A Decoy Gambit?
How badly does Obama want to impose pricing limits on health insurers?
Click here for a guide to following the health care reform story online.
"Watch out for people who lure you away from the real issue with the Decoy Gambit,"warns Roger Dawson, author of Secrets of Power Negotiating. The decoy gambit is a negotiating tactic in which Party A introduces a demand he doesn't really care about. If all goes well, Party B will make a concession to persuade Party A to drop his insincere demand. Dawson claims the decoy gambit is unethical (though he admits he used it once to lower a hotel bill). I say all's fair in politics.
Allow me to explain. On Feb. 22, President Obama introduced a White House proposal on health care reform, crafted from the bills that already passed the House and Senate. The proposal adds some minor features of the House bill to the Senate bill, none of them very surprising to people who followed the House-Senate negotiations that occurred before Republican Scott Brown's election to Sen. Ted Kennedy's Massachusetts seat blew them all to hell. For example, the White House plan makes subsidies to people who purchase nongroup health insurance a tad more generous to people at lower incomes than the Senate provided for. It also adopts a few Republican proposals, none of them of any great moment, aimed mostly at battling fraud in Medicare and Medicaid. And it further scales back the ill-advised tax on high-value "Cadillac" health plans by raising the threshold (which started at $23,000, then rose to $24,000) to $27,500 and by putting off its implementation (for everyone, not just union members) to 2018. To take up the revenue slack, the White House builds on the Senate bill's 0.9 percent Medicare surtax on family incomes above $250,000 by adding, as foretold, a surtax on investment income for families in that same income group. Also unsurprising is what the White House bill doesn't include. It contains no public option, and it doesn't address how health insurers receiving government subsidies may treat abortion. The failure to resolve this last question, which has lately received scant attention, poses the biggest obstacle to health reform's passage.
So far, absolutely nothing to cause Republicans to cry, "I was blind, but now I see." This is essentially the same bill the GOP has opposed all along.
But the White House also added something new. Something bold and somewhat surprising. It added a proposal that would give the federal government veto power over insurance premium hikes. I suspect this provision is a decoy—something the White House added so it could be bargained away later.
Under the Obama proposal (which was modeled on an amendment by Sen. Dianne Feinstein, D.-Calif., that never got a floor vote) the Health and Human Services department would create a new Health Insurance Rate Authority to review health insurance premium increases and determine whether they're fair. Thirty-three states currently perform this task. The Obama proposal would enable such review in the remaining 17 states and provide backup to all 50.
The proposal builds on provisions in both the House bill (Title I, Section 104) and the Senate's (Title One, Section 1003) empowering HHS to conduct an annual review of excessive rate increases. The purpose of these, however, is mere disclosure; HHS would post evidence of price-gouging online. It would then be up to state insurance commissioners to use the data to recommend to the newly created health insurance exchanges that the worst offenders not be allowed to participate. The Obama proposal, by contrast, would empower HHS itself to scale back proposed premium hikes or demand rebates for hikes that have already taken effect. Although this does not constitute across-the-board price controls (each premium increase would be considered on its own merits), it is a form of price control, something conservatives have always hated and that liberals have long shied away from at the national level. Administering it could prove a nightmare.
Timothy Noah is a former Slate staffer. His book about income inequality is The Great Divergence.
Photograph of Barack Obama by Ethan Miller/Getty Images.