Good Americans

by digby

Krugman writes about the new health industry lobby initiative today and says much of what I was going to say about it. The first bell that started ringing in my head was the odd idea that these health care trade associations and business interests were “offering” to cut costs over the next ten years simply because they are good Americans, as one administration official characterized it. And not only are they doing it out of patriotic duty, when asked how their promises were going to be enforced, the administration said the media would do it. The fact that the medical industry is making this commitment publicly to the president of the United States somehow means they have to live up to their promise, which is so odd I don’t know quite what to say.

Having said that, I have to believe that the administration truly wants to reform health care. Its failure would be a serious blight on the administration’s legacy and hobble Obama in reelection so it’s impossible to believe they actually believe the industry is operating out of altruism and that the media is an adequate enforcement mechanism. So, this has to be some kind of kabuki, political strategy. The question is to what end?

Although the official line is that the industry just spontaneously approached the administration with this fully formed plan, the fact is that it greatly resembles what the insurance lobby has been pushing for some time. Michael Hilzik of the LA Times wrote about this last March:

The genius of modern marketing is pouring old material into new packaging. Over the years this has given us yogurt in tubes, prechopped salad greens in cellophane bags and, most recently, the health insurance industry’s new image as a friend of reform.

In December, the industry’s trade group, AHIP (for America’s Health Insurance Plans) revealed that it had experienced an epiphany and decided for the first time to support the principle of universal healthcare — insuring everyone in America, regardless of health condition. It described its change of heart as the product of three years of sedulous soul-searching by AHIP’s board of directors, who claimed to have “traveled the country and engaged in conversations about healthcare reform with people from all walks of life.”

As a connoisseur of health insurance lobbying practices, however, I withheld judgment until I could scan the fine print. What I found by reading AHIP’s 16-page policy brochure was that its position hadn’t changed at all. Its version of “reform” comprises the same wish list that the industry has been pushing for decades.

Briefly, the industry wants the government to assume the cost of treating the sickest, and therefore most expensive, Americans. It wants the government to clamp down hard on doctors’ and hospitals’ fees. And it wants permission to offer stripped-down, low-benefit policies freed from pesky state regulations limiting their premiums.

As for universal coverage, which is the goal of many reformers (if not yet the Obama administration), the industry will accept a government mandate to take on all customers, as long as all Americans are required by law to buy coverage.

Parsing the insurance industry’s stance on healthcare reform will be of paramount importance this year. President Obama’s healthcare forum on Thursday demonstrated that the administration and Congress are girding for a big push to remake a tattered employer-based system that has left more than 45 million people without coverage.

[…]

The insurance industry understands that at this moment, with the political establishment thinking reform, it pays to make nice. In a speech not long ago, Sen. Ron Wyden (D-Ore.), who has sponsored a bill that would unlink health coverage from employment but leave a role for insurance companies, warned the industry against trying to scuttle reform as it did under Clinton. “I told them, if you do what you did then, you may hold off reform for a bit, but you will hasten the day when there’s a government-run healthcare system,” Wyden said. The warning may have inspired AHIP Chief Executive Karen Ignagni to tell the Obama summit: “You have our commitment to play, to contribute and to help pass healthcare reform this year.” (On the coy and noncommittal scale, this statement rates a 10.0.)

Ignagni can afford to be gracious because no specific reform plan is yet on the table. But veterans of the last reform battle warn that the moment concrete proposals appear, the insurance industry will deploy in force to kill anything that threatens its profitability and freedom of movement, such as an expansion of public insurance programs or tighter federal regulations. No one should take the summit’s atmosphere of good fellowship as a harbinger of what lies ahead. “Everybody’s very ‘Kumbaya’ right now,” observes Jonathan Oberlander, a healthcare reform expert at the University of North Carolina.

The insurers think government intervention is fine if it applies to customers they don’t want. The way they put it in their reform plan is that we need a system that “spreads costs for high-risk individuals across a broader base” — the base consisting of all taxpayers, that is.

The industry says that it’s going to streamline their processes and do such things as “cost bundling” and build in new efficiencies industry wide that will result in savings, which is all to the good. The waste that goes into administrative costs is nearly criminal. But Hilzik points out something that should be obvious to all of us:

AHIP’s commitment to an improved healthcare system is skin-deep. It endorses the quest for lower costs, more efficiency, and the fair and impartial resolution of claims disputes. Achieving these ends always has been within the industry’s power, but it never seems to make any progress toward them.

For example, AHIP says it believes that “administrative processes should be streamlined across the healthcare system.” But at its member firms, the administrative complexity only proliferates. I know doctors who now have to split their working hours 50-50 between seeing patients and dickering with insurance companies over claims and preauthorizations — a vast increase over the time they spent on administrative chores a few years ago.

The industry talks a good game about marching for reform side by side with all healthcare stakeholders — patients, drug manufacturers, doctors and hospitals. Ignagni says her members will “come to the table with real proposals and solutions” rather than “the old-fashioned playbook of ads and 30,000-feet campaigns.”

Veterans of earlier healthcare battles justly wonder if the industry is merely trying to get in front of the parade, the better to lead it into a dead end.

The administration says this group hasn’t asked for anything in return, but it’s pretty clear that the thing they fear the most is the public option:

America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni told Schumer that AHIP “appreciate[s] how thoughtful you are working to reconcile all these different views” but insisted that private insurers would be unable to fairly compete with a Medicare-like public plan that did not have the capital reserves of private insurers or the ability to build networks of providers:

There are a significant amount of Capital requirements that we need to meet, Medicare would have failed the capital test right now and so that is a very significant dollar figure that would have to be imbued into this plan and I know you’ve thought about that. The third issue is the payment issue…it would take a very long time, for government to develop the infrastructure to negotiate with physicians. Government doesn’t have networks, can’t put together networks, the Disease Management program failed in traditional Medicare and we all know why—because there’s no predictability with respect to who’s coming through the doors to the physicians’ offices, etc.

But here, Ignagni’s sense of fair competition is itself unfair. Ignagni does not want a new public health insurance plan to have any inherent advantages, but she’s insisting that private insurers preserve their advantage to create provider networks and enter or exit markets as they wish, etc. As Schumer pointed out, “it’s sort of as if you’re saying well the public advantages we should get rid of, but the private advantages we should keep. Let them compete.” (Listen here).

The administration says that Obama still “likes” the public plan. But it’s pretty clear that it’s on the table. I’ll leave it to the wonks to explain why that is terrible or acceptable, but it’s certainly reasonable to assume that the industry is not coming forward with a plan in partnership without geting something in return. They know very well that if a public plan is enacted in competition that it will at the very least break their monopoly and force them to actually do what they promised to do today. I assume the administration knows all this and is planning some complicated strategy to outmaeuver these people. At minimum, they may be able to forestall any more “Harry and Louise” ads from the industry, which would be helpful. The emphasis on cost savings (even to the extent that this initiative is being sold as an answer to the burgeoning deficit!) has an upside and a downside. The upside is that the industry may be able to influence their Republican allies to not fully exploit the debt issue as the reason to block health care reform. The downside is that the emphasis on cost savings focuses the issue on money, which I have grave doubts will accrue to the reformers’ favor. It’s obviously part of the equation and has to be addresses and so maybe this is the best way to do it. But I’m skeptical.
It certainly doesn’t help to have allies like Donna Shalala on MSNBC this morning saying:

In the 90s we had the money, but we didn’t have consensus. Now we have consensus but we don’t have the money.

And they have to be very, very careful that the Republicans (and the media) don’t exploit the “cost savings” by successfully characterizing it as “rationing.” (The industry letter proposing this new plan says things like “reducing over-use and under-use of health care by aligning quality and efficiency incentives,” which is very easily demagogued.) I hope the Dems are prepared for it.

I don’t mean to sound totally cynical. This is the most difficult issue out there by far. It’s hugely complicated with dozens of moving parts and a political system that is at best dysfunctional. But it seems to me that progressive activists have a job to do in this and that is to exert pressure on the politicians to keep their eye on the ball. The industry will do everything it can to insure that reform translates into their profits being protected. That’s their job. Ours is to insure that reform translates into universal, comprehensive health care for all Americans. (To that end, Move On is pushing the public plan and has been quoted saying it’s the most important issue they will deal with this year.) So, when dealing with these big business interests, skepticism must be our watchword. As much as the administration wants to spin these lobbyists as being good Americans who just want to help, I think it’s fairly clear that they work out of self-interest first. They would be fired if they didn’t.

Like Krugman, I think this is a good sign that everyone is very serious about pursuing reform. That Obama is putting his personal prestige on the line for it is meaningful. But all we can do is look at each piece of the puzzle with a clear eye and put it in its proper place on the board. And then hope it all comes together.

dday has more on this below.

Update: More links on this topic:

http://wonkroom.thinkprogress.org/2009/05/11/indudstry-cost-letter/

http://www.prospect.org/csnc/blogs/ezraklein_archive?month=05&year=2009&base_name=is_the_health_care_industry_on

http://swampland.blogs.time.com/2009/05/11/health-care-industry-steps-up-maybe/

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