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Public Statements

Preventing Extortion

Floor Speech

Location: Washington, DC

Mr. DEFAZIO. Madam Speaker, the following essay was presented to me at a health care townhall. I believe this historical analogy is very sound.

(By Jack Churchill)

The debate about a public health insurance option mirrors the debate about public power in the 1920's and 30's. The arguments then were very similar to the arguments we hear today.

The principal issue then was whether the federal government should enter the public power business by investing taxpayers' money to build the Tennessee Valley Authority and to harness the Columbia and other rivers for electrical energy or the sites should be transferred to the private sector. A second issue was who should build transmission lines and set wholesale prices when the Federal government built dams.

The answer to the second question was first enunciated on the Senate floor In the fight over the Wilson Dam in 1920 by Senator John Sharp Williams of Tennessee. He said ``The government should have somewhere a producer of these things that should furnish a productive element to stop and check private profiteering.'' Thus was born the yardstick federal policy which later found its way into TVA legislation through the efforts of Nebraska's Senator George Norris. In a 1932 campaign speech in Portland, Oregon, Franklin Roosevelt referred to his TVA and other regional proposals as ``yardsticks to prevent extortion against the public.''

Roosevelt's statement enunciated America's public power agenda, which through the years has saved the federal government and electrical consumers hundreds of billions of today's dollars. This public investment provided the electrical energy to build the bombers and the atomic bomb and was a critical factor in winning World War II.

At the time of the Yardstick Public Power legislation of the 1930's, most of the farms and homes in rural America were without electrical power. Only in the cities could private power companies make a profit selling electrical energy. With the launching of the New Deal yardstick pricing, together with publicly owned electrical cooperatives and public utility districts, rural America was electrified and private utilities ended up serving a large majority of rural consumers.

Because we adopted yardstick pricing back in the 30's, today America possesses a healthy and balanced mix of private, public, and cooperative electrical systems.

The public power analogy might be a useful device in combating the brutal campaign against a federal public health insurance option. History is repeating itself. We see the same epithets of socialism, unfair competition, and government interference with private enterprise.

Both America's constitutional system of government and our free enterprise economic system are built upon the fundamental notion of balancing power between institutions. It is only when there is an imbalance of power within one of the two systems or the share of power between them that we fail. Recent disasters created by imbalance, including Enron and California energy manipulation and the collapse of the American banking system, wiping out our citizens' retirement accounts, are painful examples.

Most importantly and perhaps most painful for great numbers of our citizens today, America trails all developed countries by many years in fashioning an effective national health services delivery system.

There is no industry that has a more shared and complex mix of nonprofit, government, and private for-profit delivery systems. Yet we have a system that is neither cost-effective nor meets the needs of our citizens whether insured or not. It is a system that is out of balance. It desperately needs an effective yardstick

The imbalance in our system began in 1975 when the Supreme Court gave the green light to commercialization of medicine by removing medicine from protection of the antitrust laws. The imbalance was greatly exacerbated in 1980 when the American Medical Association changed its ethical guidelines to declare that medicine was no longer a professional service but both a business and a profession. The other factor of great influence that has led to imbalance is the dominance of investor-owned private insurance companies born from the establishment of employer-based health insurance systems.

Thus began the corporatizing and domination of Wall Street in organizing and pricing for-profit medical services. Rather than a system organized to deliver cost-effective medical services to patients, today we have a system designed for profit.

Despite the roles of federal Medicare, state Medicaid, members of Congress health care programs, federal delivery systems such as the Veterans Administration, and nonprofit group health cooperative associations, the balance of power in our national health care delivery system is now largely in the hands of Wall Street-driven for-profit enterprises. Every medical procedure from putting on surgical gloves to sending bills to the insurance company has become a profit center. And the pricing for all the services are set largely in an oligarchical framework of administered pricing. There is absolutely no competitive pricing. Have you or anyone you know ever negotiated the price of medical service?

So history repeats itself. The Democratic party is charged with formulating another national yardstick policy that will have enormous consequences for the health and welfare of our citizens in generations to come. Like Franklin Roosevelt, President Obama is simply leading the nation to create sufficient power in the public sector to balance against the private sector and the Wall Street pricing effect. Or in President Roosevelt's words, ``a yardstick to prevent extortion against the public.''And as President Obama stated the issue ``to keep insurance companies honest.''

The failure of Congress to build in an effective market yardstick for pricing medical services would cost future generations trillions and fail to deliver cost-effective medical care to all our citizens. No amount of regulation will suffice. Only the market mechanism will provide effective cost reduction to pay for universal coverage.

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