Out of the Wreckage of ABX1 1, Consumer Watchdog Plans Another Shake-Down

You would think that anyone seriously wanting to improve health care in America would want to reduce, not increase the administrative, bureaucratic burden of over regulation, in order to ensure more dollars go to patient care.

But if you profit from the regulatory burden, you’d hardly make that a serious objective of reform, would you?

Enter the Santa Monica based, self-styled, “Consumer Watchdog”, a.k.a. the Foundation for Trial Lawyer & Other Contrived Rights. Oops, did I write that? What I meant, of course, is the Foundation for Taxpayer & Consumer Rights. What could I have been thinking?

Anyway, out of the wreckage of the Schwarzenegger-Nuñez California Health Care Deforminator, Model ABX1 1, the Consumer Watchdog has decided to extend its two-decades old business model: enlisting the power of the state to fill its coffers with money lifted from companies.

Consumer Watchdog first rose to influence with the success of 1988’s Prop 103, which regulates the premiums of property & casualty (including automobile) insurers. Before Prop 103, these premiums were determined competitively. Since then, Consumer Watchdog has consistently propagated the line that Prop 103 reduced auto insurance rates. Analysis showing that frivolous lawsuits had pushed premiums artificially high prior to Prop 103, and that driving became subsequently safer for other (technological) reasons, is ignored by Consumer Watchdog.

And understandably so! Consumer Watchdog profits mightily from Prop 103. How? Prop 103 contains a provision for “intervenors” to “advocate” at the California Department of Insurance and be paid fees (lifted from the insurers by the CDI) for their “consumer intervention”.

And whom do you think the prime intervenor is? No prize for guessing the Consumer Watchdog. According to the CDI, of almost one million dollars paid out as fees in fiscal year 2006-07, Consumer Watchdog “earned” over $900,000!

Wow! Nice work, if you can get it.

So, it’s no surprise that Consumer Watchdog seeks to take advantage of the frustration following the defeat of ABX1 1 to extend its business model to health plans, as reported this morning. The “Dog” wants to get a proposition on the November 2008 ballot that will basically replicate Prop 103 for health plans.

Unfortunately for patients, regulating the premiums charged by health plans will do nothing to reduce the cost or increase the quality of health care. Anyone who’s followed the troubles (and the falling stock prices) of for-profit carriers like UnitedHealth Group and WellPoint knows that their business models are struggling.

Fact is, the cost of health care is going up because the cost of health care is going up, not health plans’ profits. (See an analysis by the McKinsey Global Institute for more on the cost-drivers of health care.)

But if you’re a self-styled “consumer advocate” whose business model depends on exploiting regulation to make money, you’re not going to let that get in the way of expanding your brand, are you?

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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