The Health Care Lobby: Watch What They Do

A crisis that demands fundamental change. A president with a mandate to drive it. A Congress, controlled by Democrats, ready to act. Now comes the hard part: actually getting something real done.

These are salad days for Democratic lobbyists, because deep pocket interests—health insurance companies, Big Pharma, oil and gas and coal companies, the utilities and, of course, the banks—are buying them up to help harness the gale winds of change. Get ready to be dazzled; the strategies employed will reflect the imagination of Washington's most clever operators.

For example, the health care lobby has employed one basic theme in trying to stop health care: Scare the hell out of Americans by decrying a "government takeover" of health care. But in the age of Obama, they want to be seen as part of the solution, not simply part of the problem.

So last week, the leading health care trade associations—the lobbies for insurance companies, doctors, hospitals, drug companies, plus a union—stood [1]with the president to pledge dramatically to "do our part" to reduce the rate of soaring health care costs by 1.5 percent a year over the next decade, a promise that if fulfilled would save some $2 trillion from the cost of care. Not surprisingly, the president—eager to show that his efforts to give everyone a seat at the table were bearing fruit—was happy to hail that promise.

The lobbies got national coverage that their clients were for reform and would make a real contribution to it. This bolstered their argument that while regulation might be in order, we don't need a public plan like Medicare to provide a choice for businesses and individuals. Give us time to fulfill our promises (and for this reform moment to pass), they argue. If we fail, then consider a public plan (when the president may be less popular and the Congress more conservative). Word was Sen. Charles Grassley, a Republican actually looking for bipartisan accord, thought that the argument made a lot of sense.

Outside the photo op, however, the reality was very different. A new report [2] released today by Health Care for America Now, [3] a leading citizens' coalition pushing for comprehensive health care reform, put the industry claims in sharp relief.

The HCAN report shows that after 400 mergers involving health insurers over the last 13 years, concentration has gone up in local markets across the country. The single largest provider of small group coverage (for small businesses, for example) controlled a median market share of 47 percent in 2008. The American Medical Association says 94 percent of insurance markets in the U.S. are highly concentrated.

The result, of course, is soaring prices—with premiums up, on average, more than 87 percent over the past six years. Profits at 10 of the country's largest publicly traded health insurance companies in 2007 rose from $2.4 to 12.9 billion (428 percent) from 2000 to 2007. The CEOs of these companies in 2007 alone collected an average compensation of $11.9 million each. Nice work if you can get it.

As then Senator Barack Obama said in September 2007, "These changes (mergers) were supposed to make the industry more efficient, but instead premiums have skyrocketed."

Insurers use their position to pass rising costs onto the insured. And, not surprisingly, Medicare does better. A recent study [4] by University of California professor Jacob Hacker for the Institute for America's Future (which I co-direct) shows that from 1997 to 2006, private health insurance spending per enrollee grew at an annual rate of 7.3 percent while that of Medicare was at 4.6 percent, or more than one-third less.

The concentration of insurance markets and the lack of private competition provide compelling reasons for the Congress to establish a public plan like Medicare as an option for those seeking insurance. Give consumers a real choice. The public plan would provide both a benchmark for private plans and much needed competition in what are now perversely concentrated markets.

That certainly offers better hope for bringing down prices than the voluntary promises of the hospital, drug and insurance company lobbies, made without detailing how they would go about fulfilling those promises. (promises that many of them began to wiggle away [1] from two days after the press conference, when the TV lights were no longer on).

HCAN and other citizen groups are scrambling to counter the calumnies, claims and cash of the health insurance lobby, but of course, they can't match the industry's firepower. What they do have is the best moment for serious reform since the 1960s, when Johnson ushered Medicare into existence—and the possibility of rousing citizens to put their legislators on notice that they are paying attention, want real reform, and aren't going to be distracted by the health care lobby.