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    Health care lobbying begs a fundamental question

    01/05/2010

    On December 28th, the Politico web site ran a long article entitled “Wielding influence in health care fight” which lays out the influence and impact of various lobbying groups on the health care “reform” debate.  The groups, including organizations representing “Big Pharma", hospitals, health insurance companies, and the medical device companies each have described their lobbying strategy and tactics and the outcome for their group.

    The descriptions are generally about how well the lobbyists “played their cards", as if legislation were a high-stakes poker game – which is all too close to the truth, apparently.

    The stories read like part of a business intrigue novel by a modestly talented writer of novels that people buy to read on airplanes:

    Disagreements also abound on AHIP’s (the health insurers lobby) release of a report critical of the Senate reform measure just days before the final, Finance Committee vote.

    AHIP said it released the report, which criticized a last-minute amendment watering down the penalty for individuals who don’t buy insurance, because it wanted to elevate the issue of curbing costs. Senate finance staff is convinced AHIP was motivated by an amendment that put limits on executive compensation.

    Robert Zirkelbach, AHIP’s spokesman, denies the compensation issue prompted the report. “We have never raised that issue. It has not been a focus of ours throughout this debate,” he said.

    Whatever the motivation, the report burned up any goodwill with the White House and Senate.

    While on one hand it’s easy to see Washington, D.C. for the slime pit it has become, full of people spending money (that should be going back to shareholders as dividends) to make sure Congress doesn’t gore their particular ox when taking their next bite out of the American economy.

    The lobbyists are simultaneously repugnant and understandable.

    Throughout the debate and in most analysis, you read and hear about whether a particular lobby has been effective, who its political friends and enemies are: “On July 31, the House Energy and Commerce Committee — run by longtime PhRMA antagonist Rep. Henry Waxman (D-Calif.) — passed a reform bill that allowed for government negotiated prices and extracted about $160 billion from the industry.”

    One can’t help but be offended (and I presume this is true of people of good will of all political stripes) by the idea that a particular politician is an “antagonist” of a particular (legal) industry. And one can’t help but be concerned that the “antagonist” would use his temporary political power to “extract” money from that industry.  TV talking heads, newspaper columnists, and ivory tower academics tend to forget that it’s actual people who own these companies, whose pensions and other investment funds are invested in their shares, and who presume that some combination of increased share value and/or a dividend stream will help these actual people get through the financial requirements of their lives, particularly their retirement.

    It’s often said – and with great truth – that companies don’t pay taxes.  The meaning is that companies must and will operate at some level of return on capital, or else go out of business.  In competitive industries, these companies already tend to operate near the lowest return commensurate with the risk involved in that business.  (Higher risk businesses demand higher returns from investors to get funded, sensibly.) Therefore, there is little room for extra costs in competitive industries (a description which fits nearly every aspect of health care) and those costs must and will simply be passed on to customers (as higher prices) or to a lesser degree to shareholders (as lower dividends).  In either case, it is not the targeted company from whom the money is being extracted. It is you and me, at least if you own any mutual funds or ever need medical treatment. (If you’re an anti-social hermit with no investment funds and who will never see a doctor, then health care reform won’t affect you.)

    Nothing good comes of letting Henry Waxman extract his pound of flesh.  Nothing good comes of having the medical device industry subject to a huge tax which will just get passed along to everybody who needs a test or treatment that involves a medical device (CT scan, pacemaker, dialysis, etc.)  Nothing good comes of forcing industries to spend money on lobbying that could go into developing the next generation anti-AIDS drug or blood sugar meter or MRI machine, or to allowing investors a higher return to boost the quality of their lives, their kids’ educations, or their retirements.

    I made these points to highlight my main point: All the discussion is about whether the lobby has been effective and how much a particular lobby saved or gained for its industry.  A few well-informed souls (like your humble blogger) tread into areas such as the real economics of these deals, with the assumption that at least a few other would-be well-informed souls have the interest and capability of understanding the point.

    But what I have done with that economic analysis, and what the media does in all of its analysis, is overlook the fundamental question begged by this discussion: Why do politicians have the power to control and manipulate the private economy?

    Where in either common sense or, more importantly, in the Constitution, is this sort of government power permissible or desirable?  Is it OK in any sense for the government to control entire industries and to impose, as a condition of citizenship, a requirement that people purchase something from an insurance company?

    You’ve already repeatedly heard the “practical” implications arising from Congress’s multi-generational commercial power grab: When government gets too involved in business, you get GM. You get regulated monopolies, hardly a leading source of innovation and customer satisfaction. And you get Medicare, in which America’s seniors are routinely prevented from getting tests their doctors believe they need because of the rationing necessary to control costs when giving away something for “free”.

    But it’s time for the nation to start thinking about the more basic questions, even if the question is generated by the bad outcomes government causes: “Who said you can do this?” and “Who said we want you to do this?” And when enough people have the answers to those questions reverberate in their minds, as they must, “Constitutionally, you can’t” and “We don’t”, maybe the nation will then return to a path of liberty, limited government, and economic bounty as conceived in the wisdom of our Founding Documents.