Special Interests' Thinking Weak on Health Care Reform

One of the most interesting aspects of the current health reform debate has been the bumbling role of the special interests. The major Washington trade associations all are torn between cutting the best deal they can while hoping to maintain some degree of independence from regulations, taxes and mandates. They need to placate both their friends on Capitol Hill and those pesky association members who expect effective advocacy. The result has been very sloppy and inconsistent.

This is nothing new. The same things happened during the last Great Debate on health care, in 1993-94. A myth has grown up that the interest groups were united in opposition to HillaryCare and spent huge amounts of money to kill it, exemplified by the Harry & Louise commercials sponsored by the Health Insurance Association of America.

Actually, HIAA was chaired then by David Hurd, a loyal Democrat and a major contributor and fundraiser for the Clinton campaign. He supported universal health care, and HIAA had endorsed an employer mandate. Hurd tried to negotiate an agreement with the White House but was repeatedly rebuffed because Hillary Clinton already had chosen the insurance industry as the villain in the public relations effort for HillaryCare.

HIAA staff was reluctant to run the Harry and Louise commercials, fearing doing so would forfeit their "seat at the table," but the membership insisted on a proactive stance. The media buy for the commercials was very modest, but the ads sparked interest among the news media and ran as news stories far more than as paid advertisements.

The Obama administration has been more effective at buying the interest groups' silence by offering those coveted "seats at the table." In some cases, such as the recent American Medical Association endorsement of the House bill, the tactic has bought outright, full-throated support.

Interest groups torn

As with HIAA in the 1990s, the interest groups today are torn between staff desire for a seat at the table and membership wanting them to protect their interests. Many physician members of the AMA, for example, are furious about the organization supporting legislation contradicting its stated policies. They have turned to their state medical societies to oppose the national organization.

Similar reactions are coming from the membership of the American Heart Association, America's Health Insurance Plans and other Washington-based associations. These members suspect they are being sold down the river so the organizations' Washington staffs can prosper.

More likely it is not that nefarious, but simply the Washington staff had blinders on. They tend to be former congressional staff themselves and are comfortable with the give and take of Hill negotiations. They may not know very much about the actual business of the groups they represent and thus don't comprehend how a regulation here or a tax there can destroy a business model or a profession.

There is little strategic thinking going on. The thought process extends to, "If we agree to give X, we will get Y." Maybe, but what happens next? What other interests are affected by the agreement, and how will they react?

Health care policy is an extremely complex web of interactions. It is almost never a simple two-party arrangement. Cut payments for inpatient surgery, and the use of outpatient surgery soars. Businesses started second-opinion programs to cut down on needless surgery, but almost all the second opinions agreed with the first ones, so costs were raised, not lowered, because now there were two doctors involved.

Who is looking ahead?

In Massachusetts, the hospitals agreed to support then-Gov. Mitt Romney's health reforms, thinking that if more people were insured, the hospitals would make more money and have less uncompensated care. They didn't reckon that many of those newly insured would be on a state program that pays Medicaid rates, which are below costs. Now some of those hospitals find they are losing more money after reform than they did before.

And on it goes. Apparently nobody in health care plays chess. They all think just one move ahead and don't consider what the other players will do in reaction. So people are constantly surprised by the latest development, and nothing ever gets solved.

Instead of trying to guide the process of greater government control, business and the public always do better by getting government out of the situation and letting consumer choices guide their decisions. Too bad that's not on the table in the Capitol-yet.