There's been a lot of skepticism about the White House's strategy of cutting deals in which industry players voluntarily promise to save money over the next 10 years. The skepticism is simple enough: If the pharmaceutical companies are willing to save $80 billion as a favor to Barack Obama, that suggests there's a lot more than $80 billion that could, and probably should, be saved. As Nancy Pelosi told me, "The minute the drug companies settled for $80 billion, we knew it was $160 billion. Right? If they're giving away $80 billion?" A few minutes later, she suggested that maybe those agreements weren't inviolable. "The president made the agreements he made," she said. "And maybe we'll be limited by that. But maybe not!"
A front-page story in today's New York Times suggests that her optimism was misplaced. Billy Tauzin, head lobbyist for the pharmaceutical industry, hasn't liked some of the cost-saving measures moving through the House. In particular, he's worried about provisions that would allow doctors to negotiate prices with Medicare. So he sat down with a reporter and gave up the game. The deal that the pharmaceutical companies made with the White House wasn't simply to offer up $80 billion in savings. It was to offer up $80 billion in savings so long as the White House promised to protect them from anything that would extract more than $80 billion in savings.
It's often noted that Obama's strategy on health reform is the opposite of Hillary Clinton's in 1994. (See, for example, "The Ghosts of Clintoncare" by Ezra Klein in the Washington Post.) Instead of hiring Ira Magaziner to draft a bill and then shoving that bill down Congress' throat, the Obama White House is letting Congress write the health reform bill. This strikes me as a reasonably shrewd strategy. But when you very deliberately aren't controlling the legislative process, it doesn't make a lot of sense to cut deals with special interests about what that legislation will contain. Health reform has a thousand interconnected parts. Give in on something here, and you have to make alterations on something there. That's why Senate finance Chairman Max Baucus keeps saying, "Everything is on the table" (even though that isn't strictly true).
Obama has taken tens and perhaps hundreds of billions of dollars off the table by ruling out an elementary cost-saving measure whose rejection by the Republican congressional majority back in 2003 is an ongoing scandal. What did he get in return? The hope that other sectors in the health care industry would get on board with reform. But health reform's principal target—the insurance companies—not only refuses to endorse the creation of a public-option government health insurance program, the one essential component to major health care reform; it refuses even to stop hunting for trivial reasons to cancel insurance for policyholders after they develop expensive-to-treat illnesses. (See "Why You Can't Trust Your Health Insurer.") Mr. President, you've been played for a sucker.