Bootleggers & Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics (26 page)

But the president faced a hard sell with the public at large. A Gallup poll showed nearly half the country disapproved of new government interventions in the private health care system. This disapproval increased as debate continued on the issue, from a low of 28 percent disapproving in 2007 to a high of 50 percent in mid-2009. We find a similar trend when respondents were asked whether they favored preserving the current system or overhauling it through government intervention. In November 2007, 41 percent of those polled favored replacing the current system; by November 2009, this number had dropped to 32 percent. As debate continued and the rationally ignorant became more informed, Americans were less inclined to approve of government intervention in the private health care system (Newport 2009c).

One reason for this increasing wariness on the part of voters may have been a fear of higher costs under a public health care system. Even though the United States was spending the largest share of GDP on health care across developed nations, the adjustment problem posed by Obamacare remained (OECD 2012). Firms in the health sector looked warily at the potential for rising costs caused by new coverage requirements and restrictions on pricing. Recall that in 2009, Americans were just waking up from the financial nightmare described in our last chapter and suffering the effects of the global recession that followed. Unsurprisingly, 70 percent of Americans described economic issues as the nation’s top problem; only 16 percent cited health care (Newport 2009a). In September 2009, cost was seen as the biggest problem with health care by 38 percent of those polled. Only 15 percent saw too many uninsured persons as the biggest problem. In other words, more than twice as many respondents were chiefly concerned with costs compared with lack of coverage (Saad 2009a).

Responding to the conversation in Washington, an unlikely alliance of Bootleggers and Baptists emerged to guide the legislation. Under the umbrella of coalitions such as Health Economy Now, these groups lobbied to shape health care reform in their favor. This particular coalition included the Pharmaceutical Research and Manufacturers of America, the AARP, the American Medical Association, the Business Roundtable, Families USA, and SEIU, among others (Fox News 2009).

Although the aims of reform were widely agreed upon—expanding coverage, reducing costs, and improving the overall quality of the system—they were also vague enough to leave plenty of room for Bootleggers and Baptists to operate. As we discussed in regard to sinful substances, the fuzzier the ends of a reform campaign, the greater the opportunity for Bootleggers to fill in their desired fine print when choosing the means. And of course, with 17 percent of the economy weighing in the balance, suitably designed health care reform legislation could pump billions of dollars in the direction of the hard-working Bootleggers.

An early approach favored by an array of progressive wonks and policymakers was called the “public option.” This meant the federal government would establish a publicly sponsored and funded insurance agency that would compete directly with private insurers. Supporters of the public option claimed that it would reduce costs by providing competitive pressure on private insurers. In the planners’ ideal world, the public option would extend coverage to all who need it, insulated from the bottom-line pressures that prevent private insurers from extending money-losing coverage.

Although a public option appeared compatible with the broader goals of health care reform, it met fierce resistance from pork-loving lobbyists. Several hospital Bootleggers, such as the Federation of American Hospitals, opposed the policy, fearing it would result in a reduction of rates paid for services; they preferred higher-priced health care. These lobbyists met with key legislative leaders, such as Sen. Max Baucus (D-MT), chair of the Senate Committee on Finance, to quash the plans for such an option (Kirkpatrick 2009).

The insurance industry represented another major Bootlegger. With no love lost between Washington and the insurance industry, at least in public utterances, battle lines were drawn on particular fronts of health care reform. The industry pursued two major goals: (a) eliminating the public option and (b) expanding its market base through mandatory coverage.

Like hospitals, the insurance industry saw the public option as a direct threat to its bottom line, though for different reasons. For private insurers, a public insurance agency would act as a government-subsidized competitor, able to draw customers away at prices below the competitive market rate, an unacceptable result. Their second goal represented potential pork that might be extracted from an otherwise potentially dangerous bill (Pickert 2009c).

Because of hospital and insurance company Bootlegger opposition, the public option soon lost its chief supporters. At one town hall meeting in August 2009, President Obama sought to downplay the centrality of the public option to his larger reform ambitions. “The public option, whether we have it or we don’t have it, is not the entirety of health care reform. . . . This is just one sliver of it, one aspect of it” (quoted in Stolberg 2009). Later, he signaled through his Health and Human Services secretary, Kathleen Sebelius, that the public option could be dropped. By the end of the year, the option was off the table (Stolberg 2009).

But the insurance Bootleggers didn’t stop there. They further attempted to massage the bill, primarily by seeking to reduce the new cost burdens the legislation would impose. In October 2009, America’s Health Insurance Plans, the major health industry lobbying organization, released a report by PriceWaterhouseCoopers showing how the latest version of the bill would increase private insurance premiums. Although congressional leaders widely panned the report for a variety of supposed shortcomings, insiders reluctantly admitted the bill’s ultimate effect on private plans was uncertain, with one congressional aide claiming, “It’s impossible to figure out what the bottom-line impact is” (Pickert 2009b).

Though it received plenty of caustic public reprimands for focusing so insistently on profit, the insurance industry nevertheless struck a chord with the public. Popular concern about rising costs in the wake of the Great Recession translated into reluctance on the part of Congress—and not just among Republicans—who were united in opposition.

Many Democrats faced constituencies hostile to the idea of a federal health care mandate. Sen. Blanche Lincoln (D-AR), for example, attracted opposition from both sides of the political aisle by opposing the public option but subsequently voting for the reform once it had been removed (Weisenthal 2010). Rep. Betsy Markey (D-CO) encountered more one-sided hostility from her largely conservative district in Colorado (Villegas 2010). Pennsylvania senator Arlen Specter, fighting an uphill battle against his own party after pivoting to support the president’s agenda, shed his Republican affiliation only to be defeated in a Democratic primary, in a state where polls showed a majority of voters opposed to government health care mandates (Philip Klein 2010). Legislators realized they ran the risk of shortening their political tenure as a result of their support for an increasingly unpopular initiative.

At a critical moment, one politician became a linchpin for the entire reform effort: Sen. Ben Nelson (D-NE) represented the key vote needed to push filibuster-proof legislation forward in the Senate. Nelson not only felt pressure from Obamacare supporters (Bender 2009) but also received direct assistance from a major Bootlegger. The lobbying group Pharmaceutical Research and Manufacturers of America spent $150 million on an advertising campaign in Nelson’s home state of Nebraska. Their price for this service? Language would be inserted into the bill barring the importation (or reimportation) of cheaper drugs manufactured or sold abroad. Eliminating foreign competition was just what the doctor ordered (“ObamaCare’s Secret History” 2012). In December 2009, with the importation ban in place, Senator Nelson announced his support for Obamacare (Jonsson 2009).

Pharmaceutical companies had in fact agreed to support reform in early 2009. In addition to the concession on imported drugs, the administration promised to not repeal an existing rule enacted during the George W. Bush administration. It prevented government from negotiating drug prices under Medicare and Medicaid, a restriction that generates hundreds of billions of dollars to the pharmaceutical industry (“Drug Deals: Big Pharma, White House Unlikely Partners” 2009).

Private insurers, in contrast, began to see reform as a losing deal. Although the insurance industry succeeded in killing the public option, ensuring mandated coverage, and generating public fear over costs, one measure threatened to overwhelm any Bootlegger gains. This was a provision establishing a minimum “medical loss ratio,” specialist jargon for the percentage of insurance premiums spent on actual health care services. Insurance companies would have to reduce overhead costs, refunding premium dollars if they failed to meet the proposed 80 percent medical loss ratio threshold (Pickert 2009a). The amount to be rebated retroactively for 2011 transactions alone rose to a nontrivial $1.1 billion (Ungar 2012, 2).

The medical loss ratio devastated an already shaky alliance between the insurance industry and health care reform advocates. The October 2009 report from PriceWaterhouseCoopers was just the start of a protracted, largely secretive effort to block reform. America’s Health Insurance Plans, the insurance industry’s super-lobby firm, spent $102.4 million in just over 15 months, funneling dollars into negative advertisements run by the Chamber of Commerce (Ungar 2012). Clearly, the honeymoon between insurers and reform advocates was over.

“Cosmos” and “Taxis”

Let’s now take a step back and take stock of the story so far. With such an eclectic ensemble of aims and interests represented in the bill’s more than 2,000 pages, health care reform became something quite different from what any one of its champions had initially envisioned. For example, the public option had been considered an essential feature of any meaningful reform by many advocates. But intense opposition by Bootleggers succeeded in relegating it to the legislative dustbin. As it turns out, outcomes in politics, as is often true in the market, emerge not from any grand synoptic plan but as a spontaneous byproduct of the struggle among interdependent actors striving toward distinct and often conflicting ends.

Some wisdom on this dynamic was offered by F. A. Hayek in his classic treatise
Law, Legislation, and Liberty
(1978). Hayek contrasted two types of order that may emerge from social processes—including the democratic process of framing legislation. Order that emerges from conscious direction he labeled “taxis” (from the Greek word
tassain
, meaning to arrange). Taxis is centrally planned and in theory yields whatever outcomes the planners have rationally designed it to produce. Examples of taxis include architectural design, engineering, and even the orchestration of gala events.

Order that emerges from the interaction of a multitude of interdependent yet decentralized parts, Hayek dubbed “cosmos” (from the Greek word
kosmos
, meaning to adorn). This type of order is spontaneous and emergent, generating outcomes as the upshot of an uncontrolled process shaped by a multitude of factors that are often unknown—and perhaps even unknowable. Examples of cosmos include markets, evolutionary processes, and improvisational jazz jam sessions.

We typically think of legislation as falling into the category of taxis: a contrived and reasoned product of rigorous debate and strict procedure. Through discussion and deliberation, lawmakers debate and fine-tune legislation until a majority consensus emerges. Though this may be the ideal of democratic politics, its actual practice lies far from this romantic conception—as the chaotic story we’ve just recounted demonstrates.

Even the health care bill’s biggest supporter, President Obama, was himself unsure of its ultimate contents. In a revealing March 2010 interview—just before Obamacare passed—the president was unable to confirm what final measures would be added to the bill to ensure its passage. Here is part of a telling exchange with interviewer Bret Baier:

Bret Baier: “So . . . you don’t know exactly what will be in the bill?”

President Obama: “By the time the vote has taken place, not only will I know what’s in it, you’ll know what’s in it, because it’s going to be posted and everybody’s going to be able to evaluate it on the merits. . . . The notion that this has been not transparent, that people don’t know what’s in the bill, everybody knows what’s in the bill.” . . .

Bret Baier: “Mr. President, you couldn’t tell me what the special deals are that are in or not today.”

President Obama: “I just told you what was in and what was not in.”

Bret Baier: “Is Connecticut in?” . . .

President Obama: “Connecticut—what are you specifically referring to?”

Bret Baier: “The $100 million for the hospital? Is Montana in for the asbestos program? Is—you know, listen, there are people—this is real money, people are worried about this stuff.”

President Obama: “And as I said before, this—the final provisions are going to be posted for many days before this thing passes.” (Noonan 2010)

This is striking for several reasons. First, few definitions of “transparency” would cover the 24-hour exposure of a 2,000-page bill that would transform a huge swath of the economy. Second, the fact that the bill remained in flux until its passage shows just how volatile political outcomes can be when Bootleggers and Baptists are involved. Appealing to the sympathies of the public while placating economic interests requires deft and speedy maneuvering by political operatives. So much for transparency.

Even President Obama’s weak criterion for transparency was ultimately not met, because the bill was never publicly posted before passing. How could it be, with 11th-hour additions being made left and right? From the representative from Chicago who was promised support on immigration policy, to the anti-abortion executive order notoriously issued as payment for Rep. Bart Stupak’s (D-MI) vote, universal health coverage was scarcely the only goal achieved in this bill (Noonan 2010).