Sunday, August 2, 2009

Some Single-Payer Ideas for Racing

President Obama and the Congressional Democrats may have backed off the single-payer concept for health care, but that doesn't mean it's a bad idea. In fact, the single-payer concept could be very useful indeed in a restructured racing industry. In particular, the single-payer concept would work well in three different parts of the racing game: (1) simulcasting; (2) workers' compensation insurance, and (3) health care for backstretch workers. Let's take a look at how this might work.

First, a quick definition of single-payer systems. It's just what it sounds like: one entity pays all the costs (and sometimes provides all the services) in a defined economic area. In the US, the great successful example is Medicare. For those of us 65 and over, it's a wonderfully simple system: you go to the doctor or hospital, the government pays the bill, minus a very small deductible. Most other industrial countries use the same approach to health care for their whole populations. Not only is it cheaper (no bloated administrative costs for insurance companies, much of which is spent on advertising or on trying to deny coverage), but the results seem to be better as well; the US ranks at or near the bottom on most international health measures.

So how could the single-payer concept work in racing? Let's look at the three possibilities.


First, we can all agree that racing's simulcasting system is a mess. Different bet-taking companies make separate deals with different tracks, and conflicts between the tracks, the horsemen and the off-track betting outlets are legion. For their part, bettors have to go to multiple platforms to bet the races they're interested in, subscribe to multiple cable or satellite TV feeds (TVG, HRTV, etc.), and generally navigate a very unfriendly web environment. This was one of the best racing weekends of the summer, with the Haskell, Jim Dandy and West Virginia Derby, yet there was no national television coverage, and no simple way for the average racing fan easily to see and bet on all the races. The fact that Rachel Alexandra's dominating Haskell win (if she wins the Travers as well, shouldn't she get the Eclipse Award as champion three-year-old colt?) was an incredibly stupid waste of an opportunity to build a racing fan base. I don't care if the NTRA is broke; this was one weekend for which they should have held a bake sale to get the races on national TV.

My Thoroughbred Bloggers' Alliance colleague Patrick Patten recently posted an idea for a single-entity company that would handle all of racing's simulcasting. Definitely worth reading in full. Basically, Patrick's plan would have a single platform, jointly owned by the tracks, that would both buy and sell all the individual signals. As envisioned in Patrick's post, all tracks would get together and form a company that would have the exclusive right to buy all the simulcast signals and then would in turn sell those signals, both to other tracks and to off-site bet takers such as OTBs, casinos, dog tracks, jai alai frontons and internet racing sites.

The simulcast company would need to fall under some sort of antitrust exemption, since it would involve cooperation by tracks that would otherwise be seen as competitors. While the National Football League is currently pursuing a Supreme Court case that might extend antitrust immunity broadly in the sports business (currently, only baseball has complete immunity), my own reading of the law is that it wouldn't be so easy, under racing's current fragmented ownership structure, for a racing simulcast company to qualify for the exemption so as to exercise the needed monopoly power. [You can take that legal opinion for what it's worth; I'm a tax and trusts and estates lawyer and don't practice in the antitrust field.] But if racing were actually organized into a formal league structure, as I suggested a couple of weeks ago, then the legal case is much stronger. In a league structure, the individual teams (or race tracks) are all parts of one entity, and that entity can set the rules for broadcasting its events. A closer parallel to racing than the NFL might be NASCAR, which operates as a unitary entity even though the individual tracks have different ownership. The cars and drivers in NASCAR compete in various divisions, or classes. Sounds a lot like the different Eclipse Award or Breeders Cup categories.

Presumably, one effect of channeling all simulcasts through a central entity would be to smooth out differences in takeout, and in the fees paid and received by betting outlets and tracks. If so, there could at least be a mechanism for reducing takeout, which ought to be good for betting handle growth, while at the same time guaranteeing a fairer share of simulcast betting revenue to the horsemen who put on the show. My own preference would be for such an entity to be owned not just by the race tracks, but also, or alternatively, by owners and trainers. A jointly owned and managed simulcasting entity would be far better than the current mess in which both racing fans and horsemen are ill-served.

Workers' Compensation

Some seven years ago, Price Fishback and Samuel Allen of the University of Arizona Economics Department accurately pointed out that horse racing had a workers' compensation crisis. The cost of providing workers comp coverage for trainers' employees had gotten too high for most trainers to afford, and differences between states made it difficult or impossible for trainers to move their horses from one track to another without incurring crippling premium costs. Their conclusions were adopted by the National Horsemen's Benevolent and Protective association (HBPA) in a report, also drafted by Allen, in 2003.

Seven years later, that crisis is still with us. Trainers are being forced out of business by the high cost of workers comp. Steve Standridge, among the leading trainers at Calder, was forced out for a while because his insurance carrier canceled his policy. And the cost of insurance continues to go up. My own trainer has been forced to add a separate item to his monthly bill for the cost of insurance, and trainers who try to incorporate that cost in their day rate find that their owners complain about ever-higher costs.

The only states that have some sort of solutions to the problem are Delaware and California, where there are state-wide policies covering all backstretch workers, rather than each trainer having to get his or her own policy, and New York, Delaware and New Jersey, where jockeys (and, in New York, exercise riders) are covered under a separate fund and so not included in a trainer's obligations. None of these solutions are cheap, though. The jockey/exercise rider coverage in New York is financed by a 0.75% deduction from every purse (a couple of hundred dollars from a typical allowance win purse); over the course of a year that's not an insignificant amount, and it still leaves the trainers liable for covering grooms and hot walkers.

So what's the solution?

The recommendations of those old reports referred to above are still perfectly workable: (1) a "captive" insurance company, owned by horsemen, that would qualify to offer workers comp insurance in all the major racing states, or (2) a federal program, with the US government as the "single payer," that would offer workers comp contracts that crossed state lines and that would be required to be honored by the various states. But, since even a government option, along the lines of Medicare, to offer health insurance for all Americans seems to generate considerable know-nothing opposition in Washington, one shouldn't hold out all that much hope for a federal solution. That leaves it up to us, horse owners and trainers, to do it ourselves and set up our own insurance company.

Backstretch Health Care

[Disclosure: I'm a member of the Board of Directors of the Backstretch Employees' Service Team (BEST), the health and counseling program for backstretch workers at NYRA tracks, as is my wife -- I'm appointed by the NY Thoroughbred Horsemen's Association and she's appointed by NYRA, so I guess that proves the two organizations can work together.]

The grooms, hotwalkers, assistants and night watchmen who care for thoroughbred race horses are among the lowest paid and least protected full-time employees in the country. Most trainers can't afford to offer their employees health coverage, and most backstretch workers can't -- or are afraid to, because of their immigration status -- qualify for free care, through Medicaid or similar programs.

Now, if we had true national health care -- the single-payer system that most other countries have that simply covers everyone -- then there wouldn't be an issue. But we live in America, not in Utopia, nor even in what passes for the rest of the civilized world. So, even if some sort of health care bill emerges from Congress, it's likely that coverage will not be truly mandatory for the smallest of small businesses -- like most thoroughbred trainers. The current version of the House bill, for example, does provide a tax credit for small businesses that do provide health care to their workers and allows small employers to join in larger insurance pools, rather than purchasing separate policies. In addition, the bill would exempt employers of 25 or fewer workers -- which would probably include 90% or more of thoroughbred trainers -- from its "pay or play" fees, thus permitting these small employers not to offer coverage.

Todd Pletcher or Steve Asmussen could afford health coverage for all their employees (Asmussen could probably get a good start toward paying for the policy with what he earned in 10 minutes on Saturday afternoon). But most trainers can't. It might well cost them $10,000 for health insurance for a worker whom they're paying $15,000-$20,000 a year. The economics just won't work. So the solution has to be some sort of collective action.

The NYRA/NYTHA/BEST model is by no means perfect. It covers only the people who actually work at the track, not their families, and it is subject to fairly low limits on total coverage. Not so long ago, the amount contributed to backstretch health by NYRA was enough to cover trainers, their assistants, backstretch workers and their families. Now, with NYRA's contributions continuing at their historic level, and with NYTHA (out of the owners' purse money) adding another $500,000 a year there's barely enough to cover just the grooms and hotwalkers. But it's still better than the situation at most other tracks, where workers have no health coverage at all.

Here's how the New York plan works: because backstretch workers are not employed by the track, but by individual trainers, NYRA can't just set up an employee health care plan the way most employers would. Instead, it's created an independent organization, BEST, which is a 501(c)(3) charity and which in turn has established a fund which in tax and labor law terms is "voluntary employee benefit association," or VEBA, that actually pays the health care costs. As it has evolved in New York, BEST operates an on-track health clinic and the VEBA pays for off-track doctor, lab and hospital costs, acting as a self-insurer, mostly because no insurance company is particularly interested in providing coverage for a low-wage group like backstretch workers.

As I said, the New York model is by no means ideal; we'd love to be able to cover families, as well as those trainers and their assistants who can't afford individual coverage, and we wish the limits on benefits were higher. But at least it's something.

The model could easily be extended to tracks across the country, and could be financed with matching funds from the tracks and the horsemen, plus the aggressive pursuit of federal, state and chaitable grants. With all the money being raised these days for thoroughbred retirement, one might hope that there could be a bit raised as well to care for the people who care for our horses.

Are these solutions to simulcasting, workers comp and health care easy? Of course not. Are they possible? Yes. With a little effort (well, with lots of effort) and with a willingness to submerge or individual or corporate selfish interests for the greater good of the sport that we love, we can overcome.

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