This Harpers piece by Luke Mitchell is instructive:
The story of capture is repeated again and again, in industry after industry, whether it is the agricultural combinations creating an impenetrable system of subsidies, or television and radio broadcasters monopolizing public airwaves for private profit, or the entire financial sector conjuring perilous fortunes from the legislative void. The real battle in Washington is seldom between conservatives and liberals or the right and the left or “red America” and “blue America.” It is nearly always a more local contest, over which politicians will enjoy the privilege of representing the interests of the rich.
And so it is with health-care reform. The debate in Washington this fall ought to have been about why the United States has the worst health-care system in the developed world, why Americans pay twice the Western average to maintain that system, and what fundamental changes are needed to make the system better serve us. [. . .] The health-care industry has captured the regulatory process, and it has used that capture to eliminate any real competition, whether from the government, in the form of a single-payer system, or from new and more efficient competitors in the private sector who might have the audacity to offer a better product at a better price.
The polite word for regulatory capture in Washington is “moderation.” [. . .] No one today is more moderate than the Democrats. Indeed, the triangulating work that began two decades ago under Bill Clinton is reaching its apogee under the politically astute guidance of Barack Obama. “There are those on the left who believe that the only way to fix the system is through a single-payer system like Canada’s,” Obama noted (correctly) last September. “On the right, there are those who argue that we should end employer-based systems and leave individuals to buy health insurance on their own.” The president, as is his habit, proposed that the appropriate solution lay somewhere in between. “There are arguments to be made for both these approaches. But either one would represent a radical shift that would disrupt the health care most people currently have. Since health care represents one-sixth of our economy, I believe it makes more sense to build on what works and fix what doesn’t, rather than try to build an entirely new system from scratch.”
You can agree or disagree with the IDEA of reform propounded in the health bills, but you must admit that the issue of regulatory capture must be addressed if you are going to favor the regulatory reform framework that ObamaCare seeks to advance. Nothing I have seen seems to do this. The closest attempt to it by Ezra Klein seemed laughably naive:
[A] lot of people are concerned that private insurers will jack their rates up in anticipation of the exchanges. This is not a concern I fully understand, to be honest. The virtue of a competitive market -- that is to say, a market in which it's easy for a lot of people to compare products and prices -- is that this sort of behavior is actually very difficult. For a rate-raising strategy to work for insurers, you'd need pretty impressive collusion. [. . .] The fear of deceptive rates comes, I think, from the fact that people really, really hate and mistrust private insurers. And they have good reason for that. But private insurers aren't monsters. They're capitalists. And when the rules and incentives of the market change, so too will their behavior.
The invisible hand of the health insurance market will cure everything says Ezra. Makes you wonder why we needed reform in the first place. We could have just put in mandates and left the rest to the market. Well, as Paul Krugman noted, the health insurance market does not work:
There are two strongly distinctive aspects of health care. One is that you don’t know when or whether you’ll need care — but if you do, the care can be extremely expensive. The big bucks are in triple coronary bypass surgery, not routine visits to the doctor’s office; and very, very few people can afford to pay major medical costs out of pocket. This tells you right away that health care can’t be sold like bread. It must be largely paid for by some kind of insurance. And this in turn means that someone other than the patient ends up making decisions about what to buy. Consumer choice is nonsense when it comes to health care. And you can’t just trust insurance companies either — they’re not in business for their health, or yours.
This problem is made worse by the fact that actually paying for your health care is a loss from an insurers’ point of view — they actually refer to it as “medical costs.” This means both that insurers try to deny as many claims as possible, and that they try to avoid covering people who are actually likely to need care. Both of these strategies use a lot of resources, which is why private insurance has much higher administrative costs than single-payer systems. And since there’s a widespread sense that our fellow citizens should get the care we need — not everyone agrees, but most do — this means that private insurance basically spends a lot of money on socially destructive activities.
No reasonable person could argue that the "market" will take care of the problem. And indeed, after some thought, Klein tries a better gambit:
[E]conomist Austin Frakt notices that there's actually a policy that will directly police rate increases. "The rate reviews that take effect this year (85% and 80% loss ratio minimums in the large and small/individual markets, respectively) would be a means by which to cap rate increases," he e-mails. "Consumers are supposed to get rebates if those minimums are exceeded. Thus, the vast majority of rate increases will have to be justified by actual medical expenses."
(Emphasis supplied.) I highlighted the phrase "supposed to get" because a lot of things are "supposed" to happen and never do. From paper to reality is a long journey. And in between this particular journey is the issue of regulatory capture. But then again, when you do not doubt the efficacy of the health insurance market, you are not likely to think regulatory capture is in issue.
But I want folks to imagine this - it is 2016, in the middle of a Presidential race and election season. Democrats are touting the health care reform accomplishment and Republicans have been paid off like slot machines by the stakeholder in the health care industry - who is going blow the whistle on health insurance companies not complying with the great Dem achievement? Good luck with that one.
Speaking for me only
