Consumer Power Report #152

Published November 5, 2008

Hoisted on His Own Petard

Now, there’s an expression I don’t get to use very often, but it could not be more fitting than to describe the doomed candidacy of Senator John McCain. Mr. McCain’s own campaign finance “reforms” came back to destroy him.

Like most politicians he thoroughly misunderstood the issue he was addressing and was egotistical enough to think that a simplistic law could magically transform it. His law failed to limit the practices he was worried about. In fact, it backfired and multiplied those very problems many times over.

He wanted to limit the spending of outside groups on election campaigns close to the date of the election. Yet I saw more commercials from unregulated independent groups in the last two weeks than I saw from the official campaigns.

Far worse, he wanted to limit the ability of a few rich people to buy a candidate’s loyalty by making generous campaign contributions. But he created a system in which Mr. Obama could collect hundreds of millions of dollars from–whom? Nobody knows. The donations were made in small increments with untraceable credit cards. They could have all been from George Soros. They could have been from foreign governments. They could have been from terrorist organizations. There is no record whatsoever.

This sorry episode suggests the American people knew what they were doing in rejecting Mr. McCain. He would have made a very poor president.

He got wrapped up in campaign finance reform after the personal humiliation of being associated with the Keating Five Scandal. But there never was a Keating “Five.” McCain had done absolutely nothing wrong, according the federal prosecutor who looked into the matter. He got associated with it because he was close to Keating and the Democrats in the Senate needed a Republican to turn what was purely Democrat corruption into something bipartisan.

His fervor for campaign finance reform was based on a misplaced desire to vindicate himself from a charge that never was legitimate. That doesn’t show the kind of judgment we would like to see in a president.

In fact, throughout the campaign Mr. McCain showed a dogged determination but not much strategic analysis. By contrast, Mr. Obama was purposeful, cagey, well-organized, and disciplined. He never got off-message, even when the central issue changed from the War in Iraq to the economy. The all-purpose message was good for all occasions–“hope” and “change”–even though Mr. Obama knows even less about the economy than he does about foreign policy.

It boggles the mind that the long-time chairman of the Senate Commerce Committee would be seen as less capable on economic issues than a two-year Senator with no experience in anything other than community organizing.

But Mr. McCain allowed that to happen. He never delivered a vision for the economy or for anything else. He was entirely in a reactive mode. Gas prices were up, so he changed his mind about off-shore drilling. Joe the Plumber appeared, so he started talking about redistribution.

It’s a pity because there were times–the Saddleback debate, the Al Smith dinner, the last two weeks of campaigning–when Mr. McCain provided glimpses of a man who could be inspirational. Too bad that man showed up so rarely.

So, where does that leave us?

Those of us who are deeply involved in the business of health care have a lot to worry about.

Ted Kennedy has been rushing to put together a comprehensive reform package as his final legacy. At a bare minimum it will involve:

  • A mandate on all Americans to buy health insurance.
  • A mandate on nearly all businesses to help pay for it.
  • Creation of a national Health Insurance Exchange as the sole or primary source of purchasing coverage.
  • Strict regulation of the private insurers who may offer coverage through the Exchange, including minimum loss ratios, minimum benefit requirements, prior approval of premiums, guaranteed issue, and modified community rating.
  • Mandatory use of health information technology, pay-for-performance reimbursement, case management, and quality assurances.
  • A federal “reinsurance” program that will absorb expenses in excess of a certain level in exchange for a premium paid by health plans and self-insured employers.

Note there are not a lot of new federal expenditures involved so far. All of this is simply creating the infrastructure for a new system. Congress may stop there and catch its breath, or it may begin adding new subsidies and taxes, depending on fiscal conditions at the time.

Mr. Kennedy will try to pre-empt any Obama health proposal by having his package ready-to-go and introduced as legislation before President Obama even has his cabinet in place.

It will sail through the House, and even if the Democrats do not have a filibuster-proof majority in the Senate they will be able to attract enough Republican support, such as Olympia Snowe and Susan Collins, to break a filibuster. Mr. Obama has no interest in alienating his own party in Congress, so he will embrace the effort.

Mr. Kennedy may or may not survive long enough to see the bill enacted, but in either case there will be a strong emotional component to the effort as a way to fulfill the lifelong dream of “the Lion of the Senate.”

It will be enacted by June 2009.

That’s the easy part. The hard part–in fact, the impossibly difficult part–will be in implementation. Mr. Kennedy and Members of Congress don’t concern themselves with any of that. Their job is done when a bill is signed. Let someone else worry about implementation.

As we have seen in Massachusetts, setting up such a system is a nightmare. And Massachusetts had the distinct advantages of dealing with a much smaller problem and using tons of federal money to soften the blow. Imposing such a system on the entire United States will be far more daunting than sending a man to the moon.

The entire enterprise may very well collapse at this point.

The stakes are enormous. If you have looked through the bulleted list you have probably already noticed the direct impact on you.

There will be no place for brokers and agents in this system. You will be replaced by federal bureaucrats.

Physicians and hospitals will bear the entire brunt of “cost containment.” You will be closely monitored to ensure you perform only those “evidence-based” services that have been approved by federal bureaucrats.

Employers will be expected to pay the costs of covering their employees, without having any control over what benefits they get or how much it will cost.

Health plans will be strictly controlled as to what benefits they may offer, how much they may charge, and what administrative services they may provide.

And consumers will have a limited choice of health plans and no ability whatsoever to affect their spending. You will not be allowed to use your money in some other, more important way to benefit your own family.

Do not call this “socialism.” That is an old, hackneyed expression that carries no weight with the public. And it is not an accurate description, in any case. It is not socialism. But it is massive government control over every aspect of the health care system. If you liked Fannie Mae, you will love this system.

Now, some of us will get cagey and try to play the odds–“If I can get a seat at the table, maybe I can tweak this a little so I will come out ahead.” Reports are that some health plans are already thinking that way. They see mandatory coverage as bringing in billions of dollars in new revenue and reduced administrative costs by not having to pay broker commissions anymore. Maybe so, but they will be handcuffed in what they can and cannot do. They will no longer be free to innovate or develop new markets. They will be confined to providing cookie-cutter policies approved by the federal government. They may have a secure source of revenue, but at the price of sacrificing their freedom to think, to act, to create, to innovate, to contract, and ultimately to profit beyond what a federal bureaucrat thinks is appropriate.

That is a prisoner’s bargain–I will live in a cage in exchange for a cot and three squares a day.

That is the trade-off we all will face. Are we willing to sacrifice our freedoms for some crumbs from the federal government?

If you would like to maintain your freedoms to act as you think best, to associate with whomever you want, to enter into contracts with other willing parties, to innovate and succeed or fail based on the merits of your ideas, I urge you to take all this seriously at last.

Join with us to ensure the continuation of freedom in health care.

If you are not already a member of Consumers for Health Care Choices, join us. If you are already a member, consider an additional contribution to help meet the coming challenge. Go to our Web site to learn how.

In either case, join us on November 12 at the J.W. Marriott in Washington, where we will be bringing together the free-market health community to strategize how to prevail in the coming years. Go to to find out more.