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The mandate is in Justice Kennedy’s hands EZRA KLEIN
klein from G1
approachtouniversal coverage that represented“healthinsur- ance for everyonewithout a gov- ernment takeover”whenitwas signedby aRepublicangovernor inMassachusettswas spunby congressionalRepublicans as the missing final chapter of “The CommunistManifesto”when Democrats triedto scale itna- tionally. Giventhat theplanwas enact-
edanyway, it’s time to check inon howMassachusetts
isdoing.And the answer, basically, ispretty
well.Thisweek, the state’shealth andhumanservices agency re- leasedthe results of anew, inde- pendent survey examining cover- age
inMassachusetts.More than 98percent—98percent!—of the state’s residentsnowhavehealth insurance, asdomore than99 percent of the state’s children. Remarkably, thosenumbers
have gottenbetter inrecent years,withthenumber ofunin- suredresidents inthe state fall- ing to 1.9percent in2010from 2.6percent
in2008.That’s very
unusual.Normally, the ranks of theuninsuredswellduring reces- sions aspeople lose their jobs andstates cut back onpublicpro- grams to balance their budgets. Nationally, thenumber ofAmeri- canswho areuninsuredrose to 16.76percent in2010from14.8 percent in2008, according to Gallup. ThatMassachusetts’s reforms
have survived, andevenpros- pered, inthis economic environ- menthas left the law’s architects feeling vindicated. “The goal of the lawwas coveringpeople,” says JonathanGruber, anMIT healtheconomistwhoworkedon the legislation, “andit couldn’t have gone better.” By andlarge, that’s reflectedin
thepolling.TheMassachusetts reformshave consistentlypolled betweenthehigh-50s andmid-
60s.Perhaps theirmost impres- sive showing came amidstnow- Sen. ScottBrown’s candidacy, whenaWashingtonPost-Kaiser- Harvardpoll foundthat even thoughamajority ofMassachu- setts votersdisapprovedof the national reformeffort, amajority of them—andevenamajority of
fcc from G1
market.Somecriticsworry that if the cable giant owns NBC, it will have incentives to withhold its content from Web competitors. Those critics are pushing the government to set conditions on the merger to prevent such favor- itism and send a signal to the rest of the industry. “This is a big moment that
couldmake or break online video companies and determine who are the next winners of the Inter- net video space,” said Barbara Van Schewick, a professor of law and computer science at Stan- fordUniversity. Internet access providers say
CHIP SOMODEVILLA/GETTY IMAGES Justice Anthony
M.Kennedy’s often makes the difference in 5 to 4 Supreme Court decisions.
Brown’s supporters—approved of theMassachusetts law. The lawdoeshave itsprob-
lems. Inparticular, itwasnotde- signedto control costs. “That’s one of the areaswhere the federal bill is just better thantheMassa- chusetts bill,”Gruber says. So costs inthe statehave continued to rise—withonenotable excep- tionthathas a lot to say about our currentdebate over the indi- vidualmandate. Like the federal law, theMas-
sachusetts lawleftmostpeople’s healtharrangements
alone.The exception:peoplewhodon’t get their coverage througha large employer or apublicprogram. That accounts formost of theun- insured. It’s alsowhere the indi- vidualmandate isprimarily in play andwhere the “exchanges” — thepurchasingmarkets that put individuals andsmall busi- nesses ina singlepool andforce insurers to compete for their business andtreat themfairly— reallymatter. InMassachusetts, thatmarket
hasworkedbetter thanexpected. According todata fromAmerica’s HealthInsurancePlans, the larg- esthealthinsurer trade group, premiums for thatmarkethave fallenby 40percent since the re- formswereput
inplace.Nation-
ally, thosepremiumshave risen by 14percent. There are a couple of reasons
forMassachusetts’s success.One is that themarket ismore trans- parent, andso insurers are com- petingmore aggressively against one another. JonKingsdale,who ranthenewhealth-caremarket, notes that the lower-costplans have beenmuchmorepopular
thanthehigher-costplans.The bigger reasonis that the individ- ualmandate—plus the combin- ing of individual andsmall firms inthe same insurancemarket— broughthealthier, youngerpeo- ple into themix,whichbrought averagepremiumsdownfor ev- erybody. All isnot roses andwaterlilies
forMassachusetts, of
course.The reformsdidn’t address anumber ofproblems:The statehad, on average, thehighesthealth-care costs before reform, andithas thehighesthealth-care costs to- day. (There are a variety of rea- sons for this,many of themhav- ing todowiththepower of the state’s renownedhospitals.) Waiting roomswere overcrowd- edbefore, andthey’re overcrowd-
edtoday.Andthere areplaces where the reformsdidn’twork as
hoped.Predictions that expen- sive emergency roomvisits
woulddropnowthatpeople couldgo to thedoctorhavenot beenborne out. Thenational lawis better onat
least some of those counts. Ithas provisions to expandthemedical workforce,particularly the ranks of generalpractitioners. Ithas a slewof cost-control efforts, in- cluding a tax onexpensivehealth insuranceplans, anindependent boardable tomake cost-cutting reforms toMedicare, a vast array of changes to thehealth-carede- livery system, changesdesigned to getus away frompaying for volume andtowardpaying for quality andmuchmore. But the reality is that there’s
oneway inwhichit couldget muchworse: ifRepublicanjudg- es strike out the individualman- date, andRepublicancongress- menrefuse toworkwithDemo- crats ona replacement. Inthat world, the lawcanlimpalong, anditwill still cover tens ofmil- lions ofAmericans, butpremi- umswill behigher, the insurance marketswill be less competitive andmany of the bill’s cost con- trolswillnothave the chance theyneedtowork. So repeat afterme, “Justice
Kennedy:You’re getting very sleepy . . . ”
kleine@washpost.com
those concerns are overblown. They say any rules should be flexible for cable and telecom firms to experiment with new partnerships on the Web, and that wireless networks should be largely free of regulation because they get congested more easily. That idea that doesn’t sit well with Web companies such as Skype and Google, which argue that consumers are increasingly getting entertainment and news over smartphones and tablets. “I see consumers winning with
video every day with all the op- tions that are out there, and companies deserve the opportu- nity to figure outwhat bestmeets consumer needs or fail in trying,” saidKyleMcSlarrow, chief execu- tive of the National Cable and Telecommunications Associa- tion, a trade group. Those debates are taking cen-
ter stage at a significantly weak- ened FCC, which is struggling to be the nation’s Internet watch- dog as more people use the Web as their main medium for com- munications and entertainment. The uncertain outcome casts a shadow over multibillion-dollar business plans as television net- works, cable and telecom firms, and Web giants such as Google and Apple jockey to lead in the nascent Internet video industry. They are taking their fights
outside the boardrooms of Sili- conValley andWall Street, lobby- ing the FCC on their positions as Chairman Julius Genachowski attempts to fulfill a year-old promise for new rules governing Internet access. His proposal for “net neutrality” restrictions will face a commission vote Tuesday. Meanwhile, the FCC and the Jus- tice Department are expected to wrap up their reviews of Com- cast’smerger withNBCUniversal early next year. Silicon Valley companies such
as Craigslist,Microsoft and Cisco have expressedsupport forGena- chowski’s net neutrality rules. Investor John Doerr of venture capital firm Kleiner Perkins and angel investor Ron Conway say the rules are a good balance of consumer and corporate inter- ests.
But other companies, likeNet- Yesteryear Yesterday
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flix, Amazon and Skype, and in- vestors in start-ups such as Twit- ter and Foursquare say the FCC’s proposal has loopholes that could harm Web companies as theycompete with cable, satellite and telecom giants. The rules don’t apply to wireless service providers, which allows Verizon and AT&T to pick and choose which applications are delivered on the next releases of Droids and iPhones. AT&T and Comcast have of-
fered tepid support for Genach- owski’s plan, which at least doesn’t recast their broadband Internet networks as more heavi- ly regulated telecom services — something the chairman threat- ened earlier this year. Gillis Cashman, a partner at
MC Venture Partners in Boston, said his investments in broad- band and wireless firms would lose value with overly strict gov- ernment rules. But he saidGena- chowski’s blessing of usage- based pricing gives cable compa- nies leeway to charge the heavi- est users more and return the investment into their networks. “When you think of video and
the huge economic bandwidth hog it is and that consumers pay much less per megabit for video, themodelhas tochange dramati- cally,” Cashman said. One of the biggest bandwidth
hogs is Netflix, whose 17 million subscribers produce 20 percent of traffic on broadband networks during peak hours. Level 3, a company that deliv-
ers movies for Netflix and other partners over fat broadband pipes between big cities, said Comcast is already trying to squash competition by charging more to connect its services to Comcast’s subscribers. It has called for the FCC and Justice Department to consider putting conditions on the merger that would prevent that practice. Comcast argues that it would
have no incentive to withhold NBC shows from online services such as YouTube and Netflix, because it wants as many eye- balls on its shows as possible. But it also resists conditions on the merger that would force it to offer, say, CNBC and “The Real Housewives of Beverly Hills” to all Internet video distributors on identical terms. And Comcast has rejected the
accusation that it is deliberately penalizing Level 3, saying the issue is more that Level 3 did not secure good terms in its partner- ship withNetflix. “We can certainly understand
Level 3’s motivations,” said Joe Waz, senior vice president of public policy at Comcast. “That companyseemstohave cutavery bad business deal to distribute content.” Public interest groups say the
details of the merger—as well as the broader net neutrality debate —involve far more than business technicalities. They say the FCC’s actions over the next fewmonths could set the course for the devel- opment of Internet video for years.
Somein the industry aremain-
ly concerned that the govern- ment not overreact, because the market is still in its infancy. Jeremy Allaire, chief executive of Brightcove, which delivers vid- eos for Discovery Communica- tions and Fox Entertainment, said the landscape will be much clearer in about a year. “The underlying pricing dy-
namics and competitive issues will start to surface in a very material way at that point,” Al- laire said, “so this is the right time to think these issues through, but they should be thought out very carefully be- cause there hasn’t been a galva- nizing business event to sharpen the focus on it.”
kangc@washpost.com
SUNDAY, DECEMBER 19, 2010
Battle rages on costs of putting TV online
“This is a big moment that could make or break online video companies and determine who are the next winners of the Internet video space.” —Barbara Van Schewick, professor of law and computer science
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