Wednesday, November 05, 2008

Morgan Stanley Reacts to Obama's Election

Here's some snippets from Morgan Stanley's analysis this morning of the Obama Election as it pertains to Human Resources:
Cost of Labor

Senator Obama would impose a new payroll tax (between 2% and 4%) on incomes above $250,000. The tax would be imposed on both the employee and the employer, increasing the cost of labor. However, some employers would qualify for the new worker tax credit (up to $3,000 per employee) for firms that are increasing their number of employees.

Miscellaneous Business, Labor and Manufacturing

A handful of other commercial issues currently dominate the attention of lawmakers and federal officials –payday lending reform, credit card abuse, union elections, infrastructure improvements – and Obama has identified each as a priority in 2009. In general, Obama supports a more consumer protection-oriented approach than McCain would have. A good example was the Obama campaign’s focus on payday lending abuses. To protect lower-income individuals, Obama has announced his intention to cap interest rates on payday loans at 36 percent, while seeking to provide borrowers with clearer, simplified disclosures on loan fees, payments and penalties. He would encourage banks and credit unions to increase small-denomination, short-term consumer loans.

Organized labor will see a significantly more receptive White House under Obama than in past years under President Bush. To wit, Obama has received grades of 100 percent from the AFL-CIO and 94 percent from the Service Employees International Union for his labor efforts in the Senate. Increasing the minimum wage has been and will remain an Obama priority. In the 110th Congress, Obama voted in favor of increasing the minimum wage to $7.25/hour. He has announced his intention to continue to seek minimum wage increases and will look to index the minimum wage to inflation.

To reverse the waning influence of unions in American business (union participation has declined from 24 percent of American workers in 1970 to 12 percent in 2006), Obama will look to enact the Employee Free Choice Act, a bill to make union organizing easier by eliminating the secret ballot from union elections. Most businesses have opposed the concept and other efforts to increase the role of unions. If successful, Obama’s labor policies will drastically change the dynamic of labor relations that has characterized the past several decades in American commerce.

Health Care

As polls suggested for months preceding the election, a primary concern on the minds of the American public is health care. This was another issue that painted a deep contrast between Obama and McCain. As a senator, Obama has voted several times to expand funding for health care programs, including the State Children’s Healthcare Insurance Program (SCHIP), which Obama would use to increase health care funding for both children and certain adults, using proceeds from tax increases in other areas. In 2007, he voted in favor of allowing seniors to purchase cheaper prescription drugs from Canada and other developed countries.

Obama has given health care a central position in his domestic agenda for 2009. Seeking to expand coverage to many of the 47 million uninsured Americans, the Obama campaign trumpeted its health care plan that “provides affordable, accessible health care for all Americans, builds on the existing health care system, and uses existing providers, doctors and plans to implement.” Central to the plan is a requirement that all children be covered (coverage would not be mandatory for adults), paid for with aforementioned tax increases on households making over $250,000. He would require employers to pay at least some of employees’ health care costs.

Obama would require insurance companies to cover pre-existing conditions; seek to lower costs for business by creating a small business tax credit to help them provide insurance to employees; prevent insurers from overcharge doctors for malpractice insurance; establish a national insurance exchange that includes a range of private insurance options; and establish a tax credit program to allow low-income families to afford premiums. He continues to support lowering the cost of prescription drugs by allowing importation from other countries and by encouraging the use of generics.

Some of the highlights of Obama’s Healthcare proposals include:

Expanding Access to Coverage

  • Require all children, but not adults, to have health insurance
  • Require employers to offer health benefits or to pay into a national insurance fund
  • Expand Medicare and the State Children's Health Insurance Program
  • Create a national health insurance exchange through which individuals and small companies could buy coverage from private insurance plans or a new government insurance option
  • Provide people who are currently uninsured an unspecified tax credit to help buy insurance.

Coverage for People With Existing Illnesses

  • Require "guaranteed issue," prohibiting insurance companies from denying coverage or charging higher premiums to people who are sick

Controlling Costs

  • Aim to improve prevention and management of chronic diseases
  • Devote $50 million to promote health information technology
  • Promote the use of generic drugs, instead of more expensive brand-name ones
  • Reduce payments to private Medicare health plans

Improving Quality

  • Support research into medical effectiveness and promotion of the best practices
  • Foster more reporting of quality and price data
  • Address health disparities for different racial and ethnic groups

Obama should get a quick and early victory in the health care area by expanding those covered by the SCHIP program. He also will look to bring down the eligible coverage age for Medicare to 55, expanding this program from the top down. The federal government’s swelling balance sheet and focus on the credit crunch, however, will likely exhaust the actual and political capital that Obama will need to pursue his more ambitious health care plans. Although Congress will be generally sympathetic, it may be somewhat constrained by the realities of economic turmoil in the short- to medium-term.

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