The Law of Unintended Consequences

As I wrote so many weeks ago, the health insurance industry will not lose this battle ... any more than the too-big-to-fail Banks have ... at monumental public expense.

Max Baucus' political contributions from the health care and finance industry are well documented. Now they have enlisted Tom Daschle and Bob Dole. What a pair -- Tweedle Dee and Tweddle Dum. I have never understood what qualified Tom Daschle as a health care expert? His ties to the industry? A deposed ex-Senate Majority Leader?

Howard Dean, who has been unceremoniously and conspicuously excluded from this process despite his physician credentials and incisive comments, has rightly derided this for what it is:

"The Baucus bill is the worst piece of healthcare legislation I've seen in 30 years," Dean said last night at a healthcare town hall and book signing in Washington. "In fact, it's a $60 billion giveaway to the health insurance industry every year," he said. "It was written by healthcare lobbyists, so that's not a surprise. It's an outrage."

And the denouement by Eleanor Clift of Newsweek:

After all those months of buildup, the chairman of the Senate Finance Committee, Montana Sen. Max Baucus, produced a health-care reform bill that coddles the insurance industry to such an extent that it could have been written in a corporate boardroom. Indeed, you might say that it actually was, because it incorporates recommendations offered by two former Senate leaders, Republican Bob Dole and Democrat Tom Daschle, both now affiliated with Alston + Bird, a prominent law and lobbying firm that includes among its clients major health-insurance, pharmaceutical, and hospital clients.

And just when most needed, there is always an shadowy insider voice. Wendell Potter who joins a list of past insiders and whistleblowers -- Mark Whitacre, Jeffrey Wigand, Daniel Ellsberg and Karin Silkwood:

Wendell Potter, the former Cigna executive-turned-whistleblower, told a small group of reporters Monday that the Baucus health care plan is an "absolute gift" to the industry.

"The Baucus framework is just an absolute joke," said Potter, Cigna's former head of corporate communications who has been speaking out against insurance industry practices. "It is an absolute gift to the industry. And if that is what we see in the legislation, (America's Health Insurance Plans chief) Karen Ignagni will surely get a huge bonus."

The President is spending too much political capital on this one issue. It forces the issue. Either a landmark generational bill is passed or failure lurks. There is such a thing as a bad bill. Sophie's Choice taught us just when it seemed too bleak, it could get bleaker. The administration has figuratively painted themselves into the proverbial corner. I warned of this months ago.

The law of unintended consequences, a variant of the Peter Principle, states good intentions can lead to unexpected and unfavorable or spurious outcomes. Do the right thing? There are numerous examples, notably the 1906 publication of The Jungle by Upton Sinclair. King of the muckrakers. But the public's revulsion at the unsavory conditions of the meatpacking industry eventually lead to the formation of the FDA -- not at all his intended purpose. A more cynical political view was stated by Andrew Gelman in Seeking Alpha:

"The law of unintended consequences is what happens when a simple system tries to regulate a complex system. The political system is simple. It operates with limited information (rational ignorance), short time horizons, low feedback, and poor and misaligned incentives. Society in contrast is a complex, evolving, high-feedback, incentive-driven system. When a simple system tries to regulate a complex system you often get unintended consequences." (Andrew Gelman)

More simply stated -- be careful what you wish for. It's the old Genie-in-the-Bottle rouse. There is still a slim chance that a silver lining can found in these dark gathering clouds. The rhetorical and metaphorical emphasis has shifted from health-care reform to health insurance regulation. Which I have advocated.

No one is focused on the real crisis -- failing Quality of Care. We need more creative solutions -- a paradigm shift. Something really transformational -- not bureaucratic mandates. About which we will write in the next week.

Comments

[dougaus1]

This is definitely true. Obama misspent his political capital, despite of the need for healtcare reform. But this is probably only the second biggest crisis facing the Obama Administration. The first thing he should have done upon entering office is focus on the outrageous greed and excessive risk-taking on Wall Street, which has cost millions of Americans either their homes or their jobs, in many cases both. Early on, he focused all of his political capital on getting the stimulus package passed. He did not make this the two-pronged approach that he needed to make it. While the stimulus package was important, he should have made reform of Wall Street a higher priority, so that the daily financial data coming from Wall Street is more aligned with the well-being of those on Main Street.

Enacting time limits for repaying bailout funds, banning credit default swaps, and re-enacting the Glass-Stegall Act to separate commercial banks from investment banks are examples of what he needed to push much harder than he did. Doing all of this would have cleaned up the banks and stopped the freefall much sooner. It would of have been much easier to pass harder reforms to punish those on Wall Street who tanked the economy. Obama did not create the momentum needed to pass a strong healthcare reform bill.