeps thinking about ways to expand and grow the business over time. Let's talk

about Apple. This morning, Warren Buffett said that he continued to buy Apple shares at at a rapid clip, and that it is now I believe, his second biggest holding. What do you make it? I mean, what I make of that is I think what we wrote last year when when the stake was first disclosed, is that Apple. You know, Buffett has long had this aversion to tech companies, but they're not looking at Apple as a tech company. They're looking at it more as a consumer products company.

And if you think about Apple from the advantage, it really does start to check some of the boxes that that Buffett cares about. The iPhone, you know, he said this morning is just this incredibly sticky product. And when you have an ecosystem of apps and all the stuff that Apple is is providing in terms of the cloud, Um, people are just reluctant to change devices or switched to a different ecosystem. So, um, I think I think that played in more than uh, his you know, past reservation

about being able to guess where technology is going. No, he also spoke about furniture. Maybe you want to sit on something while you're using your Apple product, and that is a good connection to taxes. He spoke a little bit about that as well. Yeah, I mean I think

I think he was cautioning people. Um, you know, there's been a lot of talk about the border adjustment and what's going to happen with respect to tax reform, and I think he threw some cold water on the idea that we were going to have this major, major overhaul. Um in part because um uh there's uh, there's some political realities and um, well economic realities too, right, because

he's got furniture stores. He says, it's seventy of what you see is important, and then if you have to pay an import tax on it, they're just going to pass it along to two consumers. Yeah, that's that's that's exactly what he said. And um, uh, we're gonna have to see over the course of this year if he's right. Um, I want to ask about bonds. He was pretty naked have about treasuries and he did reduce proportion of government bond holdings in his portfolio. How how well has he

timed the bond market? You know, I think I think the more important thing to look at there is just the Buffett has had this ban um towards stocks, towards wayne to own productive assets for a long time. And uh, it's even though the bond portfolio has been shrinking, He's got a lot of other investments that are bond Like. If you look at the amount of money that Berkshire has poured into the utility industry, for example, I mean the balance sheet of these electric uh power companies that

they own. These are regulated utilities that kick off pretty dependable returns um and in certain ways they serve as a bond block investment on Berkshire's balance sheets. So I don't think the discussion is really about whether Buffet time the market right or wrong. He just he just has a fullosophy about investing in productive assets and wanting to be an owner of companies, and I think that's reflected

in Berkshire portfolio. Burlington Northern Santa Fe spoke in the letter about the industrials and the infrastructure in the United States. To give us your take, Yeah, b NSF had a had a tougher year last year, and I think Buffett laid that out pretty clearly. A big challenge with the NSF is that, uh, it's a major one of the major things that hauls this coal and we've seen a shift in the US away from power plants using as much coal. We have more natural gas electric generation now,

so that's hurt the railroad. UM. Also some of the business they were getting from, you know, providing uh materials and hauling oil away from from our onshore production in the US, that that business has declined. UM. But overall, you know, Buffett reiterated that he's committed to spending lots of capital to make sure the railroad, uh you know, they upgrade their tracks and have um you are spending the kind of capital that that that they need to make that a world class uh company. He also said

he did I'm saying a parton go ahead. Well, I thought that He also talked about spending money. He doesn't mind spending big money for fees if he gets a good deal. Yeah, yeah, you know that was that was Buffett sort of typical advertisement that he sticks in the annual letter. He wants to wants to buy businesses he's he has said that Berkshire is a sprawling conglomerate that

wants to sprawl ever further. So that was that to me, was an advertisement telling, you know, investment bankers who have ideas about businesses Berkshire might want to buy a you know, coming off on his door. Thanks very much, Noah bou Hire. P and L is brought to you by proper Cloth, a leader in men's custom shirts. At proper cloth dot com, ordering custom shirts has never been easier. Create your custom shirt size by answering ten easy questions, select from over

five fabrics to suit your personal taste. Shirts start from eighty five dollars and are delivered in just two weeks with proper Cloths perfect fit guarantee. Remakes are completely free and expert staff are standing by to help. For premium quality, perfect fitting shirts, visit proper cloth dot com Custom shirts made Smarter. I want to bring in Brendan Brown, chief economist and head of economic research at Mitsubishi u f

J Securities. UH Brennan, you wrote about how the US can win currency wars, and I want to get to that, but I want to start with something else that we're talking about earlier in the program, about how the bond market right now is is sending a veto to the FED as far as hiking rates in March, and I wanted to ask you, do you agree that the FED would accept the bond markets guidance as absolute It would only would only high rates if the bond market was

absolutely pricing it. Do you agree with that? I don't agree with that at all. I think the bond market at the moment is entranced by the FED, as are many other markets. Um. If you look at for general way markets behaving been behaving in recent week, stock market up, gold market up, credit credit spreads down, you've got a general vibrant asset price inflation going here. And that's dominated I think by a perception of FED is being pretty easy. If not the easing policy, you have to go back

to an observation of Milton Friedman. But you can't you can't measure the stance of monetary policy by looking at interest rates at a time when growth is accelerating everywhere around the world. If rates in the US only go up twenty five basis points once a year, the US is actually expanding monetary policy at a at a more rapid rate than ever before. Well, does that bode well

for our future economic performance and the future asset prices? No, because I think what we're seeing in the US is classic to many other asset price inflation cycles we've seen in the US. But you get to a fairly late stage, like in early two thousand and sixteen, where the asset markets look very shaky. The FED comes in and does the greenspan poot or a strong pood or a yell and put whatever you want to call it um six

months down the road. If it works, the whole global economy begins to pick up, asset markets begin to look frothy, And I think that's where we are now. But we know from previous history that that sort of late cycle doesn't normally end up well. Well. Okay, So given the fact that we're in a sort of later cycle in the credit in the credit markets, you have an unpredictable president in the United States. You know, you have a federal reserve that may or may not hike three times

or more this year. How do you then go from that to pricing in the path of the US dollar. Well, the US dollar is dominated by first of all, perceptions of relative strength around the world, the US economy versus everyone else, plus perceptions about the extraordinary policies being followed

in Europe and Japan. So at the moment, the dollar is sort of looking a bit weakish, especially against the yend, because of the perception that Janet Yellen is going very slow in rate rises and may not raise rates at all in April we were on March. We don't know, um, but if if, if that perception changes, then the dollar will change with that. What's the biggest miscalculation that you've experienced,

let's say over the last twelve months. Now, that's something you thought was going to happen with that wasn't going to happen, and it came back to the face. Well, that's put it this way. When the Fed exercised the yell and put last and effectively backed away from any rate rises, Um, could one be sure that was going to work? But it was going to bring a rebound

in markets and an acceleration in economic recovery. I certainly had that as a scenario, But if I go back and look at my work last spring, I was probably giving that scenario thirty or forty probability as against. So, yeah, what's your highest conviction forecast right now? My highest conviction forecast is that we're going to see continue to see quite a strong growth momentum around the world for several quarters, um.

But but within six quarters to two years, I think, like all previous late cycle monetary inflations, this is going to end up badly, gonna end up badly. Well, is there anything, Is there any way to protect oneself? Well, I think I think for the way to protect oneself against these outcomes of the obvious ones m long positions

and got positions in long treasury bonds, positions and equities. Um. But as you as as we know, Arthur Miller famously said, but if it's Wednesday in the market and enough people think it's thirsty, then it's thirsty. But of course, after a hundred Wednesdays, people may begin to realize it's not thirsty. I want to thank you very much for joining us Brendan Brown on This Monday, chief economist and head of

economic research at the Mitsubishi u f J Securities. Last week, Bloomberg's Michael McKee sat down exclusively with Mexico's economy minister uh and he found out some interesting, interesting tidbits about Mexico's approach to negotiating trade with the U. S. Let's take a listen. You'll never an engage in a knew that look with the with the idea in your mind to go into a trade war that will be a

loose proposition proposition for both nations. You rather engage in a very propositive view trying to move forward an agreement that will benefit Canada, the US and Mexico. We hear a lot about whether or not Mexico is going to talk with the US, but we're getting maybe perhaps a clear sense of what lines are being drawn. To get more of a sense of that is Eric Martin, economy reporter for Bloomberg in Mexico City. So Eric, what was

the big takeaway for you from this interview? The big takeaway is that Mexico is absolutely and unequivocally unwilling to accept tariffs being added to NAFTA, The idea is that this is a free trade agreement, and so if you start talking about trade which is in some way limited by definition, it stops becoming a free trade agreement. In Mexico has been very firm on that stance, and they've reiterated in various ways, but perhaps never as forcefully as

Minister Guaharda last Friday. Can you talk to the issue of whether this really is a trade agreement that needs to be updated. Let's put the political rhetoric to the side, but are there some things that need to be renegotiated given the fact that this is a treaty that was completed before the iPhone was released. Kim, certainly that is a point of view that's popular even among the people who wrote NAFTA negotiated it more than twenty years ago.

I spoke in January with Carla Hills, who was the U S trade negotiator, and she compared it to a house that needs some remodeling and repainting, but that when you have an old house that still serves, you don't knock down the house. That was a metaphor that she used, and with NAFTA, it was before the iPhone. There was no e commerce, No Amazon, Uh, there was very little

done in terms of intellectual property protections. Then Mexico had enshrined in its constitution a prohibition on foreign in private companies being involved in oil exploration and production. Here, so all of those areas are areas that Mexico has said should be incorporated into an AFTAH. The law has since been changed to welcome that kind of foreign investment in

the oil and energy industry. And so those are some of the areas where Mexico has said, yes, definitely, twenty three years in, we should be updating, we should be modernizing. What we don't want to do is adopt any rules in any tariffs that would take a step backwards and would interrupt supply chains, would put an end to some of his integration that has been so key to the increase in trade between the two countries. Right, well, Eric, then let's look at it from the US point of view.

If Mexico will not negotiate any deal that even talks about tariffs, will the U US negotiate a deal that does not include tariffs? You know, that's a question that everyone is asking. Steve Manuchin was out last week saying that the US is interested in a scenario or in a solution that would be a win win situation for Mexico and the US. And UH, you know, a lot of Trump's kind of emissaries and deputies have been making positive statements about NAFTA and about working with the US.

But then you have in the beginning of January, Trump tweeting about General motors and Toyota imports to the US, threatening a tariff which not only would violate NAFTA, but would also violate the norms of the w t O. And so for Mexico, Uh, the real nightmare scenario is not Trump leaving NAFTA. The minister said, that's something Mexico

can essentially live with. Uh, it's the concern that Trump would leave the w t O or adopt policies to violate the w t O. But in that case, it's a concern and a problem not only for Mexico but for the entire world and the multilateral trading system. If the United States seeks to amend or change the World Trade Organization's relationship with the countries trade and tariff laws, what's likely to trans transpire. There would be any number

of legal challenges. Countries could adopt reciprocal measures that mirror U S terroiffs and quotas. Really is a spiral, a death spiral for globalization as we know it, and it would cause all kinds of distortions and issues in terms of international trade. I mean, that's what really every endalyst who we speak to tells us. Now, I want to thank you very much for joining us. Eric Martin is our economy reporter for Bloomberg News in Mexico City, giving us an update on any revamp or a change or

renegotiation to the North American Free Trade Agreement. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at iTunes, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm out there on Twitter at pim Fox. I'm out there on Twitter at Lisa Abramo. It's one before the podcast. You can

always catch us worldwide on Bloomberg Radio. P and L is brought to you by proper Cloth, a leader in men's custom shirts, with proprietary, smart sized technology and top rated customer service. Ordering a custom shirt has never been easier. Visit proper cloth dot com to order your first custom shirt today,