National Defense Authorization Act For Fiscal Year 2010-Conference Report--Resumed

Floor Speech

NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2010--CONFERENCE REPORT--Resumed -- (Senate - October 21, 2009)

BREAK IN TRANSCRIPT

HEALTH INSURANCE INDUSTRY ANTITRUST ENFORCEMENT ACT

Mr. WHITEHOUSE. Mr. President, I come to the floor to speak in strong support of the Health Insurance Industry Antitrust Enforcement Act, introduced by the senior Senator from Vermont, the chairman of our Judiciary Committee, Mr. PATRICK LEAHY. I believe this bill is an important part of health care reform, and I am hopeful it can be included in the final reform bill as it makes its way through this body.

Our antitrust laws embody the proud American idea that democracy shapes capitalism and not vice versa; that vigorous economic competition is not an amoral, Hobbesian contest but disciplined by a strong rule of law tradition; and that ours is not a society in which might makes right and only the powerful write the rule book.

The great Supreme Court jurist and antitrust crusader William O. Douglas, wrote:

Industrial power should be decentralized. It should be scattered into many hands so that the fortunes of the people will not be dependent on the whim or caprice, the political prejudices, the emotional stability of a few self-appointed men. ..... That is the philosophy and the command of the Sherman [Antitrust] Act.

The passage of the Sherman Antitrust Act and the Clayton Antitrust Act and the creation of the Federal Trade Commission and the Antitrust Division at the Department of Justice demonstrated a Federal commitment to a level economic playing field. Small businessmen and entrepreneurs, shouldering the enormous task of starting and sustaining a new enterprise, would know that powerful competitors could not collude to keep them out of the market. Consumers could rest assured that prices were not being fixed artificially high by scheming monopolists. Every industry, ever vector of American business, was made subject to these rules of the road--except for one: the insurance industry.

In 1944, insurance companies challenged the Federal Government's very ability to enforce antitrust laws against them, and the Supreme Court ruled that the insurance business was subject to antitrust laws just like everybody else. In response, insurance companies came to Congress, where they launched a massive lobbying campaign, pressuring Congress to invalidate the Supreme Court's decision--not unlike the current lobbying barrage they are aiming at killing health care reform. That campaign back in 1944 was successful. In March 1945, the McCarran-Ferguson Act exempted insurance companies entirely from the reach of America's antitrust laws. If that exemption ever made sense, it no longer does, especially when it comes to health insurance coverage.

Today, Americans pay ever-higher premiums for less care because a small group of wealthy, powerful companies control the health insurance market. Just consider these numbers: A study by the American Medical Association shows that 94 percent of metropolitan areas--virtually every one--has a health insurance market that is ``highly concentrated,'' as measured by Department of Justice standards. This means that if the Department of Justice's Antitrust Division had enforcement authority over the health insurance industry, it would be carefully scrutinizing this market for signs of anticompetitive conduct that hurts consumers. But due to the antitrust exemption, the Department of Justice cannot do that job. That same study shows that, in 39 States 2 health insurers control at least half of the health insurance market and in 9 States a single insurer controls at least 70 percent of the market.

Back in 1945, the insurance industry argued that it should be exempted from the antitrust laws because the market was heavily localized and not concentrated. Well, if that were true then, it is not true now.

Overhead for private insurers is an astounding 20 to 27 percent--charges that consumers pay for in higher premiums. A Commonwealth Fund report indicates that private insurer administrative costs increased 109 percent from 2000 to 2006--109 percent in those 6 years--and the McKinsey Global Institute estimates that Americans spend roughly $150 billion annually on what the report calls ``excess administrative overhead'' in the private health insurance market. Mr. President, $150 billion a year in ``excess administrative overhead.'' Clearly, this is not a competitive market. If it were, companies would be driven to cut these costs in order to compete effectively in the marketplace.

Without competition and without economic incentive to avoid massive administrative costs, health insurance premiums have increased 120 percent--more than doubled--in one decade, while insurance industry profits increased 428 percent in the same period--428 percent.

Doctors and other health care providers have been hurt as well. For many years, United Health Care, a massive health insurance company, owned and operated a computerized pricing system that was used by almost every other health insurer. The New York attorney general recently found that the system was designed to systematically underpay doctors for their services and that this had been going on for years. United Health paid $400 million to settle lawsuits by the State, but if the Federal Trade Commission or the U.S. Department of Justice had tried to bring suit under the Federal antitrust laws, they would have been blocked by McCarran-Ferguson.

Finally, ironically, health insurers threaten and sue doctors all the time under these same antitrust laws while protecting their own exemption from the laws they seek to impose on the providers and the doctors whom they torment.

One might ask how this exemption has survived so long. A certain school of political thought holds that the only proper relationship of government to the market is hands off, that any government involvement in the marketplace is unnatural and unwelcome.

But with respect to antitrust enforcement, we crossed that Rubicon long ago, and every industry in the country is required to play by rules that support the market by increasing competition, again, except insurance. Experience in those other areas has shown that the government referee on the field of play creates a better environment for competition, and the public wins.

Think of the benefits of a competitive health insurance market. Insurers would have to compete on price, lowering premiums for individuals and small businesses purchasing insurance, and work hard to lower those unnecessary administrative costs. New competitors would be able to enter more easily and offer better consumer service, quicker claims processing, streamlined enrollment--competition that is desperately needed in a market where 36 percent of physician overhead is consumed by fighting with the insurance industry over inappropriate denial and delay of health insurance claims.

Senator Leahy's Health Insurance Industry Antitrust Enforcement Act would repeal the unique and peculiar exemption for health insurance and medical malpractice insurance companies. The bill ensures that these companies are no longer permitted to engage in the most egregious forms of antitrust violations--price fixing, bid rigging, and market allocations--while preserving insurers' ability to share statistical information with each other in a procompetitive manner, with appropriate approvals.

Let me conclude with the words of a distinguished Senator, one of the greatest advocates for the elderly, ill, and disabled this Chamber has seen, Senator Claude Pepper. Senator Pepper, at the time, strongly opposed the McCarran-Ferguson antitrust exemption for the insurance industry, and he
warned of the ``carte blanche authority ..... which had been contained in no previous legislation ..... [and] which for the first time gives the States carte blanche to legitimize the very vices against which the Clayton Act and the Sherman Act were directed.''

It appears to me the exemption for the insurance industry was a mistake then, and it is assuredly unwise now. Let's repeal this unfair law and give health insurance consumers the same benefits of free, open, and fair competition that all Americans enjoy.

Let me finally add that the state of the health insurance market reinforces the need to which I have spoken, and so many of my colleagues have spoken before, for an efficient, nonprofit public health insurance option. The health insurance industry has been artificially sheltered by government for decades, building huge profit margins, massive market share, and colossal overhead and administrative costs. Now these same companies argue vehemently against the public option on the grounds that it would amount to government interference--government interference with their government protection from competition. That irony just doesn't pass the laugh test.

According to the AMA study I quoted in the beginning of my remarks, Rhode Island is the second most concentrated health insurance market in the country. Just two insurers control 95 percent of the market. My constituents desperately would like the chance to choose a public option and would benefit from a more competitive health insurance market, one in which vigorous competition brings down costs and improves the quality of care and encourages health insurers to treat people decently.

Mr. President, I have concluded the remarks on the McCarran-Ferguson exemption. I wish to turn to another topic, but I see the majority whip on the Senate floor, and I would be delighted to yield to him if he wishes to take a moment.

I will continue, then. I thank the distinguished majority whip.

BIPARTISAN CAMPAIGN REFORM ACT

Mr. President, I wish now to say a few words about the colloquy that took place between Senator McCain and Senator Feingold on the Senate floor a few moments ago over the need to protect our Nation's political system from the influence of corporate money.

For more than a decade, Senators MCCAIN and FEINGOLD have been stalwart defenders of the integrity of our political system, and they achieved a hard-fought victory in 2002 with the passage of the Bipartisan Campaign Reform Act, which everybody around here knows as the McCain-Feingold law. As they said in their remarks, we face a real danger that an activist Supreme Court will strike down portions of that law, overturn the will of Congress and the American people, and allow corporations to spend freely in order to elect and defeat candidates and influence public policy to meet their ends. The consequences of such a decision by our Supreme Court could be nightmarish.

Federal laws restricting corporate spending on campaigns have a long pedigree. Back in 1907, the Tillman Act restricted corporate spending on political campaigns. While various loopholes have come and gone over the years, the principle embodied in that law that corporations aren't free to spend unlimited dollars to influence political campaigns is a cornerstone of our American system of government. That principle now appears to be at risk as the Supreme Court may be poised to open the floodgates now holding back corporate cash.

In September, the Supreme Court heard oral argument in Citizens United v. The Federal Election Commission. Citizens United is an organization that accepts, channels, and funnels corporate funding. It sought to broadcast a documentary attacking our former colleague, Senator Clinton, now Secretary of State Clinton, at the time a candidate for President, on On Demand cable broadcasts. Current law prohibits the broadcast of this kind of corporate advocacy on the eve of an election. Citizens United filed a lawsuit arguing that the law infringed on its first amendment rights.

Many observers expected the Court to rule narrowly on the case, perhaps focusing on whether McCain-Feingold applies to On Demand broadcasts. Instead, after hearing oral argument, the Court asked for an additional briefing and a new round of oral argument, something the Supreme Court does very rarely, to consider whether the first amendment bans such restrictions on corporate campaign spending. There is some indication that the activist conservative wing of the Court believes it does. We may be on the verge of another effort by a Roberts court to advance its ideologically charged view of the Constitution. In so doing, the Court would overturn its own longstanding precedents, opinions such as Austin v. Michigan State Chamber of Commerce where Justice Thurgood Marshall warned of ``the corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public support for the corporation's political ideas.''

Should the Court upturn so much long-settled law, it would upend our entire political system and we could see a new era of corporate influence over politics not seen in the history of our Republic.

Imagine for a moment what our political system would look like if the Court takes the fateful step of allowing corporations to unrestrictedly spend money to influence campaigns. Corporate polluters under investigation by the Department of Justice, running unlimited advertisements for a more sympathetic Presidential candidate; financial services companies spending unlimited money to defeat Members of Congress who have the nerve to want to reform the way things are done on Wall Street; defense contractors overwhelming candidates who dare question a weapons program they build. It would become government of the CEOs, by the CEOs, and for the CEOs.

Nothing in the history of the first amendment requires the protection of such activities. To the contrary, Congress long has been understood to hold the power to protect the electoral process from the corrupting flood of corporate money. This is because, as the Supreme Court long has recognized, a corporation holds no inalienable right to participate in an election. Unlike the people from whom the sovereign power of the State is drawn, a corporation is created by and subject to the sovereign power of the State. Indeed, as Chief Justice John Marshall explained in 1809, only 18 years after ratification of the first amendment, a corporation is ``a mere creature of the law, invisible, intangible, and incorporeal and certainly not a citizen.''

In 1906, a century later, the Supreme Court explained that:

The corporation is a creature of the state. It is presumed to be incorporated for the benefit of the public. It receives certain special privileges and franchises, and holds them subject to the laws of the state and the limitations of its charter. Its powers are limited by law.

Corporations are created by government charter. They are legal fictions, tools for organizing human behavior. Neither logic nor history justifies unleashing them from the bonds of government to master and control the very government that created them--new monsters on the political landscape, bending public wealth to their peculiar private purposes.

How might they do that? Well, let's look at one recent case involving Bank of America.

All of us remember in September of 2008, Bank of America announced that it would buy Merrill Lynch for $50 billion. In August of this year, the Securities and Exchange Commission filed a civil suit against the Bank of America alleging that it had made a misrepresentation to its shareholders that Merrill Lynch would not pay bonuses to its executives in 2008 when, in fact, Bank of America had agreed that Merrill Lynch could pay up to $5.8 billion in bonuses to its executives. That is the background.

Bank of America and the Securities and Exchange Commission submitted a proposed final consent judgment proposing to resolve that case by giving $33 million of shareholder money to the Securities and Exchange Commission. The U.S. District Court in New York took a look at this proposal and threw it out. The judge rightfully rejected it as neither fair nor reasonable nor adequate. The Court said it well; I can't improve on the Court's decision:

The parties were proposing that the management of Bank of America--having allegedly hidden from the bank's shareholders that as much as $5.8 billion of their money, shareholder money, would be given as bonuses to the executives of Merrill who had run that company nearly into bankruptcy--would settle the legal consequences of their lying by paying the SEC $33 million more of their shareholders' money.

As the Court noted, this was all done ``at the expense not only of the shareholders, but also of the truth.''

That is a pretty stark example of corporate management trying to use shareholder money to serve its own ends, even against shareholder interests. Well, guess whose interests corporate managers would pursue politically if they could open the spigots of shareholder money in elections.

Longstanding statutes and judicial precedents that limit corporate involvement in campaigns rests on the well-established and long-accepted recognition that corporations and their corrupting self-interests must be controlled. There is no reason now for a fundamental rethinking of such a plain and well-settled principle. The rightwing of the Supreme Court will be hard pressed to justify departing from such settled understandings of the first amendment, from the century-long tradition of controlling corporate spending, to invent new constitutional rights for corporations against real human beings.

In closing, I stand with my colleagues, Senator McCain and Senator Feingold, in readiness to do what it takes to protect our system of campaign finance laws from the danger of corporate corruption. I look forward to working with them and my other colleagues to ensure that our elections remain enlivened by a robust debate among human participants in which CEOs don't have favored princely status because they can direct corporate funds to drown out people's voices.

I thank the Presiding Officer, and I yield the floor.

BREAK IN TRANSCRIPT

Source