Levers of Power. Kevin A. Young

If an industry was hurt by a particular element in the reform package, it would have to be compensated in some way.

      The solution was the “three-legged stool”: three inseparable elements that would form the framework for reform. In exchange for accepting customers with preexisting conditions—the first leg—insurers would get the second leg, the individual mandate that required everyone to buy insurance. The mandate was their main demand, since it guaranteed an immense expansion of their declining customer base. Obama had vocally opposed the mandate during his campaign, but reversed his position in office to accommodate healthcare interests. The third leg of the stool involved government subsidies to the poor, which would ensure that insurers and providers could collect from their new low-income patients. The mandate, combined with government subsidies, would deliver a huge infusion of profits into the insurance industry, especially since consumers were not given the option of a strong public insurance program. This framework had long circulated in right-wing and business circles, where its regressive nature won many adherents. It resembled a Heritage Foundation proposal from 1989 and an earlier Nixon administration plan. In 2006, Governor Mitt Romney of Massachusetts had signed something very similar, with much business support. It was also the essence of the health insurers’ own December 2008 proposal.⁵³

      The embrace of the three-legged stool and the simultaneous rejection of serious cost containment measures meant that rising healthcare costs would continue to be borne mostly by workers and patients, in the form of rising premiums, copays, and deductibles. Although the final ACA legislation included some small tax increases on the wealthy, many of its funding provisions were regressive, in that they targeted the working class. The healthy would subsidize the sick via the individual mandate, rather than the rich or corporations subsidizing the sick. Employer-based insurance would also be taxed, a measure that targeted unionized workforces with decent health plans.⁵⁴ The offloading of costs in this way helped to minimize the tensions over healthcare within the corporate elite. Disruptive mass movements might have reduced elites’ power to offload costs onto those below, but mass protest was minimal.

      At no time did the administration or Congress challenge the underlying premise of corporate control over healthcare. The ironclad commitment to this pro-corporate framework derived not only from health industry donations and lobbying, but also from the structural position of health firms within the economy. The sector accounted for 18 percent of GDP and was the nation’s leading employer.

      This concentration of capital and technology within the sector further enhanced the structural power of the leading firms. That power could be exercised in several ways, including through disinvestment from key markets and through price hikes, which would become visible weapons of the insurers following the ACA’s implementation. In early 2010, the Democratic Speaker of the House, Nancy Pelosi, implicitly acknowledged this power. She stressed the need to compensate insurers for accepting people with preexisting conditions by offering them the individual mandate and government subsidies to the poor. “‘Otherwise, you have no leverage with the insurance companies’ and they would likely increase rates,” she told the press.⁵⁵ Few in Washington questioned this premise. Ensuring the high profits of the private health industries was imperative, given that policymakers had ruled out public alternatives. The system would thus be reformed, but its central premises of private control and private profit would remain intact.

      All of these crucial decisions were made prior to the introduction of the legislation in Congress, during the pre-legislative stage of backroom discussions among “stakeholders.” By the time formal debate on the healthcare bills began, the Obama administration and Congress had already adopted a framework that excluded progressive options from consideration and accommodated most of the divergent interests among businesses. As a result, costs would continue rising, and tens of thousands would still die each year for lack of coverage.

       Financial Reform: Keeping Profits Strong

      What of the next major legislative triumph of the Obama era, financial reform? The 2008 Wall Street crash left no doubt about the need for greater regulation. Public opinion was both united and intense in its condemnation of Wall Street’s reckless and often illegal behavior. Obama’s electoral victory just after the crash was due in part to his call for stricter regulation. At first glance, then, the reform process that began in early 2009 might seem to have been driven by an overwhelming surge of public sentiment.

      However, the story is again not so simple. The 2008 crisis, and the destruction of capital that it involved, set off alarm bells within the corporate world that had not been heard in decades. Beginning soon after the 2008 crash, the business press, and especially the financial press, began calling for government action to protect the system from future crises. These voices advocated significant new regulations on the financial sector. Columns in the business press condemned “Wall Street’s economic crimes against humanity” and the “mass financial destruction” wrought by the derivatives industry.⁵⁶ Editors called variously for specific reforms and for a total “overhaul” of Wall Street.⁵⁷ Leading investors and hedge-fund managers called for more regulation. Even the billionaire and deregulatory crusader Carl Icahn (later hired by the Trump administration) advocated reforms that would “make corporate boards and managers more accountable to shareholders.”⁵⁸ While some of these statements were surely motivated by PR concerns and a desire to “fend off” undesirable reforms,⁵⁹ they were also self-serving in a more straightforward sense: they highlighted the widespread business interest in checking the most parasitic behaviors of high finance—parasitism that victimized other businesses and wealthy investors as well as the public. The main thrust of these calls for reform focused on increased oversight of large financial institutions and stricter rules on how much capital banks needed to retain as a cushion against crisis (the “capital ratio”). Both aspects would be central to the White House’s June 2009 white paper and the bills that became the Dodd-Frank Act signed in July 2010.