Why insurance companies don't object to healthcare reform

Another great piece explaining what the legislation does and doesn't do, by Howard Fineman in Newsweek.

There are many things you can call the legislation assembled by President Obama and his band of dogged Democrats. It's historic, if for no other reason than it effectively makes health care for all a civil right. It's massive, to be sure. And the way it was secretly bolted together and jammed through Congress in the final days made a mockery of Obama's campaign promise of "transparency." But the one thing that you can't call it is "socialism." If this is socialism, then Warren Buffett is Karl Marx. It is, rather, a monument to the political philosophy of -Chicago—indeed of -America—which declares that big business deserves to make a lot of money (a lot of it from the government itself) in the name of doing some good for the citizens.

You'll notice that, while the GOP's tea partiers are in a frenzy, most of the health-care industry is not. The stock market didn't tank when Obama signed the bill, and health-related stocks have been beating the overall average. That is because much of the health-care industry is going to make out big under the new law. Insurers, hospitals, doctors, and drug companies will get 32 million new government-subsidized -customers. Most of the new regulatory burdens they'll have to shoulder are ones they've decided they can live with, or figure out how to neutralize sooner or later.

The political architecture of the bill was pure Chicago. Rahm Emanuel, the Chicago-bred White House chief of staff, pursued a triple divide-and-conquer strategy worthy of the Daley machine. By brokering deals with Big Pharma, the hospitals, and doctors, he isolated the recalcitrant insurance companies —which became the political piñatas in a campaign financed in part by the other, more cooperative parts of the industry (a nice, vindictive touch). At the same time, he divided the larger business community into warring factions and divided the GOP from part of its base.

But, of course, doing this costs money. And here the noninsurance players were as shrewd as Rahm. Big Pharma agreed early on to kick in $88 billion to help seniors pay for the cost of their drugs. But industry analysts say that they will make that back—and more—in part by encouraging seniors to keep using name-brand drugs (which the government will help pay for) and by expanded use of drugs as the government (eventually) looks for cheaper treatment methods. The drug companies also benefit from what the White House agreed to keep out of the bill: the importation of cheap foreign drugs and a plan for government wide price negotiations with suppliers.

Hospitals kicked in upfront cash, too, but in exchange for a lifeline in the law: the promise that the government will pay the cost of most uninsured patients, under Medic-aid. As for the doctors, they also got a promise: a pledged increase in Medicare reimbursement. It's not in the bill (it simply cost too much), but the widespread assumption is that they will get what they want. As for the insurance companies—the middlemen in the industry—they're going to get squeezed. They'll have thinner margins and more bureaucrats to deal with. But these companies are themselves vast bureaucracies with lots of cash and lawyers to spare. No one's expecting them to wither.

And how will the new law reduce the percentage of our economy we de-vote to health care—the highest in the world? That's fuzzy. There are "pilot" programs and studies and an "Independent Medical Advisory Commission" empowered to (again, eventually) impose some "cost--saving" measures. That is, if Congress doesn't overrule them. If Obama really wanted to save money for the entire society, he might have suggested that the federal government should be in charge of all health care, and then put the delivery of that care up for bid in the private sector: true, vicious, competitive bidding. But that's not the way they do socialism in Chicago.