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Obama’s Medicare Disadvantage

September 29, 2009

Medicare Advantage is a recently instituted federal program that allows individuals eligible for Medicare to opt to take their coverage from a private carrier, such as a Health Maintenance Organization (HMO) of Preferred Provider Organization (PPO). These MA deals usually offer somewhat better coverage at a somewhat higher price. The entire program is meant to introduce competition into the Medicare market–which places it in the Obama administration’s cross hairs now that its crusade for health care reform has stalled.

Humana, a big player in this market niche, recently sent a letter to its enrollees, devoid of specifics, urging them to lobby Congress to oppose program “cuts [that] could mean higher costs and benefit reductions on Medicare Advantage.” The Centers for Medicare and Medicaid Services (CMS), which supervises these programs, promptly wrote Humana a letter, equally devoid of specifics, that insisted that “this information is misleading and confusing to beneficiaries, represents information to beneficiaries as official communications about the Medicare Advantage program, and is potentially contrary to federal regulations and guidance for the MA and Part D programs …” CMS also said: “As we continue our research into this issue, we are instructing you to end immediately all such mailings to beneficiaries and to remove any related materials directed to Medicare enrollees from your Web site.” Act first, think later.

This highhanded action offers yet one more potent reason to oppose the further government regulation or nationalization of just about anyone. The risk is that government agents will squelch protests with administrative sanctions, which they could never get courts to sanction through ordinary legal processes. Any private supporter of the administration gets, of course, a free pass because its statement could never be “misleading or confusing.” The state action thus skews the terms of public debate, not only for health care, but for every industry that depends on government checks, licenses or permits to stay in business.

Usually, these threats are covert so that firms stop publicly criticizing any government agency that can slow down repayment or ask for more data to back up a permit application. It is hard to find a good legal strategy to smoke out quiet government threats, however inappropriate they may be. But that’s no obstacle to stop overt practices that menace free speech.

Fortunately, for these cases, the all-purpose doctrine of “unconstitutional conditions” should do the job. The government may allow companies to sell MA plans or not, but it cannot explicitly condition its participation on their willingness to suppress their opposition to legislative reform. In this instance, the general doctrine of freedom of contract–if you don’t like the condition, don’t join the program–will not cut the mustard because of the monopoly position of the state. The doctrine of unconstitutional conditions does more than vindicate the interests of the speaker. It also protects all parties who want to hear both sides of the debate. In this case, it lets Humana keep up its campaign.

Amazingly enough, some academics such as Timothy Jost have defended CMS on the ground that there are lots of other ways for Humana to get across its opposition to health care reform. But since when does a government outsider get to order a firm to drop one method of communications because others are still available? You may as well let the government tell a party that it can speak on radio but not on TV.

No, the real question is whether you can limit this speech at all. In general, prior restraint of speech is the paradigmatic violation of the First Amendment, which is made more appalling because CMS’ letter demanded that Humana cease and desist–during the heat of the political debate, no less–without a shred of evidence to back its demand. Brazen doesn’t quite describe its actions.

There are some cases, most notably the 1983 decision in Connick v. Myers, which hold that the government has a legitimate interest in stopping some speech by its employees. But that ruling was carefully limited to garden-variety disputes about individual job reassignments in which employee speech was damaging to morale and the efficiency of the office.

Connick explicitly exempted from its purview speech by employees on matters of “public concern.” Here Humana is not an employee. Its speech does not remotely implicate the efficiency of the government program. Nor, ironically, is there any reason to believe that its statements about the future are any less accurate than CMS’–as if that mattered.

The bottom line is clear. This extraordinary use of government power is manifestly in violation of the First Amendment, and the president should promptly sack CMS’ Acting Director Teresa DeCaro for writing such an ill-conceived and ominous letter. You don’t have to be a libertarian to believe that the government should never use its power of the purse to silence political opposition.

Richard A. Epstein is the James Parker Hall distinguished service professor of law; the Peter and Kirsten Bedford senior fellow, the Hoover Institution; and a visiting professor at New York University Law School.