The business of health care reform

MOST GREAT American fortunes were made by capitalists who used the power of government to gain advantages over competitors or to profit from public resources.

For example, the Gilded Age plutocrats—the Vanderbilts, the Astors, the Stewarts, the Goulds—built their railroad-based fortunes on the foundation of $100 million in federal and state grants and 200 million acres of federal land grants.

The Dupont chemical empire owed much to U.S. seizure of German chemical patents and government assistance in building its plants during the First World War. The modern nuclear power industry and the Internet are both products of the privatization of technologies developed in government laboratories.

Or consider the Telecommunications Act of 1996, one of the main legislative achievements (besides ending welfare) that Democratic President Bill Clinton claimed in that election year. The bill, passed overwhelmingly with little public debate and quickly signed by Clinton, took down barriers of ownership and transmission rights of content among major media, radio, phone, and Internet companies.

Although the industry promised a new era of competition that would lead to lower prices and greater choice for consumers, the exact opposite developed. The act unleashed a bacchanal of media mergers and industry consolidation.

In the decade following its passage, cable television rates jumped by almost 50 percent, and local phone charges increased by 20 percent. Under the law, the government gave away to broadcasters digital TV licenses that were valued at the time at $70 billion—one can only guess what they are worth today.

All of this for a total industry investment in the Democratic Party of about $309 million.

Despite the free-market rhetoric that claims “Big Government” and “Big Business” are pitted against each other, big business has always found it useful to invest in politicians and their political parties to win government policies that improve their bottom lines.

Karl Marx’s collaborator Frederick Engels described American political parties as “two great gangs of political speculators, who alternately take possession of the state power and exploit it by the most corrupt means and for the most corrupt ends—and the nation is powerless against these two great cartels of politicians, who are ostensibly its servants, but in reality exploit and plunder it.”

It is worth keeping this history—and Engels’ observations from a century ago—in mind as we observe the end game of the current health care reform debate. The media have tended to view the fight over health care reform as pitting a liberal government bent on providing a new health care entitlement to the uninsured against industry and conservative forces fearful of a “government takeover” of the U.S. health care system. Of course, reality is a lot more complex than that.

Where does business really stand? It simply isn’t the case that noble Democrats for health reform stand on one side, arrayed against the evil health insurance lobby on the other. In fact, the health insurers are playing both sides of the fence, as big business always does in “bipartisan” Washington.

The insurance, pharmaceutical, and hospital industries realize two things: first, the current model under which they reap their profits is unsustainable; and second, for the foreseeable future, Democrats are going to be in charge of Washington. So their leading lobbies have made the calculation that working with (rather than against) the Obama administration and congressional leaders will help them to reach their objectives.

Like the nineteenth century railroad barons who built their fortunes from the public trough, the health care lobbies can spot a bonanza in the making. If Congress establishes a government requirement for everyone to buy health insurance—a core idea of all the current health care bills—the insurance industry will reap a huge windfall.

This doesn’t mean that the health care industry lobby won’t try to shape the legislation that emerges even more to its advantage. Obama and the Democrats have made clear that they will make major concessions to keep these “stakeholders” on board. So health insurance lobbyists are pushing for as much as they can get away with and still have the potential of portraying the end result as a “reform.”

For this reason, the industry has lavished attention on the leading conservative Democrats on the Senate Finance Committee—Max Baucus, Kent Conrad, Bill Nelson, and Thomas Carper—to produce what Justin Ruben, executive director of the liberal lobbying group, called a “dream come true for the insurance industry.”

The Senate Finance Committee version of the health care reform legislation has everything the industry could want: the “individual mandate,” billions in government subsidies for the uninsured, a lower requirement for the percentage of care coveraged under insurance than other bills in Congress—and no “public option”—a publicly funded competitor to the private health insurance industry.

Even if some of these provisions are softened in subsequent congressional action, they have set down markers that assure the industry is going to get much of what it wants from health care reform.

The health care industry lobbies that have worked with the administration and Democrats to shape reform might be called the “pragmatic” wing of the health industry.

At the same time, there is an ideological wing of business allied with political conservatives that opposes health care reform completely. These are the people who ginned up the crowds that turned up at August town hall meetings, as Tim Dickinson’s exposé “The Lie Machine” in the September 23 issue of Rolling Stone described:

Behind the scenes, top Republicans—including House Minority Whip Eric Cantor, Minority Leader John Boehner, and the chairman of the GOP’s Senate Steering Committee, Jim DeMint—worked hand-in-glove with the organizers of the town brawls.

Their goal was not only to block health care reform, but to bankrupt President Obama’s political capital before he could move on to other key items on his agenda, including curbing climate change and expanding labor rights.

The business interests involved in the Republican road show weren’t the leading organizations of the medical-industrial complex, but ideological conservatives who fund right-wing organizations like Freedom Works and Conservatives for Patients Rights. The latter organization is the brainchild of former Columbia/HCA CEO Rick Scott, who was forced to resign his position amidst charges that he defrauded millions from Medicare. But if you peel away the layers of Republican-allied front groups, you find that some of the same health care industry corporations whose official voices in Washington are working with the administration are also funding these opponents of reform.

The health care industry lobbies are using a pincer move on health care reform and its legislative water carriers. From the one side, they work “constructively” to make sure that reform legislation friendly to them passes. On the other side, they work with opponents of health care reform to stoke fears of a “government takeover.”

From the one side of the pincer, they can get most of what they want. But they’re also advancing from the other side to make sure that a “public option” (what they call a “government takeover”) either doesn’t pass or is so weak that it will offer little competition to the private health insurance industry.

As more people have looked at the developing health care reform legislation, they have figured out that forcing people to buy lousy private insurance may be an untenable position to sell to the public. For that reason, the “public option” has remained alive despite industry attempts to kill it.

It may yet find its way into a final bill. If so, most likely, it will resemble New York Senator Charles Schumer’s “level playing field” idea. This innocuous-sounding provision is really about making a government-run insurance system operate by the same rules as private insurance—thereby taking away any potential benefits to consumers that a low-cost government-funded program could offer.

The smart money is still on health care reform’s passage. Too many big industry players, not to mention the Democrats and the president, are invested in seeing something pass. If it passes, what will become of the corporate interests who are warning us today that “Obamacare” will send us down the road to serfdom? Like the robber barons of the past, and the Rick Scotts of today, they’ll set to work “exploiting and plundering” the new market that “Big Government” just handed to them.


Issue #76

March 2011

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