Missing in Action on Healthcare?

Missing in Action on Healthcare?

The Obama administration is focused on cutting healthcare costs, but that may be easier said than done.


It should come as no surprise that Barack Obama does not support a national health insurance system like most other countries have. He made that clear during the campaign. What is surprising is that he has been so vague about exactly what kind of healthcare reform he has in mind. It’s becoming clearer that reform will include some or all of these options: requiring everyone to carry health insurance (an individual mandate à la Massachusetts); subsidizing a portion of the 85 percent of the uninsured who can’t afford to buy a policy; taxing some of the health benefits workers now get from employers to pay for insurance for the uninsured; letting people keep the coverage they have even though it’s likely to cover less as time goes on; shoving more people onto Medicaid; and trying to get insurers to insure sick people. There may or may not be a public insurance option–maybe like Medicare, or maybe not–that would compete with private insurers and theoretically reduce the cost of insurance.

Most of these elements are controversial. Former single-payer advocates, for instance, are banking on a public plan to open the door to a single-payer system. Insurers know that and are working overtime to make sure that doesn’t happen. Aside from saying he supports a public plan, the president hasn’t gotten his hands dirty in the political muck. Is he pursuing a conscious strategy to be above the fray or waiting to see what Congress does before jumping in? Is the president being strategically vague or abdicating to Congress because he, too, is feeling the heat from the special interests that contributed millions to his campaign?

Campaign rhetoric led the electorate to believe that a new president was ready to overhaul the healthcare system and bring health coverage to everyone. A poll released by the Kaiser Family Foundation indicates that there is strong support for health reform but that the public can be swayed on the details. “There is still a tremendous opportunity for leadership,” says Kaiser CEO Drew Altman. But the special interests can still move the debate in one direction or another.

During his April 29 prime-time press conference marking his first 100 days in office, Obama peppered his remarks with his healthcare accomplishments to date–expanding S-CHIP, giving more money to community clinics, helping laid-off workers pay for COBRA coverage. Here and there, he dropped a few hints about what appears to be the focus of his healthcare agenda: bringing down the cost of medical care. “New investments in healthcare will cut costs for families and businesses,” he said at one point. At another, he said, “You can expect us to work on healthcare reform that will bring down costs while maintaining quality.”

Absent from the president’s press conference were any comments about that pesky and elusive goal of universality. Unlike the Clintons, who focused on health coverage for everyone, the Obama administration appears to have embraced lowering the cost of medical care as its centerpiece. Indeed, Obama has said that once costs go down, more people will be able to buy health insurance. One of Obama’s eight “principles for reform” said only that he would “aim for universality.” He did not say he was determined to accomplish it anytime soon.

The Congressional budget agreement includes a provision for a reserve fund to pay for the subsidies needed to help the uninsured buy health insurance. It suggests no specific amount such as the $634 billion offered in the president’s budget message. Instead, the various committees dealing with health reform will decide how much can be spent in this budget cycle. The administration is in sync with this approach. The resolution is also budget-neutral, which means Congress must find an offset of money from other programs or a new source of funds. Obama had proposed trimming the deductions allowed for charitable contributions for wealthy Americans, an idea many members of Congress rejected. He also wants to cut excess payments to Medicare Advantage plans, which is meeting stiff opposition from insurers.

Senator Ron Wyden told journalists that unless there is some provision for taxing workers’ health benefits, no other source of progressive funding is available to finance these subsidies. (Wyden’s own reform plan calls for the elimination of employer-provided insurance and Medicaid and requiring everyone to buy coverage on their own in a tightly regulated insurance market.) During the campaign, John McCain also proposed such a tax, and candidate Obama hit him hard for it. Has President Obama changed his mind? On May 6 Representative Charles Rangel, who heads the House Ways and Means Committee, said there was “no way” he would support taxing workers’ health benefits. That throws a monkey wrench into a financing plan–for without subsidies, most of the uninsured can’t afford coverage.

Money directed at health information technology in the stimulus package is not likely to bring down the cost of medical care; nor will preventive care, the much-touted disease-management programs or research into what medical interventions work. Earlier this year an article in the Annals of Internal Medicine by three respected healthcare experts, Theodore Marmor, Jonathan Oberlander and Joseph White, concluded that such reforms “sound like benign devices to moderate medical spending” and may be desirable for other reasons. But they are “ineffective as cost control measures.” Serious cost containment–global budgeting, for instance, which sets a cap on what can be spent on healthcare by various sectors–is as far off of the table as single-payer.

“We do not know how to control health spending significantly,” Princeton health economist Uwe Reinhardt told health journalists at their annual conference a few weeks ago. “The Obama administration must have the guts to force physicians to defend their high cost of spending. We could save 30 percent without hurting patients if they practiced medicine right.” But the administration seems to be moving more in the direction of stopping the Medicare fee cuts already scheduled for doctors. The AMA was gleeful when the administration released its budget. President Nancy Nielsen said that the budget proposal “takes a huge step forward to ensure that physicians can care for seniors by rejecting planned Medicare physician payment cuts of 40 percent over the next decade.”

Obama must level with Americans who still believe that everyone will be covered automatically once his healthcare reforms are enacted. If there is to be an individual mandate, he needs to make the case that this is good medicine and convince Americans that they may have to pay stiff tax penalties if they don’t swallow it. And instead of reassuring people that they can keep the coverage they have, he needs to explain that employer-provided plans are likely to raise deductibles and other out-of-pocket costs. A survey by Mercer, the employer-benefits consulting firm, found that next year the percentage of employers offering high-deductible plans could double, leaving workers underinsured when illness strikes.

If Obama wants to give more than lip service to a public plan, he should offer guidance on how it will work. Right now the term is loosely tossed around and means different things to different interest groups. But most ordinary people, if they understand it at all, believe it will enable them to chuck the coverage they have and choose cheaper and better coverage. If Massachusetts healthcare is a model, though, that’s not likely. There, if residents have employer coverage and decline it because it’s too expensive, they are barred from subsidized insurance. In other words, they don’t have much of a choice. The reason: to keep people from “crowding out” private insurance; that is, taking away business from the private carriers. On May 4, New York Senator Charles Schumer stepped into the void and proposed “ principles” that seem to answer some objections from insurers.

Right now it looks like the insurance industry has the upper hand in negotiations over a public plan. It will take a lot more voices and political muscle to nudge health reform to a point where it serves the needs of millions of Americans who are either shut out of the current system or have become its victims.

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