Palin's Efforts to Reform Health Care Are Complicated

By Matthew Mosk
Washington Post Staff Writer
Friday, September 5, 2008

ST. PAUL, Minn., Sept. 4 -- When Alaska Gov. Sarah Palin took office, she inherited a vexing health-care problem common to many states: whether to let small clinics compete freely against hospitals for such services as outpatient surgery and MRIs.

Palin responded with an aggressive, uncompromising and, to date, unsuccessful push to promote competition -- an effort consistent with her free-market ideals, but also welcomed by the medical groups that helped finance her 2006 campaign and an industry lobbyist who served as a top political adviser.

The battle Palin has waged over competition in health care has been one of her signature efforts since she became governor in 2007, and it offers a look at how the little-known GOP vice presidential nominee would approach a complicated policy dispute. When she addressed the Republican National Convention on Wednesday night, she said she "took on the old politics-as-usual in Juneau," standing up to special interests and lobbyists. But her efforts to reform health care reveal a more complicated picture.

Palin was part practical politician, accepting more than $34,000 from medical groups that were trying to spur competition, according to an analysis by the nonpartisan Campaign Money Watch. She also worked closely with Paul Fuhs, an Anchorage lobbyist who was helping imaging firms battle hospitals over control of a lucrative trade. And while supporters and opponents credited her with reaching out to all sides, they also said she was a fierce idealist, taking a philosophical position and not giving ground.

"There are times when a leader has to take a stand, and that's what she did," said Shawn Morrow, the chief executive of a Juneau hospital who battled Palin over the issue. "Even though we disagreed, I admire her for pushing," he said. "She did it in a respectful way."

Palin's views on the issue began to take form in the late 1990s, when Jeff Kinion, the chief executive of Alaska Open Imaging Center, sought to open a facility to provide MRI scans and other diagnostic imaging services in Wasilla, where Palin was mayor. Palin was sympathetic to the problem that Kinion confronted in Wasilla and elsewhere: He was unable to open clinics before getting a "certificate of need" from the state, a process that gives Alaska's government the power to determine whether the service is necessary.

As Kinion's business and others like it started to spread, they became entangled in a tense political and legal battle with the state and hospitals over whether they should be allowed to obtain the certificates. "The hospitals didn't want to share their pie," Kinion said. "They started organizing against us politically."

Similar battles have raged in dozens of places that have certificate-of-need requirements, and the question of whether the process drives up costs and leads to better care has been fiercely debated in state houses as well as in the health-care community.

Palin and others think that more competition will reduce costs and lead to better care. As she put it in an opinion article in the Anchorage Daily News: "Under our present Certificates of Need process, costs and needs don't drive healthcare choices -- bureaucracy does. Our system is broken and expensive."

Hospitals and other supporters of certification counter that increased competition leads to higher operating costs in areas that are not directly related to health care, such as advertising, that are passed on to consumers.

"It would seem like increasing competition would reduce costs, but that's not what's happening," said John A. Hurson, a former president of the National Conference of State Legislatures and a health policy expert. "The demand just meets the supply. There's more advertising. It just generates more costs."

In Alaska, hospitals also argued that the new competitors were siphoning away their most lucrative services, bringing them to the brink of financial collapse. "We were worried people would come in and cherry-pick," said Morrow, who runs Bartlett Regional Hospital. "Just take the cream and leave us with skim milk."

In November 2006, during a debate with her Democratic gubernatorial opponent, Palin took a clear stand on the issue, saying she wanted to do away with the certificates-of-need program, as 14 other states had done. Changes, she said, should be made "with the consumer's needs in mind."

As governor, she empaneled a commission of experts to review the issue -- including at least two of her largest campaign contributors -- but the group recommended that the certificate program remain in place.

"She wouldn't go for it," said Fuhs, the lobbyist who had worked on Palin's campaign and who served on the commission. "She said no, she wanted to open it up for everything. She stood on her principles and said, 'No, we're going to get this done.' "

In January, Palin sponsored legislation that would scrap the certificate process.

Critics said that Fuhs's political support gave him undue influence with Palin on the issue, an allegation he denies. "There really wasn't any influence-peddling with her," he said. "I worked hard and long on her campaign and I got nothing special. In fact, I got less because she wouldn't have liked the appearance that she was helping me."

Palin pushed forcefully. In February, she wrote the opinion article and promoted the proposal in her state of the state speech. "We will allow competition," she said. "Alaskans want health care in the hands of doctors, not lobbyists and lawyers."

But by March, the legislature had watered down her proposal so it would apply only to certain types of medical facilities. Despite Palin's push, the legislation died.

Palin's political opponents say the battle was evidence of a simplistic approach to a complex issue. "It didn't matter what you asked her about health care," said Tony Knowles, the Democratic governor who lost to Palin in 2006. "Getting rid of certificates of need was her only answer."

But Morrow, the hospital administrator, approved of the way Palin handled the issue, even though he opposed her. "We were glad we got a seat at the table, that she took an opportunity to listen to us," he said. "I think she was sincere in that endeavor. I think at the end of the day she just saw it differently."

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