Politics

Obamacare Escapes the Chains of Law

You Want to Sell Obamacare You’ve Got to Take Care of Obama: Megan McArdle notes that Obama’s HHS has “reached the limits of its November strategy of using last-minute rule-making to implement on-the-fly changes to the law.” No more rules! Now insurance companies are being “encouraged” and “strongly encouraged” to extend deadlines, accept late payments, pay for some out-of-network doctors and out of plan prescriptions. Many of these things violate the formal terms of the deal the government had made with insurers and will cost the latter money. “They’re asking insurers to pay for the mistakes” the administration made in the launch of the program, complains Avik Roy. The key word is “asking.” But, as Roy notes, there’s a club HHS is holding behind its back–the threat that if insurers don’t play along HHS will be “considering” that factor in the “renewal process.”

It would be hard to frame this policymaking process as a rule. How about: “Insurance companies will have access to Obamacare’s exchanges if they’ve sacrificed a reasonable portion of their expected profits to cover for our screw-ups, as determined by us, and haven’t said anything too nasty about us in the press.”

HHS has pretty clearly escaped the rule of law and entered a world of corporatist haggling, where political leaders and a few big industry types sit around the table and work everything out. True, they have a mutual interest in doing so–Obama needs Obamacare to work, insurers are counting on it working well enough to make them money. The interests aren’t symmetrical though—at some point, long before Obamans give up on Obamacare, insurance companies could decide to cut their losses, bail, and go make money somewhere else. That gives HHS a motive to make sure they get enough money to keep them in the game: ‘Don’t worry, we’ll make it up to you later.’ This is a policy best announced at a small table in a noisy restaurant, not in the semi-judicial proceedings required for formal rulemaking under the Administrative Procedure Act.

What’s so terrible about that? The “rule of law” is overrated. For one thing, it takes too long–too long to cope with panicked attempt to avert a first year flop of your signature legislative accomplishment. Some of the more celebrated examples of presidential leadership–JFK jawboning the steel companies, for example–were cases of government threatening oligopolies, corporatist-style, not government imposing uniform rules on a competitive market. Washington’s agencies have to use their discretion, and the attempt by lawyers to cabin, channel and regularize that discretion–by requiring formal “rules” and judicial review of them–was always kludgy and artificial.  You wouldn’t want to have sex under the Administrative Procedure Act.* Maybe launching Obamacare is more like sex and less like imposing rules against pollution.

But … 1) The big insurers also have a self interest in avoiding too much innovation by newcomers who might put them out of business. (How does Ford feel about Tesla? How does Yellow Cab feel about Lyft?) Now that Obama owes insurers big time, will he compensate them in part by heading off such threats? The Democrats need them to make money after all–if they bail, Obamacare is in trouble. 2) Obama also has an incentive to favor companies that play ball  (and companies that donate to his party) over companies that don’t. This can quickly degenerate into an extortion racket; 3) The voters are the other party conspicuously left out of the corporatist alliance of mutual blackmail. They may benefit from the end result–politicians need to be reelected after all. But the politicians won’t really be threatened unless the health care system is so bad the voters revolt and defect to the opposing party, in this case Republicans, who may be almost equally distasteful. Political parties have a more airtight oligopoly–a duopoly–than most big businesses can dream of.

The idea–or one idea– animating Obamacare is that competition can cut costs and foster innovation without compromising care. A seat-of-the-pants corporatist bargain seems unlikely to achieve this optimal outcome, and more likely to impose extra burdens on the public.

P.S.: Does anyone think Obamacare is going to come close to meeting its 2014 enrollment goals–either in terms of the number of people who sign up or the mix of healthy vs. unhealthy enrollees? … Marshall? … Cohn? … Bueller?

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*–This may be what my old boss Charles Peters calls a “get-up-and-get-a-beer line.” Please do not get up and get a beer.