Insurers, drug makers poised to profit from Obama health plan
By Timothy P. Carney
DC Examiner
Beltway Confidential blog
2/25/09
Although President Barack Obama promised that he would freeze out the lobbyists in order to finally reform our broken health-care system, his nascent push to overhaul the industry already shows signs of becoming a lobbying feeding frenzy, with health insurers, drug makers and employers all poised to benefit from government’s expanded role.
We don’t yet have the specifics of Obama’s plan, but we do know its centerpiece: an individual mandate on health insurance. Obama has said — and corporate-labor lobbying coalitions have agreed — that Washington should require Americans to buy health insurance. When healthy people opt out of the insurance pool, the theory goes, risk is not adequately spread.
You can guess who’s most enthusiastic about the individual mandate: the insurance companies. Sure enough, The New York Times reported last week that America’s Health Insurance Plans, the trade association representing health maintenance organizations, has been working with Sen. Edward Kennedy, D-Mass., to help draft a plan that includes a mandate.
Another player in Kennedy’s backroom meetings is the Pharmaceutical Research and Manufacturers of America, usually a bete noire for liberals because it represents the drug companies. PhRMA’s primary stake in this fight is also obvious. It wants mandates and subsidies, and it wants to limit cost-control measures that would favor cheaper generic drugs.
La Merie, a “business intelligence” publisher, wrote in a recent pharmaceutical industry report: “Obama’s new universal health-care program will increase demand for drugs, both branded and generic, reduce the need for free drug programs due to universal health-care coverage, and boost pediatric drug and vaccine programs.” Sounds like a good deal for drug makers.
Groups lobbying on health-care policy include the Coalition to Advance Healthcare Reform, led by Safeway Chief Executive Officer Steve Burd, who actively backed Arnold Schwarzenegger’s plan to require all California businesses to cover their workers or face a new 4 percent tax. The coalition’s lobbyists include Judith Lemons, the former chief of staff for House Speaker Nancy Pelosi.
Lobbying powerhouse General Electric is a champion of Obama’s proposals to create a national health database — a database GE plans to build, manage or both.
What about the small-business coalitions that were crucial to killing HillaryCare in 1993? “They’re going to have to buy off small business,” says Cato Institute health-care expert Michael Tanner. Subsidies for small employers to afford health insurance are likely to do the trick.
To be sure, drug makers and insurers will have to bear the brunt of new regulations that come with increased government involvement. A priority for Kennedy and Obama is the pair of policies called “guaranteed issue” and “community rating.” The latter means insurers may not charge customers different premiums based on their health or age. Because this would encourage insurers to simply refuse to insure older customers or those with pre-existing conditions, government would require “guaranteed issue,” meaning that insurers could not turn down applicants.
Requiring insurers to charge one price and accept all comers would boost prices and drive away younger customers, who would find it cheaper to pay medical expenses out of pocket. Then only sick people, old people and families with kids would buy insurance — a high-risk pool, requiring even higher premiums. That’s why government will force younger and healthier people to join the pool with the individual mandate. Even so, the addition of high-risk and newly insured people will drive up the cost of health insurance — and taxpayers will get stuck with the bill.
Regulations spur mandates, which spur regulations, which spur subsidies. Insurers love the subsidies and the mandates, and the regulations don’t bother them too much — huge regulatory burdens, after all, keep out competition.
The great irony is that Kennedy and Obama, when calling for universal health care, have portrayed themselves as battling big business and freezing out the lobbyists. But it’s not as if Obama’s victory has cowed big business to the point of surrender. Many big businesses have long called for a greater government role in health care.
Insurers, drug makers, General Electric, regulators and employers will all benefit, and Obama will declare it a great group effort and a win-win solution. In truth, not everyone wins. “In the end, the taxpayers are going to lose,” says Tanner, “because the taxpayers are going to pay to buy everyone off.”