"The story of capture is repeated again and again, in industry after industry, whether it is the agricultural combinations creating an impenetrable system of subsidies, or television and radio broadcasters monopolizing public airwaves for private profit, or the entire financial sector conjuring perilous fortunes from the legislative void. The real battle in Washington is seldom between conservatives and liberals or the right and the left or “red America” and “blue America.” It is nearly always a more local contest, over which politicians will enjoy the privilege of representing the interests of the rich
The polite word for regulatory capture in Washington is “moderation.” Normally we understand moderation to be a process whereby we balance the conservative-right-red preference for “free markets” with the liberal-left-blue preference for “big government.” Determining the correct level of market intervention means splitting the difference. Some people (David Broder, members of the Concord Coalition) believe such an approach will lead to the wisest policies. Others (James Madison) see it only as the least undemocratic approach to resolving disputes between opposing interest groups. The contemporary form of moderation, however, simply assumes government growth (i.e., intervention), which occurs under both parties, and instead concerns itself with balancing the regulatory interests of various campaign contributors. The interests of the insurance companies are moderated by the interests of the drug manufacturers, which in turn are moderated by the interests of the trial lawyers and perhaps even by the interests of organized labor, and in this way the locus of competition is transported from the marketplace to the legislature. The result is that mediocre trusts secure the blessing of government sanction even as they avoid any obligation to serve the public good. Prices stay high, producers fail to innovate, and social inequities remain in place.
With such soothing words, the Democrats have easily surpassed the Republicans in fund-raising from the health-care industry and are even pulling ahead in the overall insurance sector, where Republicans once had a two-to-one fund-raising advantage. The deal Obama presented last year, the deal he was elected on, and the deal that likely will pass in the end is a deal the insurance companies like, because it will save their industry from the scrap heap even as it satisfies the “popular clamor for a government supervision.”
The private insurance industry, as currently constituted, would collapse if the government allowed real competition. The companies offer no real value and so instead must create a regulatory system that virtually mandates their existence and will soon actually do so...."
The AMA suggests this is because various “regulatory requirements” provide “significant barriers to entry.” Chief among those barriers, it should be noted, is an actual congressional exemption from antitrust laws, in the form of the McCarran–Ferguson Act of 1945.
Insurance companies aren’t quite buggy-whip manufacturers. But they are close. In the past, one could have made an argument that in their bureaucratic capacities—particularly, assessing risk and apportioning payments—insurance companies did offer some expertise that was worth paying for. But all of the trends in politics and in information technology are against insurance companies’ offering even that level of value. Insurance is an information business, and as technology makes information-management cheaper, technological barriers to entry will fall, and competition will increase. (People who relied on the cost of printing presses to maintain a monopoly should be able to relate.)
At the same time, the very idea of assessing health risk is beginning to be understood as undemocratic, as was revealed by the overwhelming support for the 2008 Genetic Information Non-Discrimination Act, which bars insurers from assessing risk based on genetic information.Over time, more and more information will be off-limits to underwriters, so that insurance ultimately will be commoditized—every unit of insurance will cost about the same as every other unit of insurance. Managers know that one must never allow one’s product to become a mere commodity. When every product is like every other product, brand loyalty disappears and prices plummet....
