health care 2Second, are we finally going to replace Medicaid’s welfare rooted eligibility categories and state by state income variation with a common national standard?  Despite push back from Governors bargaining to limit state costs, there is remarkably broad support to set a national floor of roughly a $25,000 to $30,000 family income level for government supported Medicaid coverage. Not just for moms and kids but for everybody. By contrast, a working parent today in Texas or Alabama is excluded from coverage if their annual income exceeds $5000. Twenty-five million additional people could benefit from improvements in this public program.

Third, can Congress find roughly $50 billion per year in new taxes, plus savings from current health care spending, to pay for a reformed system? Current estimates are for a $900 billion plan over ten years which would be paid for by roughly equal shares of cost reduction and new revenue. The President promises no new increase in the national debt. How then to raise the revenue? Tax the rich? Tax generous insurance plans? Add fees to the firms who make drugs and medical devices?  No one taxed will be happy. But we’re talking $50 billion per year for a health system spending well in excess of $2 trillion annually. Lots of dust, lots of shouting, but in stimulus terms, the new revenue numbers are at the margin.

Fourth, the Big Kahuna is whether the rate of growth of health care costs can be reduced over the next decade. “Bending the Curve” is the phrase of choice. Here the politics have largely avoided real debate. Neither party wants to mention that this part of the debate is all about how care is provided and paid for in a system currently designed to maximize revenue.  Republicans attack the government; Democrats demonize insurance companies, arguing that competition by a public plan will push other costs down.

It’s all a bit hazy. In the end there are really only a few choices. Apart from both the aspiration and rhetoric that we should all be thinner and healthier, the tools to hold down costs are to consume fewer units of service or to pay a lesser price for them. For example, generic drugs can often give us therapeutic value equal to the newest brand name formulation at a lower price. Extending this “value equation,” some argue that government or an independent entity should assemble scientific studies to compare the effectiveness of various treatments. A traditional cost cutter is as simple as shaving a percentage point or two off an annual price increase. The core of the debate, however, is to replace the largely fee for service payment system with an approach that rewards better outcomes, measured, say, over the entire episode of an illness. Don’t pay for more; pay for better. A key test for a final bill will be whether the Medicare program is empowered to lead the way toward new forms of payment.

Beyond the specific challenges of the legislation, all of this is an extraordinary lesson in American politics.  Republicans have chosen virtually universal opposition. Defeat the bill and we defeat Obama say some in Congress. Democrats are aware that adding health reform to Social Security and Medicare as a successful final leg of a Roosevelt/Johnson/Obama domestic Trifecta could support their future majority status. But as of now they lack the cover of bipartisan support.

Major interest groups, unlike 1994, are invested in success. Bargaining modest concessions with the White House, those closest to the action know that failure of the reform debate this year leaves a broken health care system with cost increases projected to bankrupt existing programs in the decade ahead. Without action to alter direction, future budget deficits will fall heavily on those who provide care.

Main Street constituents, however, still fear change. Should a bill signing occur by year’s end, Washington rumor suggests a “repeal” effort in 2010, not seriously to reopen the debate but to use voter fear and frustration to undermine incumbent members of Congress who vote in support. The issues will no doubt again resurface in the 2012 election and for some time to come.

Oddly, what may seem as easy political compromises or issues avoided in the months ahead may in the end sow the seeds for future demise. Health reform is so big that it really has to work. New revenue sources need to generate real money. Subsidies have to work sufficiently to allow mandated purchase of insurance to seem fair. The benefits have to be sufficient to pay for the bulk of the care we need. Washington and the states need a balance of responsibilities sustainable through economic cycles.  Somehow market incentives or government action, probably both, have to change both the method and the level of provider payments.

And so the big question isn’t passing a bill, or even sustaining support during the Obama years. It’s whether all of American health care’s myriad dimensions can work in a better way. President Obama won’t be the last to face these issues.

Jim Tallon is the president of the United Hospital Fund, a think tank in New York City. He served previously as majority Leader of the New York State Assembly.

  1. Great Article, Thanks!
    This just brings to summation what I already know about this mess. Several things seem worth mentioning:

    One thing that makes pretty much every republican oppose this plan is the threat of a massive bureaucracy that will be needed to administer such a complicated plan. As far as I can remember, there has not been one government program that demonstrated how a massive bureaucracy has cut costs or simplified matters of implementation.

    Part of the revenue is going to come from penalties levied against those who do not purchase an insurance policy. At this point it’s impossible to tell who will or will not be penalized but one thing seems clear is that no matter how well designed this plan will be, there will be people penalized just because they can’t afford the plan. And trying to prove to the government that you should not be penalized because you can’t afford a plan (or go out of business because you really can’t despite what Washington says) will be impossibly difficult for most people…

    Another issue that seems obvious to me is that a family of 4 living on $50,000 in New York definitely can not afford to pay even %5 of income in medical coverage out of pocket. It’s expensive over here!!!

    What most people will agree on is that our cell phone bills have barely gone up in cost in the last 15 years. Mine is only 10% more expensive. That’s an annual increase of less than 2% a year. This is so because all service providers are in open competition across all 50 states with foreign owned companies in the mix as well(T-mobile is owned by Deutche Telecom, I think).
    Yet insurance companies are completely insulated from competing in the open market. Despite this common sense, the provisions for open markets in the health care system have been firmly put out of consideration by both parties. This once again proves to me that they (politicians) will do the minimum necessary, and as you rightly mentioned, we will be dealing with this issue for years to come!

  2. Thanks for the comments. Despite the public rhetoric, most of the emerging legislation builds on what we already have. If the public plan survives the debate, the Feds will rely on their Medicare experience, which works well for most current enrollees. The other new feature is the “Exchange” where either the Feds or the States will set up a website, with telephone and maybe in person support, where the uninsured person will go to compare costs, coverage, and subsidies available to buy insurance. Massachusetts already does this. Since the policies will be standardized to a degree, it will probably be simpler than now, where you have to figure out all of the insurance confusion on your own.
    The argument about more insurance competition always sounds right. But what we’re really buying is the promise that the company will pay in a future circumstance. There’s a real fine print risk here. In this debate, even the insurance companies have agreed that their current practices of denying claims or coverage over pre-existing conditions, raising the rates or ending your coverage if your claims are too high,
    and other practices should be changed. If you’re sick you present costs to the insurance company. In an open market, the company wants healthy people, not sick people. The purchaser has exactly the opposite motivation. Caveat Emptor.
    Finally, Brother B asks just how much someone can afford. Right on. The subsidies in the bill have to be large enough to work in the real world. Beware of the argument that the Congress is doing you a favor by spending less, if that means that the numbers just don’t work on the street.

  3. About more competition… I see what you mean about the services being rendered (probably) in a future circumstance… Any competition and promises would be based entirely on an X factor and there would be no basis for comparison on which a competitive price can be judged.. at least until enough time could pass to provide actual data on coverage rendered vs. actual cost of insurance paid upfront. A public option becomes even more important (as it would probably be the best quantifiable model on which comparisons could be made), but it doesn’t look too promising at this point. we’ll see :) Thanks for your comment.

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