Leo Linbeck III - Testimony in Tennessee - April 20, 2011




Mr. Chairman and Distinguished Members of the Committee, thank you for the opportunity to provide testimony on HB369, the Health Care Compact.

I appear before you as a husband, the father of a multi-racial family, a businessman, a graduate school professor at Rice and Stanford, and Vice Chairman of the Health Care Compact Alliance, but in particular as a concerned citizen – one who is anxious about the future of our nation.

I am not alone in my anxiety; I’m sure many of you share it, as do most of our fellow citizens. In fact, for the past 5 years, polls have found that around 60-70% of Americans believe our country is on the wrong track.[1]We sense that something is broken, but we don’t know what it is, or what to do about it. We elect good people to public office, but the problems appear deeper, more structural, more resistant to change.

Harvard’s Michael Sandel put it eloquently in the opening paragraphs of his book “Democracy’s Discontent”:

At a time when democratic ideals seem ascendant abroad, there is reason to wonder whether we have lost possession of them at home. Our public life is rife with discontent. Americans do not believe they have much say in how they are governed and do not trust government to do the right thing. Despite the achievements of American life in the last half-century – victory in World War II, unprecedented affluence, greater social justice for women and minorities, the end of the Cold War – our politics is beset with anxiety and frustration…


Sandel then goes on to identify…

…the two concerns that lie at the heart of democracy’s discontent. One is the fear that, individually and collectively, we are losing control of the forces that govern our lives. The other is the sense that, from family to neighborhood to nation, the moral fabric of community is unraveling around us. These two fears – for the loss of self-government and erosion of community – together define the anxiety of the age. It is an anxiety that the prevailing political agenda has failed to answer or even address.[2]


Loss of self-governmentand erosion of community. Nowhere do these trends, and the anxiety they provoke, appear with greater clarity than in the debate over health care.

We feel a loss of self-governance in health care because decisions are made in Washington DC by “insiders”: Congressional representatives, federal bureaucrats, insurance companies, big corporations and unions, special interest groups, and a variety of “experts” and “planners” who claim they know what’s best for us.

Health care laws are enacted that reflect the consensus of these “insiders,” whose incentive is to make us dependent upon them – dependent upon Congress for funding, bureaucrats for determining eligibility, insurance companies for coverage and claims processing, corporations and unions for tax-advantaged benefits, special interest groups for protection against “the wolf at the door,” experts for solutions to complex problems, and planners for planning complex systems. But we cannot be self-governing if we don’t have, as Sandel put it, “control over the forces that govern our lives,” and the extensive federal regulation of health care pre-empts that control.

We feel an erosion of community in health care paradoxically because we’ve been promised that the federal government will take care of us. That promise – which, as it turns out, cannot be kept – weakens the ties that bind our local communities together, ties of blood, neighborhood, and faith, and substitutes for them what Sandel calls “the procedural republic.” Rules replace informal bonds, and coercion replaces shared commitment.

And our community ties are weakened further because health care today is but a pawn in the chess match of national politics. Serious, thoughtful ideas quickly get branded “Republican” or “Democratic” or “Tea Party” or “Progressive,” and tribal loyalties are invoked, even though most citizens are not members of any of these tribes. Shouting and demagoguery are substituted for debate and good faith negotiation, and our sense of community is further eroded.

Loss of self-government and erosion of community: these are the root causes of our national discontent with health care. But these are not problems of POLICY; they are problems of GOVERNANCE. As such, they require a governance solution.

And that solution is HB369, the Health Care Compact.

HB369 is about one thing, and one thing only. It is about who decides.

Most people take it for granted that the federal government should decide health care policy. They assume that because health care policy is important – which is true – that Washington DC must decide – which is false.

As a result, almost all health care debates are about policy, not governance. But it is the governance system that is broken, so no policy reform can fix it. That is why we designed the Health Care Compact as a GOVERNANCE reform, not a POLICY reform. It does not speak to who is covered, what is covered, or how it is covered – only who decides.

As a governance reform, HB369 is far more important, and more far-reaching than any policy reform, because even a good policy decision can end up in disaster if the governance design – that is, the answer to the question “Who decides? – is wrong.

Consider the following situation. You go out to dinner with 9 friends. The decision is made that you’ll split the check evenly – everyone will pay 10% of the total. You all get seated, and John’s the first one to order.

John would be fine with what everyone usually orders, a chicken Caesar salad that costs $10. However, he really loves surf and turf, although he rarely orders it because it costs $40 and it’s a lot of food – more than he can generally eat. But in this situation, he figure that since he only pays 10% of the cost, it only costs him $3 more for a surf and turf. What a deal! So that’s what John orders.

The waiter then goes to the next person, and they think, “Well, I was in the mood for the chicken Caesar, but I like surf and turf too, and since John ordered the surf and turf, I guess I will too. After all, if I order the salad and he orders the surf and turf, I’ll end up paying $13 for my $10 salad.”

By the time we’re done, everyone gets surf and turf, the total bill is $400, and everyone ends up paying $40. Plus, everyone gets more food than they can eat. In short, everyone pays too much and gets too much, simply because the governance system for the meal was poorly designed.

Now, this may be a silly story, but it highlights the importance of getting governance right. Besides, this kind of thing happens all the time in the real world when governance is poorly designed – Medicaid, for instance. That’s why the first question that needs to be asked is always “Who decides?”

Judges, in particular, understand the importance of this question. In fact, the first issue any judge must consider is jurisdiction: “Is this a case I have the authority to decide, and even if I do, should I?” In theory, as the highest court in the land, the Supreme Court has the authority to hear any case brought in the United States. But if the Supreme Court did not support the primary jurisdiction of state and other federal courts for the vast majority of cases, the justice system would soon cease to function. Even if we claimed infallibility for the Supreme Court – a claim for which there is ample evidence to the contrary – time and knowledge limitations would prevent justice from being served.

Analogously, it is the view of the Health Care Compact Alliance that the federal government should NOT decide health care policy for citizens of Tennessee; YOU should. And that’s what HB369 seeks to do: it puts YOU, the elected members of the Tennessee legislature, together with the Governor, in charge of health care policy in Tennessee.

Of course, if you’re going to take responsibility for health care policy, you must also have authority. Good governance requires that responsibility and authority be vested in the same body. That’s why HB369 gives state legislators control over the two critical elements they need to discharge their responsibility: control over the law, and control over money.

Control over the law is accomplished by granting member states the right to suspend federal health care laws in their state. It is important to emphasize that exercising this right is not REQUIRED; it is simply PERMITTED. But this right gives legislators the ability to design the health care system that is best for their state, as well as control the scale and timing of its implementation. In other words, HB369 allows you to create your own customized federal waivers, although nothing changes in the law until you decide to take action.

Control over the money is accomplished by converting all federal health care spending in a member state into a block grant. The money you will control is money that is currently collected from the citizens and businesses of Tennessee, sent to Washington DC, and sent back to Tennessee (after applying a haircut) to pay for health care. It takes as its baseline year 2010 – a relatively high year due to federal stimulus dollars – and then indexes that amount for inflation and population changes.

So the simplest way to describe HB369 is as a “permanent self-waivering system” coupled with a “permanent, mandatory, comprehensive, indexed block grant program.” YOU will decide which federal health care laws apply to Tennessee, YOU will decide what to spend money on, and YOU will control the money. It’s that simple.

The natural question at this point is, “What’s the catch?” Well, here’s the catch. It’s not enough to simply pass HB369. We also need to get the consent of Congress. So you will need to join with other compacting states and grassroots activists and go to Washington DC to demand that Congress hand over its control of health care policy.

The good news is that I can assure you that Tennessee won’t be alone in this fight – although our campaign is only 90 days old, we have already made great progress on the Health Care Compact. We are in the legislative process in 11 states, drafting legislation in 8 others, and expect to be active in the vast majority of the remaining states during the 2012 session.

The political power of the compact comes from having lots of states working together to rein in the federal government. One state asking the Secretary of Health and Human Services for a temporary waiver is like a subject petitioning the king for a redress of grievances.

But dozens of states going to Congress to demand control over health care policy in their states is another thing altogether. It is the act of a free and sovereign people, working with their elected representatives to demand their right to govern themselves.

So we’re not simply asking you to pass a law here in Tennessee. We’re also asking you to join in a movement to restore self-governance to our nation.

Freedom can only be sustained if we have self-governance, and concentrated power is the foe of self-governance. Self-governance requires that decision-making authority be placed as close to the citizens as practical, so that people can impact “the forces that govern our lives.” When power is concentrated, citizens become disconnected from their government. The people become disengaged and cynical, and the government becomes “they” not “we.” Self-governance can only be sustained when people accept that the government is “we.” We the people.

That is why federal control of health care policy is so dangerous to the future of our republic. There is no way to organize top-down an efficient, sustainable, centrally planned industry that serves 309 million people. To believe otherwise is what Hayek called “the fatal conceit.” Federal control of health care WILL fail, and that failure WILL drag down every state and local government with it. Including Tennessee.

You can already see evidence of this failure, today, in the numbers.

Over the past 40 years, power over health care policy has become more and more concentrated in Washington DC. The federal government created Medicare and Medicaid in 1965. Since that time, federal health care spending as a percentage of GDP has grown from about 1% to more than 6.6%, and as a percentage of total health care spending from 10% to over 35%[3]. And with the aging of the baby boomers, unless we reform our governance system, these percentages will continue to grow.

The fiscal consequences are well documented. According to the actuary in charge of assessing the solvency of Medicare, the unfunded liabilities for Medicare alone are more than $37 trillion. This is more than $120,000 for every man, woman, and child in the United States.[4]And this is just Medicare. From the perspective of the states, Medicaid is an even bigger train wreck.

Speaking of train wrecks, my oldest son and I recently watched the movie Unstoppable, starring Denzel Washington. It is the story of a runaway freight train speeding across Pennsylvania under automatic pilot. The train is headed toward a curve in the track, a curve that will certainly derail the train and destroy the local community. Denzel’s character latches his engine onto the rear of the train and pulls in the opposite direction in an attempt to slow it down. It was a radical idea, one opposed by his corporate executives, doubted by the experts, and seemingly hopeless.

Our health care system is like that runaway train, only it’s a passenger train, not a freight train. There is a big, powerful engine pulling it – the federal government – and there are 50 cars attached (there were only 47 in the movie, but go with me on this).

Tennessee is one of those cars. It is filled with your family, friends, and neighbors, and they’ve chosen YOU to figure out what to do. There’s disaster looming on the horizon, so you have to do something. If you wait until you see the curve, it will be too late.

But there’s an engine that’s ready to pull the other way, and that engine is the Health Care Compact campaign. We’re asking you to pull the pin that connects your car to the runaway train, and latch onto our engine. You still have time.

Joining the Health Care Compact, like stopping a runaway train, may appear radical. It may be opposed by special interests. It may be doubted by the experts. It may seem hopeless. But it CAN work. You simply need to act.

Of course, taking this action will be heroic, but these are times that require heroism. Our republic is truly at risk, and it will take state legislators like you to save it. So that is why I’m here: to ask you to be heroes, like Denzel Washington’s character in Unstoppable. We at the Health Care Compact Alliance will support you in any way that we can, but we need YOUR support of HB369.

I want to thank you again for the opportunity to testify today. I truly believe that this legislature is the best body for determining health care policy for the State of Tennessee. If you will join in with the other states that are signing up for the Health Care Compact, together we can take our nation forward by restoring self-governance. Health care policy in America is a Washington failure resulting from several decades of mismanagement by both parties. But I know that, with your support, the Health Care Compact can turn Washington’s failure into an American success.

I thank you for your consideration of HB369, and I welcome any questions from the Committee.

[2]Michael J. Sandel, Democracy’s Discontent: American in Search of a Public Philosophy (1999), p 3.