Academic journal article Independent Review

Passing the Affordable Care Act: Transaction Costs, Legerdemain, Acquisition of Control

Academic journal article Independent Review

Passing the Affordable Care Act: Transaction Costs, Legerdemain, Acquisition of Control

Article excerpt

Only a decade ago, the Patient Protection and Affordable Care Act (PPACA) of 2010 would have seemed a dystopian vision, something that could not emerge in our nation as we then knew it. For the PPACA's effect on the nation is not merely evolutionary-it is institutionally revolutionary. It not only alters the organizational structure of major segments of the U.S. economy and government but also changes the behavior and intimate personal relationships offamilies, doctors, and patients. It alters the cost structure of businesses, government agencies, families, and individuals. It changes contractual relationships between employers and employees and between both groups and health-insurance and health-service-provider industries.

At its core, the PPACA transformed the fundamental relationship between the individual and America's national government, reducing both privacy and personal autonomy. As economist Thomas Sowell explains, "With the passage of the legislation letting the federal government take control of the country's medical care system, a major turning point has been reached in the dismantling of America's values and institutions. . . . With politicians now having access to our most confidential records and having the power of granting or withholding medical care needed to sustain ourselves or our loved ones, how many people will be bold enough to criticize our public servants, who will in fact have become our public masters?" (2010).

Such power to induce subservience outside the realm of medical care may become one of the act's most profound legacies. Nonetheless, despite strong opposition in Congress, widespread public opposition, and the measure's debatable constitutionality, President Barack Obama signed the PPACA into law on March 23, 2010.

This article's primary purpose is to analyze a set of key tactics government officials used to secure PPACA's passage and entrenchment-including deception, incrementalism, obscure modification of the bill, cost concealment, strategic timing, and an attempt to preclude future repeal of part of the act1-showing how these and related behaviors are consistent with predictions made by the economic theory of political transaction-cost manipulation (TCM). While focusing chiefly on TCM's role in securing PPACA's passage, the article also examines TCM's early use in creating legislative infrastructure upon which the PPACA would build, such as the Health Insurance Portability and Accountability Act of 1996 and the American Recovery and Reinvestment Act of2009. I also note TCM's potential use after passage of the PPACA in fleshing out powers not fully defined in the act's text-including those of the Independent Payment Advisory Board, the Patient-Centered Outcomes Research Institute, the Center for Medicare and Medicaid Innovation, "value-based" programs, and entities related to health-information technology-as they define and expand their regulatory and implementation authority.

DNA of Power: Political Transaction-Cost Manipulation

Political transaction costs-also termed constitutional-level transaction costs-denote costs individuals incur in perceiving the content of and taking political action to resist legislative or other proposals that alter the scope of government power. This paper shows that in designing and securing passage of the PPACA and its precursor, the American Recovery and Reinvestment Act (ARRA) of 2009, legislators and executivebranch officials relied heavily on increasing the costs to political opponents and the public of resisting the bills, using tactics predicted by the economic theory of political TCM (Twight 1983, 1988, 1992). This theory asserts that government officials have the incentives and ability to increase political transaction costs borne by others in perceiving and resisting government power-changing measures that the officials favor but affected individuals otherwise might oppose. By so doing, these officials can expand their political power, sphere of influence, and control of government. …

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