The most fascinating aspect of the tussle over HMO “reform” waged in
Congress this week was what it revealed about the differing mindsets in
Washington — and, I suspect, the far more different typical mindset
outside the capital Beltway. It’s all about what sort of regulatory
regime you view as the normal state of things.

Early in the week House Minority Leader (has a nice ring to it,
doesn’t it?) Dick Gephardt fulminated at how awful things would be if
those wascally Wepublicans had their way. HMOs would be able to continue
operating without effective federal or judicial supervision, leaving
consumers at their mercy. The result would be untold horror — unearned
profits and untreated ailments, patients left to suffer and die in their
illnesses, all for the sake of a few extra filthy dollars.

The implicit assumption behind such comments — and Sens. Kennedy and
Daschle among many others made similar remarks — is that the normal,
expected and ordinary state of affairs is for any and all institutions
like HMOs to be tightly micro-managed by the federal government. If
that’s viewed as the ordinary state of things, then for institutions
like HMOs to somehow manage to escape such tight management by mandate
is not just unusual but an aberration, a catastrophic rip in the fabric
of society, a completely unexpected phenomenon that can only be
explained by the mighty lobbying power of the insurance industry and the
corruption of the political opposition by that money.

Now there’s little question that the kind of regulation capital
Democrats view as ordinary and normal is hardly compatible with making
health care more affordable. Mandating that certain kinds of procedures
be covered by every HMO, that every HMO have elaborate supervision of an
elaborate system to elicit second and third opinions and be subject to
lawsuits if somebody thinks they haven’t done it elaborately enough is
bound to raise the cost of the product HMOs provide. It is an effort to
make sure that all HMO plans are Cadillac plans — and to assure that no
Chevys or Hondas will be on the market.

Whether the real plan is to make it so tough to run an HMO that
increasing numbers of them will fail, thus creating a crisis that will
pave the way for national health insurance, as Rush Limbaugh contends, I
don’t know. But it’s not a completely implausible scenario.

Most Republicans inside the Beltway, whatever they might think
privately, don’t deviate in public very often from this implicit
assumption about what is normal and expected. Of course, the federal
government is expected to regulate HMOs and similar institutions — it
just needs to do it more intelligently and sensitively so they can make
a buck, and the trial lawyers should be kept away.

I suspect that outside the Beltway, however, are a lot more people
who see normality in such matters in almost precisely the obverse
fashion. They would believe that in a free and civil society the normal
and expected course of events would be not to make a federal case out of
institutions like HMOs.

Such institutions might be expected to be regulated to some extent at
the state level, the level at which health, safety and medical matters
traditionally have been handled, but the severity of regulation would
vary from state to state. It should, in this view of normality, take a
major, earthshaking catastrophic event — a multibillion-dollar scandal
of national scope, thousands of patients dying because of obvious and
blatant negligence — to break the pattern and get the
national government involved.

So you have two quite different views of normality. One views federal
micro-management as normal and expected and any lack of federal
regulation as an aberration, while the other views a hands-off federal
policy as normal and federal involvement as an aberration.

Most of the political cognoscenti and the media at least implicitly
hold the first view. How many times have you seen a news “magazine”
report on some aspect of life that concludes by noting — usually in
tones of shock approaching disbelief — that there are no federal
regulations governing this industry? The assumption that most everything
should be regulated at the national level has been building since the
New Deal and while a few in our self-appointed national elites have had
minor second thoughts, it is still the reigning paradigm.

The other view might just be moving beyond conservative and
libertarian intellectual circles and into the courts. In the Lopez
decision a few years ago that invalidated the Gun-Free Schools Act, the
U.S. Supreme Court for the first time since the 1930s limited Congress’
ability to use the Interstate Commerce clause to regulate anything it
could imagine might potentially or theoretically have an
impact on interstate commerce. A thousand yards around a school isn’t
interstate commerce, said the court, so the feds can’t make the rules.

In three more recent decisions (Alden v. Maine, College Savings Bank
v. Florida, Florida v. College Savings Bank) the court also bolstered
the powers of the state against the national government. In ruling that
the state courts couldn’t be used (unless the states consented) to file
lawsuits to make states enforce federal laws and statutes, Justice
Anthony Kennedy noted that “Congress has vast power but not all power.
When Congress legislates in matters affecting the states, it may not
treat these sovereign entities as mere prefectures or corporations.”

The Supreme Court calling states “sovereign entities” — are we on
the verge of a modest cutback of central government power, perhaps even
something of a restoration of the federalist system envisioned by the

A case pending in Washington, D.C.’s federal district court might
tell the tale. In Pearson v. McCaffery, the plaintiffs, a group of
patients, doctors and research scientists argue that the federal
government does not have the power to invalidate state-passed medical
marijuana laws if there is no evidence that setting up a system whereby
patients with a recommendation from a licensed physician can use
marijuana for medical purposes would involve interstate commerce. If
there is no sufficient nexus of interstate commerce, the regulation of
health and safety involved is strictly a matter for the individual
states and the national government doesn’t have any authority in the

That case should be decided at the district court level within the
next month or so. It should tell us a great deal — although from a
somewhat different angle than many observers might have expected — if
the concept of state sovereignty or states’ rights as a check on the
power of the national government might be due for a comeback.

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