Why Are the Medical Insurance Companies Silent?

Editor’s Note: This essay by John Goodman makes explicit, in the context of the federal passage of the Affordable Healthcare Act, a phenomenon that is alive and growing in California. We usually call it corporatism, or crony-capitalism, but the endpoint of the trends, usually described using euphemisms, is economic fascism. Where communism might be correctly defined as a government takeover of the private sector, economic fascism is more of a joint-venture between business and government, with government as the senior partner. In California, public sector unions control the government, and most corporations do what they’re told, in order to secure favorable legislation (and avoid retaliatory legislation), as well as to win government contracts and subsidies. Along with practical suggestions for how to grow California’s economy, isn’t it time for a theoretical discussion regarding exactly what sort of political economy California’s got, and what might be more truly in the interests of working families?

What exactly are they afraid of?

John Goodman, the leading medical care analyst in the country, asked this question a few weeks ago. His piece was entitled: None Dare Call It…. The missing words were economic fascism.

Economic fascism, the system developed by Italian dictator Mussolini and later adopted by Hitler, is a highly developed form of crony capitalism. It has its own code of silence, not unlike the oath of omerta associated with the Mafia.

Private interests and government officials make their deals behind closed doors and are then not supposed to talk about them. To break the oath of silence is considered a grave offense.

In the past, medical insurance companies have been regulated by the states. They enjoyed their crony capitalist deals, but principally with state officials and regulators.

The federal government could not easily bring the insurers to heel, despite periodic efforts to do so. They were quick to put up ads defending their interests. They were not the least bit silent.

For example, when Hillarycare was first proposed during the early years of the Clinton administration, the largest insurance companies came out in loud opposition. They spent huge sums advertising against it on television.

The Clintons were furious, but unable to do much about it. In the end, the insurance companies succeeded in humiliating the Clintons: Hillarycare couldn’t even get through a Democratic controlled Congress.

Perhaps remembering this history, President Obama took a very different approach to developing Obamacare.

First he announced that there would be a game-changing new federal program. Insurers knew this would make or break medical insurance company profits. The president then assembled at the White House  the major medical players, including the hospitals and the American Medical Association as well as the insurers, in order to offer them a deal.

Out of hearing of press or public, the president in effect told the big special interests: You can help us craft the legislation, but if you later oppose it, you will be dead meat.

Only one insurance company failed to keep this “deal.” It was threatened with both Senate and Justice Department retaliation and quickly fell into line.

The medical equipment manufacturers alone failed to sign on to the deal at all. They were punished with a stiff new tax on medical equipment.

President Obama is now trying to shift the blame for millions of canceled policies onto the insurance companies. You would expect them to defend themselves. But they don’t, either because they are too deep in the deal or too intimidated– or both.

Thanks to Obamacare’s passage, the federal government has much more control over them than during the Clinton administration. They have in effect become government sponsored and controlled entities, and the days of their speaking out publicly against their federal overlords are over.

Do the insurance companies like the crony capitalist arrangements they have become party to, or do they think they have no choice but to go along?

No one can be sure. As Breitbart’s Wynton Hall pointed out, the medical insurers are enjoying both record profits under this administration and buoyant stock prices.

The S&P 500 healthcare stock index has so far this year gained 37.5%, making it the top performing sector. All public shares have benefited from the Federal Reserve’s money printing spree, but medical insurance companies are doing especially well, at least for now.

There is, however, a potential fly in the ointment. The new Obamacare policies are really bad medical insurance policies.

They are bad because they severely restrict your choice of doctor and hospital and often pay the doctor barely more than Medicaid. Paying so little means that doctors may not want you as a patient or will give you very little time.

Medicaid patients are familiar with not being able to find a doctor who will take them. Obama exchange policy holders will now often find themselves in the same boat.

These exchange policies are not private insurance in the traditional sense. As John Goodman says, they are “Medicaid Lite.”

Eventually the public will catch on to all this. There will be a lot of anger. At that point, the crony partners, government and business, will fall out, and insurance profits will be anything but safe.

For now and for the forseeable future, government remains the dominant crony. It is not the private interests controlling government, as much as they would like to. It is the government controlling private interests.

Growing government dominance of crony capitalist arrangements is also documented in a new book by Peter Schweizer called Extortion.

About the author:  John C. Goodman is a libertarian economist and the founding president of the Dallas-based, free-market think-tank the National Center for Policy Analysis and Research Fellow at the non-partisan, scholarly Independent Institute. Goodman received his Ph.D. in economics from Columbia University. He is the author of ten books, including the 2012 release, Priceless: Curing the Healthcare Crisis, which provides a concrete alternative to Obamacare; Patient Power: The Free-Enterprise Alternative to Clinton’s Health Plan; and Leaving Women Behind: Modern Families, Outdated Laws, with Kimberley A. Strassel and Celeste Colgan.

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