O’Neill Institute for National and Global Health LawO’Neill Institute for National and Global Health LawLegal Issues in Health Reform

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Atlas Shrugged—So Did Wall Street

The following post is one I’m afraid I’ll look back on and say, “What was I thinking?”! At a time when the right wing is in high dudgeon and many states, with Tea Party encouragement, are essentially fomenting massive civil disobedience against the health insurance reform legislation, I’m making a more positive (albeit contrarian) argument about the long-term effects of this historic achievement.

We now know most of what’s in the legislation, who the winners and losers are, and the continuing shape of the political battle to come. What we don’t know are the contours of the political and cultural changes to follow. Will its enactment stimulate a broad political shift toward sustained libertarianism (along the lines of the current level of civil disobedience) and hence the legislation’s collapse? Or, will the implementation process accelerate broad cultural changes that fundamentally reshape health care delivery? Given the level of vitriol directed toward proponents of the bill, smart money will probably be on collapse.

But maybe the smart money is wrong. (Am I setting up a straw man here? Would I do that?) Every legislative enactment has unintended consequences. Up to now, the legitimate critiques of the legislation have been the failure to adopt more stringent cost controls, the potential for an increased tax burden on middle-income Americans, and the failure to change the health care delivery system. Combined with the sustained distortions and illegitimate critiques, the opponents have dominated the debate, though, fortunately, not the legislative outcome.

As unlikely as it may now seem, there’s a chance that the legislation will actually stimulate the kinds of reforms that many hoped would be included in the bill from the beginning. But these changes may not need additional legislation to occur. Instead, there’s a serious possibility of deep cultural change that will force stakeholders to achieve voluntarily what they failed to achieve through the legislative process.

First, the legislation includes numerous demonstration projects with the potential to provide information that will encourage policymakers and stakeholders to develop new delivery arrangements. For example, demonstrations may indicate which cost control mechanisms will be effective and how to implement them across the country. These projects may determine whether accountable health systems will reduce inefficiency and improve the coordination of care. Taken together, the demonstrations may stimulate the broad re-thinking of how health care is delivered that health policy scholars have advocated for many years.

Second, many actions can be taken voluntarily. As I’ve argued in previous posts, health insurers could have deflected some of the public’s antipathy toward them through changes that would have reduced the adverse consequences of pre-existing conditions. Tobacco control provides an analog. Many businesses decided to go smoke-free, even in the absence of tobacco control laws, because it was in their economic interests, because the public demanded it, or because they saw the inevitability state and local clean indoor air laws. Without doubt, health insurers could argue that their economic model precluded coverage for pre-existing conditions absent the full mandate included in the current legislation. But practices such as rescission were unnecessary and certainly compromised the industry’s public image.

Third, don’t underestimate the power of culture to change and to force policymakers and stakeholders to meet public demands. Once the hysteria over “government takeover,” etc., subsides and people get a better sense of how the legislation can improve their health insurance coverage, a swing in how the legislation is viewed is entirely possible.

Facts matter, and the facts favor reform. Opponents have saturated the media with lies and distortions, and it will take time for the benefits of the legislation to be disseminated and absorbed. For instance, several provisions, nicely summarized in Monday’s New York Times, may mollify Medicare recipients once they learn that the donut hole is less onerous, etc. When people digest that pre-existing conditions will no longer bar them from health insurance coverage, average citizens may well rethink their initial opposition. As passions cool and people realize that the fear mongering was deceptive, the environment for cultural change, which now seems quite hostile, will be more favorable.

Two counterexamples, however, should give pause. First, Congress enacted the Medicare Catastrophic Coverage Act of 1988. A year later, the Act was repealed later after massive protests from Medicare recipients. Second, the managed care backlash seriously undermined managed care’s implementation of cost containment initiatives.

Republicans, along with its Tea Party and talk radio/TV sympathizers, will surely foment the kind of outrage that saw angry senior citizens surround Representative Dan Rostenkowski’s car following the Medicare Catastrophic Coverage Act. I honestly believe that’s a losing strategy in this case. For one thing, AARP strongly backs the current legislation. For another, the Obama administration has the opportunity now to convince the public that the fears are overblown, and, to the contrary, many people will benefit from the changes.

At a minimum, the public is more engaged now and perhaps susceptible to a reasoned explanation of what’s actually in the legislation as opposed to the misleading distortions they’ve heard for months. None of this will mollify the Tea Party acolytes, who are beyond reach. And we can assuredly expect a period of continuing trench warfare to shape the legislation’s public image.

Nonetheless, the early signs are not terrible. It’s interesting that many Republicans have been predicting economic calamity if the bill is enacted. It would appear that Wall Street doesn’t agree. Even though the reconciliation process has yet to unfold, Wall Street’s initial response was a shrug. If Atlas Shrugged and Ayn Rand is rolling over in her grave, the mavens of Wall Street also shrugged. To be sure, Wall Street factors in the potential benefits to pharmaceutical manufacturers and hospitals, whose stocks rose on Monday, though health insurance stocks fell. But if Wall Street truly thought the legislation would wreck the economy, the market would have taken a dive. Maybe it will today or next week. Maybe not.

And if the legislation survives the initial onslaught, Republican members of Congress may be compelled to rethink their obdurate opposition to the law. Ultimately, their just say no philosophy did not impede enactment of a law they refused to help shape. Assuming that the Democrats retain their majorities in Congress, the real bargaining will begin after the 2010 elections. When the new Congress convenes in 2011, bargaining to strengthen the legislation will commence. At that point, the cultural shift will have begun. Once Republicans stop fomenting civil resistance and begin to bargain in good faith, the reforms will gain bipartisan legitimacy.

As congressional attention returns to other issues, such as banking reform, the exclusive focus on health care will subside somewhat, allowing the cultural process to operate naturally. With banking reform, Democrats may be able to place the Republicans on the defensive, forcing the Republicans to defend Wall Street malefactors. This, too, can help solidify the health insurance reforms.

12 Comments

  1. Frank G
    Posted March 24, 2010 at 12:18 PM | Permalink

    What does Wallstreets re-action have to do with anything? Your assumption that Wall Street sees this as a good thing becuase the market moved up on the day of the signing of this bill is a typical mistake most amateur investors make. This legislation and what ever impact it might have on the economy, has been priced into the market for a long time and thus the signing of the bill is basically a non-event for the market. Had this bill been scuttled, that would have produced a market event since that would have been unanticipated.

    Secondly, Wall Street does not look at this or anything else in terms of whether it is good or bad for the American people. It’s only concern is sorting out the anticiapted winners and losers and then placing bets (long or short) on the anticpated outcomes of each.

    I see nothing wrong with a country with our wealth wanting to give our citizens what the rest of the develop world has in terms of healthcare, but the fallacy is that you can get the same results that others enjoy by simply offering some subsidies to purchase insurance. While it would be great if the health care industry took it upon themselves to work things out to avoid further intervention, I think that is still very wishful thinking and in some cases impossible to achieve given the amount of state and federal regulation that exists to prevent collective actions.

    The amended system we adopted on Tuesday has so much moral hazard in it that no individual, on the left or right leaning has any idea at this point in time, who the real winners and losers will be. My guess is that who wins and loses will be dependent on what time period you look at the results. What I do beleive is that this legislation has a greater chance to produce very bad results then very good ones. At some point we will either move to a single payer system or to a completely free market, which insurance acts like insurance and the health-care cartels and monopolies supported by government regulation are done away with. Either one, is far better then where this legislation seems to take us.

  2. Peter Jacobson
    Posted March 26, 2010 at 4:21 AM | Permalink

    Hi,

    Thanks for your comments. First, I think Wall Street’s reaction has everything to do with it. Suppose the stock market had tanked this week. Do you have any doubt that opponents of the legislation would have seized on that to indict the concept of health reform? Even if you’re right that Wall Street has already factored in health insurance reform further support my contention given the recent market rise?

    Second,your suggestion that either a single payer or a pure market alternative is the eventual outcome may well be preferable. The problem is that there does not appear to be any political way to get there.

    PDJ

  3. Dan Clayton, CPA
    Posted March 24, 2010 at 1:47 PM | Permalink

    I am truely baffeled by the legal mind. I have a brother-in-law who came from a conservative family, yet now in his 3rd year of law school at a conservative school has begun following a soft liberal philosophy. Lawyers need to recognize that they are only the rule book and not the game. You can legislate a fair game. You can only ensure really bad things don’t happen. This recent healthcare reform has led to the lawyers in congress thinking they can play a better game. It is comparable to paying $100 to see an NBA game and when you show up all you find are refrees playing a half baked game. A big disappointment!

    What is most dangerous, and should be recognized by every lawyer is the threat of healthcare legislation on freedom. Can the Federal Government compel a State or its citizens to purchase a commercial product? Where is that enumerated in Federal powers? If it can then we are in a world of hurt, where individual freedom of choice has been pierced by an elite governing class. Franklin defined the very purpose of the constitution as a shield from politicians grabbing too much power over our life regardless of their stripes. Yet, we citizens have been silent too long. Like Pinocchio we have allowed politicians to lead us into the carnival where cigars and candy are everywhere. Everybody wants them, right! Everybody should have them it’s their right! That is the path that this government is going down to their advantage! You do injustice when you commiserate with that philosophy. Please wake up to the full picture. Even if you are a stark liberal, you must realize that when government swings the other philosophy will do damage to all you hold important.

    Dan Clayton, CPA
    St. Peters, MO

  4. Peter Jacobson
    Posted March 26, 2010 at 4:29 AM | Permalink

    Hi,

    Thanks for your comments. As a civil libertarian, but not a libertarian, I am certainly concerned about intrusions into individual civil liberties. That’s why I opposed and remain opposed to the provisions in the Patriot Act that truly undermines freedom in the U.S. Do you oppose the Patriot Act with equal vehemence?

    Just because the government mandates individual insurance coverage doesn’t mean that Congress is trampling on individual rights or personal freedoms. Although it’s admittedly a rough analogy, I am required in Michigan to purchase automobile insurance. I don’t view that as a particularly serious governmental intrusion into my personal freedoms.

    This is a debate worth having. If opponents of the legislation had focused on serious issues instead of fomenting fear and demagoguery, your concerns about loss of individual freedoms might have elicited a serious debate.

    PDJ

  5. captbecker
    Posted March 24, 2010 at 1:52 PM | Permalink

    “Facts matter, and the facts favor reform”

    Here’s what’s wrong with your statement (and a good bit of your entire blog):

    1) There are no facts involved, so far. Eg; We don’t know how many people will be covered, and we won’t know that until those who are eligible actually enroll. Facts derive from results, so far there has been nothing to observe from which to derive facts. Those pesky little things that you are assuming are ‘facts’ are, in reality, so far nothing more than conjecture. At some point in the future we will know some facts, but that point has not arrived.

    2) Even if we overlook your error in referring to facts that do not yet exist, your statement that those facts favor reform says nothing about the shape or size, method or target of reform. You have made the unsupported leap to declaring that facts favor this reform, which is wholly unsupported.

    You do have a way with words, probably derives from the education you’ve been blessed with. But a way with words does not equal a firm grasp of logic, science, or engineering. You provide another example of how the legal industry is leading this Nation ever further away from what we need to be in order to sustain our vision of freedom and justice for all.

    r/Chuck Becker

    PS: For actual intelligent commentary on current affairs, visit “captbecker.wordpress.com”.

    PPS: Your reference to civil rights is insane, your must have been in the midsts of an eye rolling, slobbering, convulsive fit when you wrote that. Our rights as citizens may never come at the expense of others. The federal government was perfectly correct in forcing the issue on civil rights. Nobody had to pay to buy someone their civil rights. Health care costs money, I have no right to health care at your expense. Nor do you have a right to health care at my daughter’s expense. Do they teach ANYTHING in law school, besides bill practices?

  6. iLarynx
    Posted March 24, 2010 at 5:41 PM | Permalink

    Regarding the Cap’n PPS: “Our rights as citizens may never come at the expense of others.”

    You must have been in the midsts of an eye rolling, slobbering, convulsive fit when you wrote that.

    (Alternately, with less Beckian vitriol: Your claim is simply false.)

    Taking away the cotton farmer’s slaves came at the farmer’s expense, didn’t it? He took a loss because he couldn’t harvest his crop as cheaply with paid labor as he could with slave labor.

    Ending “Separate but equal” created an additional financial burden on all taxpayers because suddenly, all schools had to be up to snuff, not just the ones where the white kids went.

    Implementing and protecting civil rights frequently, if not always, creates a burden on those who took advantage of the status quo before those rights were enforced. The slave owner was so convinced that it was his GOD GIVEN RIGHT to own slaves, that he committed treason against America and went to war against America over this perceived “right.” The slave owners lost that battle and paid a higher price to run their plantations because they could no longer take advantage of slave labor.

    As for the claim of “actual intelligent commentary,” I know where not to find it.

  7. Anonymous
    Posted March 24, 2010 at 10:52 PM | Permalink

    Actually, Sir, freeing the slaves was simply an act of the justice of returning to the original owner (the slaves) that which had been stolen from them (their freedom). By your loopy logic, any common thief has a property owner’s “right” to that which they steal from their victim. You have once again tried to laterally tie an unwarranted expansion of the federal government to the civil rights movement, where there is no connection.

    But nonetheless, thank you for your insight, if for no other reason than to prove my original contention that YOUR rights may never come at someone ELSE’S expense.

    captbecker.wordpress.com for clear logic and impeccable reason.

    wr/Chuck

  8. iLarynx
    Posted March 25, 2010 at 3:01 PM | Permalink

    Anonymous Chuck: “…freeing the slaves was simply an act of the justice of returning to the original owner (the slaves) that which had been stolen from them (their freedom).”

    Uh, that’s the whole point, isn’t it?

    CIVIL RIGHTS definition
    plural noun
    the rights of citizens to political and social freedom and equality.

    Had you to actually read what I posted, you’d have seen that I never claimed to “tie an unwarranted expansion of the federal government to the civil rights movement.”
    What I stated was, “Implementing and protecting civil rights frequently, if not always, creates a burden on those who took advantage of the status quo before those rights were enforced.”
    This was simply a refutation of the erroneous claim by the captain and yourself (is that you Tenile?) that “YOUR rights may never come at someone ELSE’S expense” (Of course, your opinion of whose rights were being violated differs from those in the treasonous southern states. Their feeling about their rights vs. those of their slaves was so strong that they fought a bloody civil war to protect their perceived right to own slaves.)

    To keep the points in focus, here is what I’ve asserted in simple 1,2,3 format:

    1. – The slaves’ rights to freedom were suppressed by the slave-owner.
    2. – The slave-owner benefited financially from this arrangement.
    3. – Emancipation came at the slave-owners’ expense (i.e. emancipation was financially detrimental to the slave-owners’ original arrangement).

    Which of these postulations (according to those proclaiming “clear logic and impeccable reason”) is in error? 1? 2? 3? All of the above?

    If you’re trying to tie my statement to some imagined affront based on health insurance reform, you’re seeing something that quite obviously is not there. Thus, your logic is not clear, as it doesn’t even address the points I made, and your reasoning displayed here is actually quite peccable. But, better luck next time.

  9. Posted April 1, 2010 at 2:26 PM | Permalink

    When taken in context rather than out of context, #2 is in error. The slave owners stole the freedom of the slaves, the Union fought to restore that freedom to the rightful owners. The proposition you are making is like saying that a burglar who breaks into my house and steals my TV set is entitled to benefit from it. And if the authorities or I recoup my property and return it to me, that I (or we) are denying the burglar his/her just benefits.

    That is a false proposition (even) under common law, therefor my claim that MY rights may never come at YOUR expense still stands. I am open to consideration of a situation where I really do need to pay for something that is your right, but I am not particularly worried that you will find an example.

    Regarding: ” your opinion of whose rights were being violated differs from those in the treasonous southern states.” Yes, but I wouldn’t limit the set of those I thus offend to the treasonous southern states. There are plenty of Northern Democratic Copperheads I would be pleased to offend, as well.

    For a fuller examination of this topic, please see: http://captbecker.wordpress.com/2010/04/01/the-great-debate-over-rights/

    Thank you for your thoughts on this, BTW.

  10. Peter Jacobson
    Posted March 26, 2010 at 4:39 AM | Permalink

    Hi,

    Thanks for your comments. Your first observation is accurate, but only up to a point. We know, for example, that a significant number of uninsured people will now be given subsidies for their health insurance. It seems implausible that this won’t result in much larger numbers of people with health insurance coverage than now. The same goes for the new restrictions on insurance practices such as denial of coverage because of pre0existing conditions. even if the numbers don’t match current predictions, it hardly means that we don’t have a factual basis for assessing the legislation.

    Second, my response is really contained in previous posts on the O’Neill blog. In essence, I support the legislation because of what’s in the bill, not how it’s been portrayed.

    Third, as I responded to Mr. Clayton, I take your concerns about governmental intrusion seriously. It is essential that those of us who support health reform acknowledge opponents’ legitimate concerns. Had opponents not distorted the nature of the legislation (i.e., ridiculous accusations of socialism and a governmental take-over of health care), the concerns about personal freedoms might have resonated.

    PDJ

  11. G Mc
    Posted March 25, 2010 at 6:32 AM | Permalink

    Nice article. This is my first visit to this blog, but it won’t be the last! As a rising 1L I’m very interested in following new developments in the legal field, especially those so deeply intertwined with current political events.

  12. iLarynx
    Posted March 25, 2010 at 1:20 PM | Permalink

    Anonymous Chuck: “…freeing the slaves was simply an act of the justice of returning to the original owner (the slaves) that which had been stolen from them (their freedom).”

    Uh, that’s the whole point, isn’t it?

    CIVIL RIGHTS definition
    plural noun
    the rights of citizens to political and social freedom and equality.

    Had you to actually read what I posted, you’d have seen that I never claimed to “tie an unwarranted expansion of the federal government to the civil rights movement.”
    What I stated was, “Implementing and protecting civil rights frequently, if not always, creates a burden on those who took advantage of the status quo before those rights were enforced.”
    This was simply a refutation of the erroneous claim by the captain and yourself (is that you Tennille?) that “YOUR rights may never come at someone ELSE’S expense” (Of course, your opinion of whose rights were being violated differs from those in the treasonous southern states. Their feeling about their rights vs. those of their slaves was so strong that they fought a bloody civil war to protect their perceived right to own slaves.)

    To keep the points in focus, here is what I asserted in simple 1,2,3 format:

    1. – The slaves’ rights to freedom were suppressed by the slave-owner.
    2. – The slave-owner benefited financially from this arrangement.
    3. – Emancipation came at the slave-owners’ expense (i.e. emancipation was financially detrimental to the slave-owners’ original arrangement).

    Which of these assertions (according to those proclaiming “clear logic and impeccable reason”) is in error? 1? 2? 3? All of the above?

    If you’re trying to tie my statement to some imagined affront based on health insurance reform, you’re seeing something that quite obviously is not there. As such, your logic is not clear, as it doesn’t even address the points I made, and your reasoning displayed here is actually quite peccable. But, better luck next time.

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