On June 25, 1950, the Korean People's Army (KPA) of North Korea invaded South Korea, setting off the Korean War. The South Koreans were quickly routed, and despite an initial influx of US soldiers and Marines they were quickly pushed back to a small corner in the southeast end of the peninsula.
General Douglas MacArthur had been placed in charge of US troops in Korea, and on September 15th, over the objections of many of his general staff he executed one of the classic military offensives in history: the Incheon landing, an amphibious assault on a coastal town west of Seoul, far from the main battle front in the southeast of the country. Because of the success of this maneuver, the South Korean capital of Seoul was recaptured, North Korean supply lines were cut and the KPA was routed, being pushed back far north into their own territory.
This dramatic opening to the Korean War contains a lesson we can usefully remember in the continuing political battle to win meaningful health care reform. Follow below the fold to hear me out.
The point of this history lesson, of course, is to recall that if you are bogged down in a stalemate, a surprise counterattack can be an overwhelmingly successful tactic to gain the upper hand. The forces of the status quo continue their fight to prevent real health care reform from taking place, and we pro-reform advocates remain hunkered down trying to defend the public option -- our last tattered shred of hope for change -- from annihilation. This seems like a good time to see where the opportunities are to counterattack: to throw our foes off balance, hit them where they're lightly defended and cut off the main thrust of their attack.
To do this, I suggest that we focus not so much on the public option: that defensive line where little movement is occurring. As it is, health insurers have no disincentive to keep stalling and chipping away, because doing so gives them nothing but upside. The way to shut them down is to show that stalling the process could hurt them more than it helps them. We should attack other important strategic targets which have already been neutralized by the forces of the corporatist status quo: health insurance reform, and cost reductions. The following are some specific ideas about how to counterattack.
1. Remove health insurers' tort immunity. A 1974 law called the Employee Retirement Income Security Act (ERISA) governs employee benefits in the United States. An infamous clause in that law referred to as "pre-emption" removes any state law jurisdiction from services covered under ERISA, such as health, life and disability insurance. Consequently, insurers in these areas are almost entirely immunized from any state regulatory practices. Lawsuits can still be filed in Federal court, but Federal regulatory laws are utterly inadequate and punitive damages are unavailable. Thus, a bill designed to codify and protect workers' benefits became the largest abrogation of civil liability law in American history. Needless to say, SCOTUS has interpreted these protections for corporations exceedingly broadly.
This protection from lawsuits can be cancelled in two ways. One, Congress could simply cancel the pre-emption clause in ERISA, opening up insurers to liability under state consumer protection laws again. This could easily find its way into "medical malpractice reform" being discussed in Congress under the health care bill now. Two, Congress could institute national consumer protections under which insurers could be sued in Federal courts. The first option is much easier, and has the advantage that suits in state courts tend to be far cheaper and quicker. The second would protect people nationwide, and would avoid the phenomenon of insurers picking off state legislatures one by one. Battle cry: Kill off the private insurance death panels.
2. Cancel the insurers' anti-trust exemption. DailyKos (and Hullabaloo) writer dday wrote an important diary two days ago informing us of a new bill introduced by John Conyers and Pat Leahy, which would end insurance company exemption from anti-trust enforcement (originally granted by the McCarran-Ferguson Act of 1945.) This is critical, as dday's diary explains, because insurance company collusion called "market allocation" has allowed them to divide up state markets so that most of them have only one or two dominant insurers in the market. This plainly anti-competitive practice violates the essence of anti-trust laws, but has been made legal. It should be made illegal. Battle cry: If the opponents of reform insist that competition among private insurers will fix health care, let's give it to them.
3. Make health insurers spend our premiums on health care. The medical loss ratio is the proportion of health insurance company revenue that is spent on providing health care. It may be regulated by states, which tend to favor this regulatory mechanism because it is easy to measure and administer. Wall Street also closely watches medical loss ratios, and a company's stock price depends heavily upon it. Wendell Potter described, in testimony to Congress, how this works for insurance company executives and their customers (see heading 2.) In 2005, medical loss ratios for six of the largest health insurers ranged from 77 - 84%. Ten years earlier, they were in the high 80's or 90's. By contrast, Medicare's administrative costs are reported by the government as 3.6% (though conservative critics often cite 5-6%) and costs under Canada's single-payer program are 1.3% (same link). By contrast, the Bush administration's effort to privatize Medicare called Medicare Advantage pays between 12 - 17% more than standard Medicare rates to private insurers to administer a Medicare-plus program. The pluses are sometimes substantial, sometimes illusory.
An essential feature of reform, both to further cost containment and health insurance regulation, is to limit the money health insurers skim off the top. I would propose that any private health insurer taking Federal funds maintain a medical loss ratio of at least 90%, rising to 96% over ten years. 96% corresponds to the Medicare administrative overhead, which is slated to diminish in upcoming years as Medicare outlays increase. Any ownership interest in qualifying companies by non-qualifying insurers would have to be prohibited, to stop the shell company scam. If private insurers are going to finance care, why should we accept greater inefficiency than government shows? Battle cry: Spend health care money on health care.
4. Give all government sponsored health insurance programs access to the VA drug formulary. The VA Health System drug formulary is the main source of prescription coverage for veterans using the VA. It covers many commonly used drugs in all drug classes, but not all of them. By negotiating aggressively on price, the VA can buy drugs at prices that compare with Canadian provincial systems, which are much lower than other sources in the US. While any provider or patient in the VA system will complain about the drug formulary, it provides the most benefit for the least cost of any drug program in America.
Dramatic cost savings could be achieved by allowing participating insurers meeting government guidelines to buy drugs from the VA or at VA prices. While the VA makes its formulary mandatory with defined exceptions, other buyers would not have to follow their practice. This would strongly incentivize drug manufacturers to compete with each other on price to get on the formulary, and it would further strengthen the VA's bargaining position to get even lower prices. This measure would obviously cancel the White House's agreement with PhRMA not to negotiate on price, but let's remember that Congress is not bound by that agreement. Battle cry: Let's get the best value we can.
Congress is including some important health insurance regulations in the current health care reform bill, such as making pre-existing conditions and rescission illegal. Some versions also cap out-of-pocket expenses for individuals and families, a critically-important measure. But these measures are not nearly enough. The reason we fight so hard for a public option is out of a belief that health insurers are out of control, and need competition. This is of course true, but they also need more regulation. A public option is an important ingredient in reform, but I believe we are counting on it too much. It needs help from other measures that more directly control the private insurers.
The question of how these measures should be incorporated is an open one. Some can still be included in the health reform bill currently before Congress. Others should be brought forward in follow-up legislation, perhaps in the next Congress. The minutiae of tactics around these questions I leave to those much more knowledgeable in the ways of government than I am. But the idea of advancing the cause by including new, more stringent regulations and more aggressive cost containment measures is IMHO a good one, one we should be pushing on our representatives.
Finally, let's remember: MacArthur's brilliant tactical move at Incheon was followed by an over-aggressive push north, which brought in a far more capable and dangerous enemy, China's People's Liberation Army. There followed a bloody stalemate lasting for years, leading to a restoration of the status quo ante with millions of deaths as a bill. Overreach can be as dangerous as premature capitulation, so we must be smart in how we deploy our resources.