Last week was a good one if you are a student of economic debacles and institutional decline.
The shaky condition of housing finance companies Fannie Mae and Freddie Mac dominated the news, but there were other frights as well. They included anxiety about the banking system in the wake of the IndyMac Bank collapse and the woes of General Motors Corp.
In the midst of all this turmoil, most people outside of healthcare probably paid scant attention to Washingtons Medicare battle. But there are significant interconnections among all these stories and common lessons to be learned.
The Medicare saga began when the Democratic-controlled Congress decided to make a link of its own, tying a halt in a scheduled 10.6% cut in physician payments to reductions in payments to private Medicare Advantage plans. The move put Republican lawmakers in the difficult position of choosing between the interests of doctors, who were irate over their cuts, or the concerns of big insurers that rake in lots of money from Medicare Advantage. Its an especially tough spot when both sides are major GOP campaign contributors.
Democratic critics of Medicare Advantage complained that the scheme is wasteful, with the government paying insurers an average of 13% more per beneficiary than the regular Medicare program. They also viewed the plans as a major step toward the privatization and ultimate demise of Medicare.
After Congress, by a comfortable majority, sided with the physicians and passed the legislation restoring their payments, President Bush nevertheless vetoed the measure, citing the restraints on Medicare Advantage among other exceptions. Later the same day, both the House and Senate overrode the veto by wide margins and the measure became law.
The White House defense of Medicare Advantage exemplifies much that is wrong with the American economy today. A supposedly free market ideology has taken hold in the countrys corporate suites and halls of government that is a corruption of Adam Smiths vision. In fact, it is closer to corporate socialism. If the engine of corporate know-how is so mighty, why should taxpayers pour a 13% premium into the coffers of private companies and take on private risk? If corporations can achieve efficiencies government cant, shouldnt they be able to provide services at lower costs?
In the case of Fannie Mae and Freddie Mac, the administration unveiled contingency plans to use government funds to bail out the freewheeling companies by lending them money and buying their stock. Again, we have the socialization of risk on behalf of corporations.
Another common thread in all these developments is the profound decline in corporate and government stewardship. Too many executives and too many officeholders have embraced recklessness with other peoples money. Fiduciary responsibility has become an endangered species as self-aggrandizing managers plunder corporate treasuries and their politician enablers dismantle rules in return for campaign cash. (Its no coincidence that Fannie Mae and Freddie Mac have, according to published reports, spent nearly $200 million on lobbying and campaign contributions.)
Regardless of the outcome of the presidential and congressional elections, a significant change in institutional ethos is unlikely soon. Physicians should prepare for the next reimbursement battle by combining all their practices into a giant corporation. (Dont worry about antitrust laws; we dont enforce those any longer.) Then management of that company should spend, and make campaign contributions, with abandon while jacking up fees to public payers by say, 13%. When the enterprise is teetering on the brink of catastrophe, doctors should go to the government and plead for the multibillion-dollar bailout they are sure to get.
On Wall Street, they say Dont fight the tape. Physicians could say Dont fight the trend.