Obama’s Bangkok Dilemma: or, why health care is doomed again

30 July 2009

[I have been promising this post for a week to as many as five different people.  As it happens it was rather prescient when I first started to compose it.  It will be less impressive as circumstances have overtaken things.  But regardless, Mom, here you go.]

Like most of the three or four cronies and political obsessives I’ve conned into reading this blog, I watched Barack Obama’s press conference on health care a few nights ago and read some of the initial reaction to it.  I suppose we’ll have to wait until new polling numbers come out to get a feel for the whole thing, assuming they say anything useful at all.  (My limited experience is that polls are mostly interested people talking to themselves through the public about their favorite topic while the rest of the country looks on with consternation.)

First a digression.  I have a history of making bad predictions.  I also have a history of making surprising, odd and wildly-successful predictions.  These two phenomena are connected intimately: I’m not afraid to be stupid, which means I can constantly make statements that others will dismiss out of hand but that can occasionally come true in a spectacular way.   All of the dozens of dumb predictions I make are quickly forgotten.  The ones that pan out, for which my batting average is far below randomly choosing from a given set of options, I sing about for months or years.

Not this one.  I’m going to make a bad prediction today: Obama’s health care initiative will fail.  I hope earnestly it’s wrong.  My moral conviction as well as my personal interest agitates against it.  And the systemic factors don’t support it.  Sixty votes in the Senate, two-hundred-and-a-lot in the House, a Republican Party focused principally on Obama’s birth certificate – the variables are good in a way that doesn’t remotely compare to 1994.  That’s part of the reason I think it will fail hard.  This thud will be resounding: forget 1994.

But first, a trip down memory lane

A very intelligent Australian psephologist called Dr Adam Carr coined a phrase about the 2007 election there.  He called it “the Bangkok dilemma“: a situation in which a governing party suffers a loss of credibility to both the electorate at large and its own core supporters.  (Or, in his words, gets screwed at both ends.)  In the service of his core demographic John Howard, the Prime Minister at the time, pursued a deeply unpopular labor relations policy (you remember kids… unions?  No?).  The possibility of it, and his fervor, alienated him from the majority of voters who didn’t much care about unions.  Its ham-handed failure alienated him from his own base.

Dr. Carr diagnosed such a failure properly – it wasn’t that Howard lacked the strength to carry his policy.  It’s that he was strong enough to do it.  Like Obama and the Democrats Howard got a working majority in the Senate for the first time in decades, in part because the opposition was so clumsy that they lost too big.  Like the Democrats, Howard’s legislation was something that was nursed within the party’s deepest darkest heart.  And despite that perfect storm he bungled it such that nobody was willing to trust him anymore.  From then it was only a matter of time.

The not-so-great debate

The not-so-great debate

Fast forward a few months to the middle of 2008.  Barack Obama and Hillary Clinton were embarking on a slugfest for the nomination.  I didn’t have a dog in the race until New Hampshire, a situation I find astonishing eighteen months later.  I eventually picked Clinton for two reasons.  The big one was health care.

Clinton was seasoned on this issue: she’d been as tied up with the 1994 failure as anybody.  To me that meant she learned a valuable lesson about how to see it through next time; was hungry for it; and best of all still wanted a single-payer system.  To me this just made sense.

The idea behind this is that there is a single source for health care expenditure – the goverment. (Technically this is not a monopoly but a monopsony – when a market has only a single buyer.)  You go to doctors, get your medication, etc. etc. and the doctors receive payment from the government.  All the payment comes from one source so the desperate effort by doctors to keep up with most major insurers is rendered unnecessary, and the fact that the government becomes the single purchaser of prescription drugs essentially “captures” the pharmaceutical industry: Latisse is all well and good (and to Wikipedia’s credit it makes this gem look less stupid than it appears on TV) but if the government won’t pay for the drugs there’s a lot smaller market for them.  It incentivizes pressing medical research.

This is a question of what’s wrong with the health care industry.  It’s a failed market.  There are two really egregious types of market failures.  The first is when something of value is not valued.  (For instance, the environment – it’s very important but largely “free,” so pollution etc. goes unchecked.)  The second is when something is dramatically overvalued.  This is what’s up in healthcare.  The traditional supply and demand system doesn’t work in the healthcare industry: practically the only ceiling on peoples’ expenditure is actual ability to pay.  Normally, as the price of a thing increases demand should decrease.  Health care demand is far less elastic – people want it regardless of the cost.  They’ll abstain from buying it only when they absolutely can’t afford it.

This is based on information asymmetry.  My health is very important to me, but I don’t know precisely what I need to maintain it.  (Diet and exercise come to mind, but I’m one to talk.)  In many countries, their reply to this is a combination of strict advertising laws and a government-run health insurance (or health care) system that heavily disincentivizes frivolous and minor medications.  They won’t pay for Latisse, so doctors won’t prescribe it, whether or not I see Brooke Shields pleasantly cascading through a meadow with thick, full lashes. In the United States we lack this guarantee.  There are lots of ads and lots of insurers who’ll pay, because they don’t really pay – we do, in the form of an employer-paid system that comes back to us in the form of a draw on my wages.  Their failure to supply a designer drug to me, who is not well-equipped to determine whether I would ever need Latisse, risks that I’ll take my business elsewhere.  All we have left is the good offices of an agent in the form of a doctor, and then only in the case of prescription drugs, and then only insofar as the doctor is noble.  Many are.  Not all.

This, to the best of my meager understanding, is the problem we face.

Enter hope

Now Barack Obama did not before and continues not to believe in a single payer system.  (He sent mixed messages, because we campaign in poetry, but his positions especially early on were fairly clear on his opposition to a “mandate.”)  This could be and likely was for a number of reasons.  Conviction that the government shouldn’t bully insurers and their employees out of their own market.  Fear of a replay of 1994 on the same terms.  Concern about the cost of fully insuring the entire country.  Question whether it’s necessary to give insurance to those without through getting rid of everybody else’s.  Whatever.

Now I get that.  Totally redoing the entire American health insurance system is not something you snap your fingers and order.  It’s a massive technical, legal and logistical effort, even if you make no change to the physical provision of health care.  (This fascinating article by a former Amazon.com technology manager makes clear the difficulty of solving issues far less fraught.)  But then this is why I elect representatives in our form of a democratic system: complexity is not my problem.  My concern is what gets done, especially since it’s my responsibility to help him see it through. (And I thought I was just a nutcase posting on a dingy little corner of the internet.)



But the initial hearings lacked even a single advocate for a single-payer option.  The responsibility of this falls to Senator Baucus, chair of the Senate Finance Committee, who is explicitly and vociferously opposed to a single-payer solution. In the House single-payer did get a hearing, if not in front of Appropriations, which makes the Senate’s omission all the more glaring.  It’s the Senate, not the House, in which this bill is really going to have trouble.  You’d think that more “deliberative” body would be more careful in its deliberations.

The fallback to single-payer has become the “public option.”  This is essentially a mandate that everybody be covered combined with the ability to sign up for Medicare or some new government-created system as part of a constellation of the usual choices.  (Blue Cross et al.)  The rationale is that those who already have their insurance and like it, which hype would have it is a significant percentage of people, can keep them.  Those who don’t can sign up for the government brand.  There are a number of variations involved, partly because a number of different committees are working on several different bills.  (They have a term for this in the Army.)

This “public option” itself is what is under heavy contention right now.  Though it’s quite vague, there’s not much question of taking anything away from anybody: no rationing boards or British doctors with bad teeth and breath coming to tell you that your four-month old son can’t have a lung transplant because he ought to buck up and be more manful about the whole thing.  These are right-wing phantasms which are to the best of my knowledge unfounded.  However, that does not mean criticism of the public option is unfounded.  The Bush-era chair of the Council of Economic Advisers (and familiar face from introductory college textbooks), N. Gregory Mankiw, posted the following on his blog.  It is as incisive as it is brief.

Would the public plan have access to taxpayer funds unavailable to private plans?

If the answer is yes, then the public plan would not offer honest competition to private plans. The taxpayer subsidies would tilt the playing field in favor of the public plan. In this case, the whole idea of a public option seems to be a disingenuous route toward a single-payer system, which many on the left favor but recognize is a political nonstarter.

If the answer is no, then the public plan would need to stand on its own financially and, in essence, would be a private nonprofit plan. But then what’s the point? If advocates of a public plan want to start a nonprofit company offering health insurance on better terms than existing insurance companies, nothing is stopping them from doing so right now. There is free entry into the market for health insurance. If a public plan without taxpayer support would succeed, so would a nonprofit insurance company. The fundamental viability of the enterprise does not depend on whether the employees are called “nonprofit administrators” or “civil servants.”

The bottom line: If the goal is honest competition in the provision of health insurance, the public option cannot do much good but can potentially do much harm. (emphasis mine)

Half of the reason I’ve always favored the single-payer option is that I don’t think a free market is the best way of regulating health care, especially in terms of breadth of coverage.  The other half is basic politeness: you stab someone in the front.  In this case the target is an entire industry, that of the health insurance, and I think it only sporting to fax them a death warrant first.

But Mankiw hits it right on the head.  Either the government will open just another insurance company, and let it go its merry way (sound familiar?) or it will create a super company that will drive the rest of the industry to the rocks.  What’s to prevent the insurance industry using its clout to secure delicious sweetheart buyouts from the government, or bailouts to prop up their service (competition is our watchword in the public option, after all)?  Worse still – what’s to prevent it simply being a gift to the private insurance companies through the ability to shuck off all the sickest and most vulnerable clients, passing them to the government at public expense?  It will be much like the “toxic assets” bank created in the bailout – only what will be toxic are people.

In short, the public option would likely mean either that we’d kill insurance or insurance would kill us.  At worst it’s dishonest; at best it’s bringing a knife to a gunfight.  When we own a tank.

Change – need we?

At least the public option would do something.  Now it looks like that, too, has run aground.

The Obama Administration’s tactic when confronted with opposition has been, thus far, the primetime press conference.  Why they prefer this to an Oval Office address is rather beyond me: but in every case until this one it worked.  Measures were passed, ranks massed, and the Congress stable, if hardly peaceful.  His latest press conference manifestly failed on that score.  His performance was widely panned and about ten minutes into watching it I found myself more interested in his choice of tie (and that of the reporters) than what he was saying.  It’s not that he was saying something too complicated.  It’s that he wasn’t saying anything.  (Except about the Gates arrest, in which he got the only good line of the night before promptly putting his foot in it.  This may have helped him, in a weird way – but not enough.)

And now comes the other half of our dilemma.  Leaving health care to the relatively conservative Baucus in an effort to ensure conservatives were suitably placated was bad enough, but now powerful House Democrats under the leadership of Mr. Waxman (D – California-Hollywood and Beverly Hills), who have generally enjoyed the support of the Obama Administration, appearready to abandon even the “public option.”  The result?

A left-wing uprising.  Which I was going to have predicted last week.  And to think I could have sounded so smart.

General Gordon at Khartoum

General Gordon at Khartoum

Even Barney Frank (D – Massachusetts-Brookline and Southwest Massachusetts), no particular legislative rabblerouser he, has declared that he is perfectly willing to do to the Administration and Waxman what the so-called “Blue Dogs” have: stall it.  Perhaps even kill it, from the sound of things.  And why shouldn’t they?  Why should liberals and left-wingers, who make up the bulk of the party, allow themselves to be run roughshod over by Southern and Western conservatives – many of whom the majority can afford to lose?  If they can look past party to their convictions – and I do not mean to suggest that the Blue Dogs do anything but this – there is no reason liberals shouldn’t either.  Many of them barely swallowed the abandonment of single payer in the name of progress.  This is too much.

At the end of the Politico article already quoted, one congressman remarked that at least “The progressives are in the room now.”  Why weren’t they before?  There are almost half-again as many members of the Congressional Progressive Caucus as there are of the Blue Dog Coalition.  The answer is that they were treated as a foregone conclusion, despite having one of their own in the Speaker’s chair.  If you had to ask me what the terminal mistake of this process so far has been, it is that.  The Blue Dogs may yet get their way – but at immense public cost and possibly at the risk of the Democratic majority.  And should an electoral drubbing follow, they will pay with their offices.  Perhaps then they will wish the march to socialism had lived up to its brutally effective reputation.

Alas, Babylon

At this point I have little reason to believe things will get this far.  Delay is inevitable.  That isn’t in itself bad – but the fact that the price of the Blue Dogs have been the entirety of the House liberals, as evidenced by the collective outrage of very senior Democrats there, puts paid to the idea that the recess will allow time for a new consensus to emerge.  This was a compromise worthy of King Solomon.  Sadly.

If such difficulty exists in organizing the House to pass health care (and given the similar activities of Senator Baucus in the other place), what chance is there of mustering the votes necessary in the Senate, where the bar is higher, the margin of error lower and the leader there, as I have heard it put, “gun shy”?  They have little reason to act if the House merely scrapes together a bill, and certainly none if they don’t.

Meanwhile the Republicans in both chambers, small in number though they may be, have the negative at their backs: the opposition doesn’t need to provide an alternative.  They just have to dislike the plan.  Sometimes being the “party of No” is all you can, and should, do.  As Napoleon remarked: “Never interrupt your enemy while he’s making a mistake.”

So here we are.  And here lies my terrible prediction: that health care will fail.  Except perhaps it’s not so terrible.  Perhaps this has turned into such boondoggle that failure is the best we can hope for now.  For any good liberal this is a “die in the ditch” moment.  A health care bill that fails to provide health care to people that can’t get it, in a way the private sector can’t give it, is not worth having.  I say this as someone who is without.  I say this as someone whose family is without.  Not that it really matters.

The lesson of the Clinton failure was to avoid completely centralizing a major legislative effort.  The lesson of the Obama failure will be not to pretend you can split the difference when the extreme, however unpalatable, has the benefit of being decisive; and not to trust Congress with your major legislative effort.  That’s a shame, but it is also a fact.  Here’s another: opposition means never having to say you’re sorry.  Government means never being able to.

Then again, I make lots of bad predictions.  I can only hope this is one of those.

I guess.

[UPDATE: Apparently initial efforts to delay the crucial votes and convince the Progressives have been unsuccessful.  Shockingly.]


5 Responses to “Obama’s Bangkok Dilemma: or, why health care is doomed again”

  1. […] I wrote about this, in part detailing why I didn’t like this so-called “public option” and why […]

  2. […] It seems like I’m not the only one running out of steam.  The fracas festering over the long hot weeks of August has put the health insurance initiative onto the back foot in a serious way.  That culminated over the past weekend with a serious trial balloon put up by senior Obama officials, including Health Secretary Kathleen Sebelius, that seemed to accept the likelihood of the loss of the “public option.”  Their reward for this suggestion was a few warm words from ex-Democratic Senator Richard Shelby (R – Alabama) and the rekindling of a newer, stronger liberal uprising than even the one I sensed coming in July.  (You can read that slightly-updated post here.) […]

  3. […] changed in 2005.  The economic reforms of SPD chancellor Gerhard Schröder managed to trigger a Bangkok dilemma: his actions were considered unacceptable to leftists and insufficient to rightists.  The Greens, […]

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