The President Has to do What Letterman Did: Refuse to Pay Hush Money

Last January, as I understand it, the White House promised Big Pharma, big insurance, and the American Medical Association the moral equivalent of what Joel Halderman allegedly demanded of David Letterman: hush money. The groups agreed to stay silent or even be supportive of health care reform, as long as they were paid off.

But now that it’s time to collect, the bill is larger than the White House expected, and it’s going to fall like an avalanche on middle class Americans in coming years. That could mean an ugly 2012 election (read Sarah Palin).

So the President has to do what Letterman did: Refuse to pay.

Big Pharma is on the road to getting its deal: not only 25 to 30 million more paying customers, but also a continued ban on Medicare using its bargaining clout to reduce drug prices, a bar on genetic drug manufacturers introducing similar biologic drugs until the originals have been on the market at least twelve years, and no public insurance option to negotiate low drug prices. (Big Pharma did agree to $80 billion of cost cuts over the next ten years, to be sure, but its hush money payoffs far exceeded that sum.)

Big insurance is well on the way to getting what it wants: 25 to 30 million more paying customers (many of them young and healthy), a requirement that almost all businesses “pay or play,” and no competition from a public option.

Doctors (that is, the American Medical Association) are on the way to getting what they want: Instead of a temporary patch on scheduled decreases in Medicare reimbursements to them, a permanent fix that would change the reimbursement formula altogether and reward them $240 billion over the next ten years.

But when they all get paid off, who will do the paying? Middle-class Americans who are already in a financial squeeze — whose wages are lower, adjusted for inflation, than they were thirty years ago, and whose jobs are disappearing. They’ll face still higher premiums, co-payments, and deductibles; and they’ll pay higher drug prices, Medicare premiums, and taxes to cover the rest.

That’s because these payoffs make it next to impossible to contain the wildly escalating costs of health care. And 25 to 30 million additional Americans will be covered.

The only thing in the emerging bills that’s related to cost containment is a proposed excise tax on so-called “Cadillac” insurance plans, priced over a certain threshold amount (the threshold is now up for grabs). But because the costs of health care are likely to rise faster than inflation, whatever the threshold, the middle class will get socked again.

So Obama has to forcefully weigh in with Nancy Pelosi and Harry Reid as the two try to cobble together passable bills for each chamber — demanding real cost containment.

The three big means of containing costs: (1) A true public option (better yet, one that allows anyone now holding private insurance to opt into; (2) authority for Medicare to negotiate low drug prices; and (3) lower Medicare reimbursement rates to doctors (in other words, no “doctor fix”).

In addition, the so-called “medical exchanges” in the emerging bills (as well as the public option, which hopefully will be included) should give preference to pre-paid health care plans, like Kaiser Permanente, whose doctors are on salary and have every incentive to keep people healthy rather than charge for more services and tests.

But if Obama doesn’t weigh in forcefully and say “no” to the hush money for Big Pharma, big insurance, and the AMA, America’s middle class will get walloped. And if the walloping starts before 2012, Sarah Palin or some other right wing-nut populist will wallop Obama. And after she or he wallops Obama, America will get walloped even worse.

About Robert Reich 545 Articles

Robert Reich is the nation's 22nd Secretary of Labor and a professor at the University of California at Berkeley.

He has served as labor secretary in the Clinton administration, as an assistant to the solicitor general in the Ford administration and as head of the Federal Trade Commission's policy planning staff during the Carter administration.

He has written eleven books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine. His weekly commentaries on public radio’s "Marketplace" are heard by nearly five million people.

In 2003, Mr. Reich was awarded the prestigious Vaclev Havel Foundation Prize, by the former Czech president, for his pioneering work in economic and social thought. In 2005, his play, Public Exposure, broke box office records at its world premiere on Cape Cod.

Mr. Reich has been a member of the faculties of Harvard’s John F. Kennedy School of Government and of Brandeis University. He received his B.A. from Dartmouth College, his M.A. from Oxford University, where he was a Rhodes Scholar, and his J.D. from Yale Law School.

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1 Comment on The President Has to do What Letterman Did: Refuse to Pay Hush Money

  1. All my friends tell me liberalism is a disease. I tell them no it is a different way of looking at things. Like take this left wing-nut job Reich who things everybody should live in the same size house, the same size family, the same income, and the same job. Did Obama not get elected as a populist? Only this is not the type of populist the American people envision. The type where everybody works for Obama’s big government. Government of the People,By the People, and For the People. But what Reich doesn’t tell you is that the rules won’t apply to his kind. He will still have three houses, fly in big jets, have 4 or 5 wife’s and plenty of kids (God forgive). You see people like Reich are special because he went to a school like Harvard and knows what is best for the “Yes We Can” dummies.

    You see for some reason people like Reich thinks this country needs to suffer. But will Reich and his left wing-nuts suffer?
    The country is slowly dying and will continue to die under an Obama administration but is that the goal?

    There is finally somebody that is not beholden to any special interest groups.
    There is finally somebody that succeeded without a silver spoon in their mouth. There is finally somebody who didn’t abuse the system to get where they are today. Finally there is somebody that is just like 90% of the country. Finally there is somebody that is one of us. But could time change?

    If a Palin was elected POTUS the country would start to heal, would come back to life, and would grow. A Palin type administration would be for the people, by the people, and of the people.

    We can’t have that now can we Mr. Reich?

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