Consumer Watchdog – Joe Lieberman and the corporate capture of health reform

When Sen. Joe Lieberman said last week that he might favor a health reform bill that traded away a "public option" for letting people over 55 buy into Medicare, he must not have checked with his bosses first. Now that the insurance industry has come out against it, so has Joe. After all, it's his home state industry and he must do as it tells him. So it's no surprise that insurance stocks soared today on Sen. Aetna's about-face yesterday.

Lieberman's devotion to the insurance industry is an easy way to understand the phrase "regulatory capture," which means corporate manipulation of government regulation to protect an industry, not the people. The current issue of Harpers' magazine revived the old economic term, in a fist-pounding by senior editor Luke Mitchell:

The story of capture is repeated again and again, in industry after industry, whether it is the agricultural combinations creating an impenetrable system of subsidies, or television and radio broadcasters monopolizing public airwaves for private profit, or the entire financial sector conjuring perilous fortunes from the legislative void. The real battle in Washington is seldom between conservatives and liberals or the right and the left or “red America” and “blue America.” It is nearly always a more local contest, over which politicians will enjoy the privilege of representing the interests of the rich.

And so it is with health-care reform. The debate in Washington this fall ought to have been about why the United States has the worst health-care system in the developed world, why Americans pay twice the Western average to maintain that system, and what fundamental changes are needed to make the system better serve us. But Democrats rendered those questions academic when they decided the first principle of reform would be, as Barack Obama has so often explained, that “nothing in our plan requires you to change what you have.”

This claim reassured not just the people who like their current employment benefits but also the companies that receive some part of the more than $2 trillion Americans spend every year on health care and that can expect to continue receiving their share when the current round of legislation has come to an end. The health-care industry has captured the regulatory process, and it has used that capture to eliminate any real competition, whether from the government, in the form of a single-payer system, or from new and more efficient competitors in the private sector who might have the audacity to offer a better product at a better price.

Yep, that pretty much explains it, including why the White House is twisting arms in the Senate to go along with Lieberman.

Among other things that are still on the chopping block in the health insurance bill is a state's right to protect patients beyond a federal minimum--for instance requiring a minimum hospital stay for childbirth, or deductible-free testing for HIV/AIDS, or treatment for autistic children. Sen. Olympia Snowe of Maine, who has done her own Lieberman-esque dance around any real reform, is bent on preempting states from giving extra protections to citizens.

That includes states like Maine, which has tried heroically regulate health insurers and stretch public funds to help more families. Of course the insurance companies complain continuously that they can't do a profitable business in Maine.

Lieberman, Snowe and other self-styled moderates all put forth "reasons" for their opposition to this or that. But in the end, what they won't vote for turns out to be what the insurance industry opposes.