The Great Health-Care Heist

Congress, naturally, would not allow a frontal assault on the insurance industry. So Senator Ron Wyden, a Democrat from Oregon, pitched the Healthy Americans Act, which had several Republican sponsors and significant support on both sides of the aisle.

"We allowed the fox to control the henhouse."

It was a simple plan: Instead of supplying insurance to employees, companies would give that money to workers to shop for policies on their own, allowing them to pocket any savings. With so many shoppers flooding the marketplace, insurers would be forced to truly compete.


Obama's first big mistake was delegating the plan's creation to a cabal of senators and health-care lobbyists — some still employed by the industry, some recent additions to the senators' staffs. They met behind closed doors, hashing out the details and squeezing other legislators out of the process.

Senate Minority Leader Mitch McConnell's home state of Kentucky has one of the most successful state co-ops, Kynect, which grabbed 60 percent of the market. McConnell, ironically, helped sabotage co-op funding in 26 other states.
Gage Skidmore/Creative Commons
Senate Minority Leader Mitch McConnell's home state of Kentucky has one of the most successful state co-ops, Kynect, which grabbed 60 percent of the market. McConnell, ironically, helped sabotage co-op funding in 26 other states.
Occupy Wall Street protestors at Pfizer's world headquarters in New York. The pharmaceutical giant benefits from the government's inability to negotiate a better price for their drugs. Canadians pay about a third less for Pfizer's Celebrex than their American counterparts.
Michael Fleshman/Creative Commons
Occupy Wall Street protestors at Pfizer's world headquarters in New York. The pharmaceutical giant benefits from the government's inability to negotiate a better price for their drugs. Canadians pay about a third less for Pfizer's Celebrex than their American counterparts.

Leading the effort was Senate Finance Committee chairman Max Baucus, a Democrat from Montana, who, from 1999 to 2005, accepted more special-interest money than any other senator. He delegated the real lifting to his chief health aide, Liz Fowler. Baucus described Fowler as overseeing "the 87-page document which became the basis, the foundation, and the blueprint from which all health-care measures in all bills on both sides of the aisle came."

Fowler, as it would happen, was a former vice president at WellPoint, the country's largest health-insurance carrier. She returned to Baucus' staff just for this occasion. As the Guardian would later write, "Few people embody the corporatist revolving door greasing Washington as purely as Elizabeth Fowler."

Meanwhile, Big Medicine donated heavily to Democrats, who suddenly began to see the industry in a far less menacing light.

Obama also started back-pedaling. "We don't want a huge disruption as we go into health-care reform, where suddenly we're trying to completely reinvent one-sixth of the economy," he said. Avoiding a single-payer setup and Wyden's plan not only kept the donations flowing, but allowed the president to make his famous claim that people could "keep the plan that you have."

In exchange for maintaining the status quo, hospital groups pledged $150 billion in Medicare and Medicaid savings over the next decade, while insurers agreed to limit their overhead to 20 percent. Anything more would have to be rebated to customers.

"Clearly, we made a mistake in taking so much off the table before we ever started," says Democrat Congressman John Yarmuth of Kentucky. "We should have left single-payer on the table just so people had an idea what the extreme really was. I'm sure that was just a bone to insurance companies to get them on board."


Of all the participants in health reform, the fattest cats came out of it smelling the best — a telling indictment of Obama and Baucus.

Drugs are the most profitable sector of health care. Pharmaceutical companies make more than $1 trillion annually, a third of that in the U.S. Their profits not only dwarf those of other health sectors, but pharamaceutical ranks seventh highest out of 215 industries tracked by Morningstar, an investment-research company.

For years, the drug makers' consigliere was Louisiana congressman Billy Tauzin. He was a conservative Democrat who rose to the position of assistant majority whip, only to switch sides after Republicans won the House in 1994, comparing the situation to reaching a fork in the Yellow Brick Road.

"I had one hand on a party that desperately needed a brain and another on a party that desperately needed a heart, and I had to make a choice," he says today. "I decided to go with the party that needed a heart, because heart-transplant surgery was possible."

In 2003, Tauzin helped shepherd through one of the great corporate giveaways in American medicine: President George W. Bush's Medicare Part D prescription-drug plan.

The rationale for Part D was noble enough. It was designed to ease the squeeze on seniors who saw fixed incomes eaten up by the cost of their prescription drugs, which were rising at a double-digit clip.

But instead of running the government-subsidized program through Medicare, where it could have been administered at a fraction of the price, Republicans handed the job to the insurance industry. They also teamed with Democrats like Baucus and Senator John Breaux, a Democrat from Louisiana, to ban Medicare from negotiating prices.

That meant that instead of using Medicare's massive size to extract price breaks, taxpayers would have to pay whatever drug makers felt like charging the insurers. According to the Congressional Budget Office, it amounted to a $137 billion giveaway over ten years.

When the bill took effect, drug makers saw a 34 percent spike in profits. By then, not surprisingly, Tauzin had left Congress to become the president of the Pharmaceutical Research and Manufacturers of America (PhRMA), the drug industry's trade organization. Breaux left a year later to open a lobbying firm, where he received a $300,000 contract to lobby for Big Pharma.

On the campaign trail in 2008, Obama blasted Part D's ban on negotiating, promising to get tough.

"We'll tell the pharmaceutical companies, 'Thanks, but no thanks for overpriced drugs,'" Obama had said at a Virginia campaign stop in 2008. "We'll let Medicare negotiate for lower prices. We'll stop drug companies from blocking generic drugs that are just as effective and far less expensive. We'll allow the safe re-importation of low-cost drugs from countries like Canada."

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