How Relationships Help Explain Obamanomics

This I learned from the Washington Post interview with Barack Obama: Our president is really into MedPAC! That's the Medicare Payment Advisory Commission, a independent federal agency that advises Congress about issues involving Medicare and private health insurers. Obama says he would like to it expanded and empowered. Is it me, or does Obama suddenly have a thing for empowered, independent agencies?

Here's what Obama said in response to the first question from Fred Hiatt, editorial page editor of the Washington Post:

At this point, I am confident that both the House and the Senate bills will contain what we've been calling MedPAC on steroids, the idea that you continually present new ideas to change incentives, change the delivery system, understanding that because this is such a complex system we're not always going to get it exactly right the first time, and that there have to be a series of modifications over the course of a series of years, and we have to take that out of politics and make sure that an independent board of medical experts and health economists are providing packages that are continually improving the system.

In short: Obama wants to make MedPAC a powerful independent agency whose expertise -- delivered outside the realm of partisan squabble and constituent interests -- can guide Medicare payments and practices to bring down its cost for taxpayers. The first thing that empowering MedPAC reminded me of was the financial regulation plan, which seeks to empower another independent agency, the Federal Reserve, to roam the financial world for abuses among banking giants. 

More critically, I wonder how this statement on MedPAC jives with my Jennifer Aniston theory of Obamaism. This is, in a nutshell, the theory that Obama prefers to tweak incentives for private actors rather than have the government take over. The name comes from the Aniston movie The Break-Up, where her character famously tells her live-in boyfriend that she doesn't want to do the dishes for him; nor does she want to force him to do the dishes: She wants him to want to do the dishes.

theorized (via this TNR feature by Noam Scheiber and Frank Foer) that Obama would try to nudge private insurers to offer cheaper effective care. On first blush, that's what MedPAC does. Obama even discusses it as a way to "continually present new ideas to change incentives" for private insurers. 

But the fact that Obama wants to take Medicare policy "out of politics" also reveals a fatal flaw in the boyfriend-girlfriend theory of economics: Tweaking your partner's incentives is always much harder than you think! Sometimes you need outside help. MedPAC wouldn't be just another nudge. It would be an expert, impartial adviser living outside the political relationship -- a marriage counselor tasked with fixing the problems we can't fix on your own. Six months in, Obama is beginning to learn the limits of economic Anistonism.
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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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