There is something about a large federal program that makes it impossible for every stakeholder to resist trying to bury a clause or two for his own enrichment. Probably the money.
I realize this isn’t new. Railroad construction was a scam of epic proportions in a growing nation, not because of the profitability of the rail operations – most went broke from low demand and the looting of management, setting the stage for Amtrak – but for the land and mineral rights the government provided. Herman Brown and a young Lyndon Johnson schemed to have World War II pilot training moved to Corpus Christi Naval Air Station, not out of any military logic but simply so Brown & Root could build the base. Pat Leahy had Lake Champlain deemed a Great Lake – quite a surprise, no doubt, for the other five – so Vermont could grab some more Federal dollars. Just last month Barney Frank had the Taunton River deemed a wild and scenic waterway to prevent a liquified natural gas facility from being built there. Why would someone want to put an LNG terminal on a scenic river? Because this is the scenery, and the terminal would replace the five oil storage tanks sitting there in white on the right side of the picture:
The shame is that this sort of petty-ante theft doesn’t stop when the stakes get higher. The TARP, for example, saw outrageous gifts; whatever you think of the government’s decision to invest in Goldman, surely the terms were concessionary. Billions of dollars ended up flowing to the UAW to cushion the bankruptcy proceedings of GM and Chrysler. Now we are seeing warrants bought in on whatever secret terms the government negotiates, because no one thought to requre Treasury to maximize taxpayer returns (charitably, one might have thought that was taken care of when people went to work for the taxpayer).
Harold Myerson has an excellent article in today’s Washington Post describing the health care negotiations:
The Blue Dogs want to reduce payments to doctors except in the rural areas they disproportionately represent, where they want to increase them. They oppose, so far, the public option, though it would be the most effective way to bring down costs in their districts.
Over at Senate Finance, judging by the reports coming of the committee, a solonic gang of six — three Democrats, including chairman Max Baucus of Montana, and three Republicans, including ranking member Charles Grassley of Iowa — are turning out a bill whose resemblance to anything the president has championed is accidental and incidental…The solonic six, in other words, seem on track to produce a plan that falls short of universal coverage, omits the savings that a competitive public plan would create, and might actually make health care harder to get.
Alas, it would appear that Harold’s words are too late, for the word is that Henry Waxman has already caved – with White House encouragement:
Under the agreement between Waxman and the Blue Dogs, House Democrats retained the idea of creating a government insurance program, which they believe will help drive down costs and give many consumers a new insurance option. But the deal takes steps to ensure that the government plan would not gain advantages as a result of the federal management of Medicare, the insurance program for seniors that can negotiate low rates for services because of its massive size.
Originally, the government insurance plan would have paid doctors, hospitals and other providers a rate set slightly higher than Medicare’s. Insurers and hospitals, as well as many lawmakers, feared that arrangement would mean the government plan would incur lower costs than private insurers and could charge low premiums — driving companies out of the market. Consumers, critics said, ultimately could be left with only one choice for health coverage: the government.
Under the deal struck Wednesday, the government insurance plan would have to negotiate with hospitals and other providers apart from Medicare. That could make it harder for the federally run plan to charge very low premiums.
Rep. Mike Ross (D-Ark.), a leading Blue Dog who worked on the House deal, called the changes to the government insurance plan “a huge win.”
Do Waxman – and Hoyer and Pelosi and Obama – even know how much of a win this is for the insurance companies? Do they know who Mike Ross defeated?
One of Obama’s specialties is letting all people see in him what they want to believe. Perhaps he wanted to bail out the shareholders of the financial institutions, and just let it appear that he was dragged into it. Perhaps he always hoped to have the stimulus package hinge on tax cuts, and only gave the illusion of being forced into it. And just perhaps he doesn’t want a viable public option, and is letting the Blue Dogs do the heavy lifting.
If so, we’re done for.
If not, he is going to have a lot of pushing back to do. It begins by realizing that while this is an inconsequential detail to just about every American, the change actually dynamites the entire plan. Operated within Medicare, the new public option would have limited marginal administrative costs. It would have a large pool from the beginning, with leverage over virtually every provider. I don’t understand – not I don’t support, I do not comprehend – why there was ever a proposal to pay x% above Medicare rates in the public option. If Medicare rates are too low, or geographically unfair, or anything else, then change the Medicare rates. If a doctor is willing to perform a procedure for $d for a Medicare patient, in exchange for the opportunity to serve the large population of Medicare patients, he should surely be happy to continue performing procedures for $d for access to the combined Medicare and public option populations.
By contrast, stripped of Medicare support and pricing negotiation, the public option is a startup insurance company, no more and no less. Actually, a lot less – it has to hire the worst administrators (everyone in the sector already either went for the money at a private operator or the security at CMS), it has the nimbleness and marketing savvy of a government agency and the purchasing power of the smallest guy in the industry, and it will almost certainly have a disaster of an insurance pool. It will be the one sucker offering community rating in a risk rating game. It’s like joining a poker table and playing cards-up.
Furthermore, this will be Obama’s only bite at the apple. Once he has the Rose Garden signing ceremony, he can’t go back and say “that wasn’t my plan, this is my plan.”
Better to veto it, make your bones, and force everyone to spend 2010 doing it all over again.