Krugman's wrong on Obama's healthcare strategy

In the NYT, Krugman says Obama's naive to think he can work with insurance companies to get a healthcare plan (“Big Table Fantasies,” 12/17/07). Krugman's dead wrong in my opinion. For one thing, Hillary's got the same notion, too, coming out of her experience in the 1990s.

It may be emotionally satisfying to think we can get the job done while sticking it to the man -- the big bad insurance companies that, oh, by the way, just happen to employ millions of workers whose votes we might like and who need Democrats to serve their real interests -- but it will not get the job done.

Here's the email I sent to Krugman.

Re Obama naivete

If Obama's naive about having to work with the insurance companies, then Hillary is naive in spades, too. She has made it crystal clear that she intends to do that this time, sometimes in code words, but clearly in any case. If anyone is not naive about the power of the insurance companies, it's certainly Hillary Clinton.

Obama's right, though, and so is Hillary. It is going to be a relentless, delicate and ingenious combination of hardball and softball -- guerrilla tactics even from the White House designed not to enlist the insurance industry so much as to neutralize it (better yet, neuter it) -- that will be necessary to get universal health insurance. The biggest part of it may be to use Warren Buffet, Bill Gates and other friendlies they can recruit from the big and "responsible" corporate suites to gain the support of the IBMs, the P&Gs, the GMs, even the Chamber of Commerce, by making them see that it is in their interest to solve this blight on the national economy.

Actually, they know it already, they just need the courage to speak out finally, even at the risk of temporarily alienating their insurance executive neighbors and fellow-members of the Business Roundtable.

Someone in the insurance industry, though, will finally figure out that if the Federal government covers the most expensive healthcare -- the catastrophic kind that is the natural subject matter for national social insurance -- they can still make big profits on the coverage underneath a Federal umbrella. They will be more stable profits, too, less risky than they are now, because (a) the national agitation will have been calmed, with less pressure for a comprehensive single-payer system that cuts them out of the picture entirely, and (b) the exposure to unpredictable, unlimited losses will have been reduced. With a stable, rationalized system, too, one that takes the endemic multi-player panic out of the current situation, the government and insurance companies will be able better to join forces on pressuring costs downward.

Do the insurance companies not make a tidy sum from the supplementals underneath Medicare now? Anyway, with the Obama and Hillary plans preserving the role for private insurance, the opportunities will be there, even more than Medicare allows. Warren and Bill can show them how they can cut their losses, even win hearts and minds, by embracing the change -- and, in fact, it will be win-win-win for everybody.

You seem to forget, too, that Obama won 70% of the vote in Illinois. That's a lot. And not to recognize that thinking the populists by themselves can beat industry is itself the most naive of views. The corporations who are paying the costs now instead of reaping the profits -- the best hope for building critical mass for reform -- will not join a purely populist, anti-corporate campaign, and the corporations surely have the media under virtually complete control. Neither will the healthcare provider industries, who can recognize the opportunity to cut back on their paperwork and their collection agencies if they are assured of at least being paid the really big bills.

There is a chance, though, with great populist and political pressure that is willing to acknowledge a difference between good corporations and bad ones, between good wealthy people (like Buffett, Al Gore and Paul Krugman) and bad ones (like Ken Lay and the $200 million club members), the responsible corporations can be nurtured along. It may be a hope, but both Barack and Hillary recognize it's the only hope.