Tough talk at HMOs will give way to corporatism

If Democrats really want to stick it to the health insurers, now is their chance. Odds are, however, Congress will follow President Barack Obama’s pattern of talking tough, but then pushing to enrich the companies at the expense of consumers and taxpayers.

America’s Health Insurance Plans, the health insurers’ lobby, invoked the ire of the White House and congressional Democrats on Monday by distributing a report arguing that the health-care overhaul before Sen. Max Baucus’s Senate Finance Committee would double health-care premiums for the average American. Democrats responded with a volley of vitriol and pledges of retribution.
Liberal congressmen have used AHIP’s critique of the Baucus bill as a rallying cry for the “public option” — a government-run insurer to compete with AHIP’s members — and Sen. Chuck Schumer, D-N.Y., has taken the opportunity to call for an end to the insurers’ antitrust exemption.

If Obama and Schumer really are interested in sticking it to AHIP, there are plenty of special favors for insurers that Congress could repeal, to the benefit of consumers.

Democrats could start by repealing the tax preferences for employer-based insurance — and replacing them with an across-the-board tax cut. Favoring employer-based insurance dampens competition among insurers, keeping prices high and quality low.
But the insurance exclusion accrues mostly to the benefit of union members. Also, candidate Obama savaged his Republican presidential opponent, Sen. John McCain of Arizona, for a similar proposal, so Democrats have left this one alone.

Insurers also enjoy extraordinary legal immunity under the federal ERISA law, which protects most employer-based insurers from liability if wrongful denial of coverage results in injury or even death.

Rep. John Shadegg, R-Ariz., pushed an amendment in the House Commerce Committee to end this favor, but Chairman Henry Waxman, D-Los Angeles, one of the top recipients of insurer political action committee cash, tabled Shadegg’s amendment.

Then there are the laws prohibiting interstate competition for health insurance. As a Maryland resident, if I choose to buy my insurance on the individual market (i.e. not through my employer), I cannot buy the insurance in Virginia, Washington, D.C., or anywhere but Maryland, even though rates may be lower. One result is a small supply of insurers in most areas — again, dampening competition and boosting prices.

While they’re at it, Democrats could reduce Medicare’s subsidies for private insurers, especially the prescription drug benefit, and save taxpayers some money.

So, will Democrats do anything to smash the government-created shelters that protect these companies from market forces? Will they create a government insurer to compete against private insurers? Will they significantly cut Medicare payments to private insurers?

Or, will they follow the model of Obama’s first nine months in office?

Think about Obama’s accomplishments so far. After assailing lobbyists, Obama signed a $787 billion stimulus bill supported by the U.S. Chamber of Commerce, the National Association of Manufacturers and every other major business lobby in the country.

Obama added a fourth bailout for AIG, and Treasury Secretary Timothy Geithner created new Wall Street bailouts. Obama signed tobacco regulation written in part by Philip Morris while claiming he was battling Big Tobacco. Cash for Clunkers was corporate welfare for automakers.

Obama has talked about battling special interests, but he’s backed away from every proposal that would actually harm well-connected corporations. Card Check? Tabled. A climate bill without corporate giveaways? That was nice in theory, but we’re not going to see it. Medicare negotiating down drug prices? Tossed out in a deal with the drug lobby.

Obama’s mode of operation has been to rattle sabers at corporate America and then give them what they want. AHIP’s attack on the Senate bill gives Democrats an opportunity to stick it to insurers, and Obama is well aware of the political advantages from attacking insurers.

White House pollster Joel Benenson admitted that Team Obama started attacking insurers over the summer because “we figured out that people like the idea of competition versus the insurance company.”

So it’s clear Obama will pitch his “reform” effort as a battle against the insurers, but that doesn’t mean he’ll actually dismantle all the laws that favor insurers.

The knock on candidate Obama was that he was all words with little in the way of accomplishments. With regard to battling corporate special interests, will that also prove to be the story of his first year in the White House?

Timothy P. Carney is The Washington Examiner’s lobbying editor. His K Street column appears on Wednesdays.

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