Reform by the numbers
Obama must compromise, put ‘health security’ before cost reduction
Democrats hope President Obama can pull together a health care bill this fall that covers as many of the 50 million uninsured Americans as possible. I see a potential “grand bargain” that could do both Obama and the nation immense good—and all for roughly one-tenth the price of the stimulus package.
There is a way to retain what’s best about the American medical system—the high quality of care for most folks—while alleviating the worst problem —the fact that millions of Americans lack coverage. It may require that Obama place his goal of cost containment on the back burner until his second term.
But in the meantime, he would have the most significant domestic policy achievement since Lyndon B. Johnson passed Medicare and the civil rights bill in the 1960s. So here goes.
To use medical terms, what are the problems of health care reform and what is the diagnosis? There are two huge problems with the health care system, but they are not directly related.
The first is that roughly 50 million Americans lack health insurance, and when they get sick, they go to emergency rooms where the care they receive is very expensive and paid for by the rest of society through higher premiums and taxes.
The second problem is that even those who do have health insurance face rapidly escalating costs that are threatening the financial viability of government and business. In the short term, the bigger problem is those who don’t have coverage, while in the long term, rising health care costs threaten to
bankrupt the payers. In order to keep Obama’s promise that the health care plan won’t add to future deficits, the Democrats are seeking to squeeze 100 percent of coverage into 85 percent of revenue. Therefore, something has to give.
Unless there is a vast treasure trove of undiscovered savings in the system — doubtful because the Clinton administration and the Democratic Senate likely would have found it — trying to cover that extra 15 percent of Americans who are uninsured without increasing resources will likely lead to diminished services for the 85 percent who are insured, thus provoking a backlash. In health care, there is likely no free lunch. So an attempt to deliver “cost-neutral” benefits to the uninsured will likely come at the expense of the middle class and elderly who have the highest voter turnout and whose rebellion in 1994 ended Democratic control of Congress.
Greatly complicating any attempted reform is the stark fact that most of the people who already have health insurance really like it — in the 75 percent to 80 percent range. (In terms of quality, American medicine is ranked among the best in the world. But we are lacking in quantity; we have the highest number of uninsured in the Western democracies).
So if Republicans can stoke public fears about the middle class losing its coverage, they can sink Obama’s program. In fact, the Gallup Poll taken right after the president’s recent address to Congress shows that by a 60 percent to 38 percent margin, voters “are skeptical that President Obama’s health care plan will be able to accomplish all he intends — to expand coverage to nearly all Americans without raising taxes on middle-class Americans or affecting the quality of care.”
Among independents, who provided Obama’s margin of victory last fall, 64 percent have severe doubts about his plans. The polls are averaging nearly 50 percent opposition. But with his trademark eloquence, Obama still can turn things around. What to do? As the Chicago Tribune put it, “The challenge in this country is to extend coverage to the uninsured without degrading quality for everyone. With a little caution and humility, the president and Congress can find ways to achieve that goal.”
To tackle the first problem, any reasonable reform would:
• Seek to cover as many people as possible.
• Outlaw the practice of denying sick people coverage (the “pre-existing condition” loophole).
• Mandate, if necessary, that those businesses and individuals who can easily afford to purchase insurance do so.
• Preserve the rights of those who already have health care they like.
To fix the second problem of increasing costs, any reform would likely have to be modest in scope (i. e., only cover the most vital medical expenses) and include legal reforms.
It is probably best to deal first with the short-term problem of the uninsured. Who are they? The Census Bureau conducted remarkable surveys in 2006 and estimated that 47 million Americans, or roughly 16 percent, lacked health insurance. (With the recession of the last two years, that figure is surely closer to 50 million).
These extensive surveys showed that those most likely to be uninsured were those from broken homes (25 percent), blacks (21 percent), Hispanics (34 percent), those ages 18 to 34 (28 percent), non-citizens (45 percent), inner-city residents (19 percent), those with family incomes under $25,000 (25 percent) and part-time workers (23 percent). Those were also the folks most likely to have voted for Obama as president. Perhaps somewhat surprisingly, fully 20 percent of the uninsured had family incomes of $75,000 or more. (Presumably, they just choose not to buy insurance.)
Fortunately, there is a way to provide nearly 100 percent coverage at a reasonable cost of less than 1 percent of the current Gross Domestic Product. By using individual mandates for those who are young and healthy and can afford it, by requiring larger companies with more than 1,000 employees (like Walmart) to provide coverage, by subsidizing those families who can’t afford it by themselves and by using a “public option” only as backup for the small fraction of areas where private insurance doesn’t exist, Obama can deliver on his promise, reward his staunchest supporters and take a big step toward re-election.
The most efficient way to guarantee health coverage for almost everyone is to build on the system already in place with a “catastrophic” plan that covers major hospitalization bills and includes generic prescription drug benefits and emergency dental care. Numerous national companies such as Blue Cross/Blue Shield, Aetna and Kaiser offer such plans right now at a reasonable cost.
After I left the California State Senate last winter, I signed up for a “catastrophic” plan with a $5,000 deductible that allows a few doctors’ visits and some prescription drug coverage plus dental care. The cost is roughly $2,000 per year. At 50 million uninsured times $2,000 per year, the total cost would be roughly $100 billion per year.
The direct costs to the federal government might be a little less because the 20 percent of the uninsured with $75,000 annual incomes will be required to buy it themselves. The remaining 40 million uninsured who are below the $75,000 cutoff will get direct subsidies to purchase insurance. That leaves a program costing roughly $80 billion to $90 billion per year until 2012.
The best way to pay those bills would be to use the money left over from the $800 billion stimulus package. And trading “pork barrel” spending for a direct and vital benefit like universal health care will reassure independent voters who are getting worried about the deficit.
This “hybrid” approach — combining the Republican principle of requiring individuals who could afford health insurance to purchase it in the private sector and the Democratic idea of providing subsidies to help lower-income families — should have broad appeal.
The comparison is to car insurance: It doesn’t pay for normal maintenance like a brake job or an oil change, but it will provide coverage for big problems like accidents or theft.
This “hybrid” approach gets the president the best of all worlds: He delivers nearly 100 percent coverage while leaving intact the already popular health plans.
The plan outlined above will be a cross between what the House and Senate Democrats are proposing. Democrats fear a repeat of 1994, when a voter rebellion against Bill and Hillary Clinton’s proposed overhaul of the health care system helped Republicans win control of both Houses of Congress for the first time in 40 years. Fifteen years ago, the Clinton Democrats managed to get the worst of both worlds: Some aspects of their plan scared the middle class, while the failure to pass anything turned off the Democratic base leading to the debacle of 1994. Already, some Republicans are hoping that defeating Obama in this health care battle will “break” his presidency and be his “political Waterloo.”
The political risks of failure are real and potentially severe. But there is a compromise plan readily available that doesn’t disturb anyone’s existing insurance, covers nearly 100 percent of the population and will cost less than what House Speaker Nancy Pelosi is proposing. It may require a modest tax increase after 2013, but in Obama’s first term the plan can be paid for with money already appropriated in last winter’s stimulus bill.
The president strongly endorsed the “public option” health plan in his Sept. 9 speech. Here is one critical fact that opponents should know: The age group that has the highest rate of coverage in the census survey was those over 65, where fully 98.5 percent have health care through the Medicare program, which is the public option on a grand scale. Medicare has helped raise the life expectancy for seniors by 15 percent over the last generation, although this program is phenomenally expensive and one of the fastest-growing items in the budget.
In terms of strategy, Obama should not be afraid to sign legislation without the public option; he can always sneak it back in by expanding Medicare eligibility to those under age 65 if the private sector doesn’t deliver services to certain areas.
To win the support of moderate Democrats (and a few Republicans), the president also can afford to accept amendments banning payments for abortion or limiting the public option to just 10 percent of the total costs. As for covering immigrants, this can probably be finessed. If their American-born children are covered, either court orders or a later executive order could make their parents eligible. But even if immigrants are not included right away, the program is still worth passing. And if necessary, the White House could ram it through the Senate on the “simple-majority” option by attaching it to the budget.
By delivering the universal coverage mandate, Democrats will have a positive record to run on in 2010, unlike 1994 when most got nailed for the biggest tax increase ever, gays in the military, gun control and midnight basketball.
It should be stressed that universal coverage is not redistribution of income, but an across-the-board entitlement like Social Security that every American will be guaranteed to receive — which is why some conservatives fear it so much. And like Social Security, it can be used to attract working and middle-class white voters to the Democrats on a semi-permanent basis. Creating a “Health Security” card that is as effective and lasting as the Social Security card, combined with generally cleaning up the messes of the Bush- Cheney years, should put Obama in the top third of presidents.
In his September speech, Obama quoted the late Ted Kennedy on the urgency of this moment. Now is Obama’s chance to both learn from his experiences and fulfill his promises. Twice, Kennedy rejected compromises on a modified health plan from Republican presidents and ended up with nothing.
In the early 1970s, the Nixon administration offered a plan that was a combination of public and private insurance that would have covered more than 90 percent of Americans. But not wanting to see the hated Nixon get any credit and holding out for 100 percent coverage, Kennedy left the deal on the table. A decade later, the Reagan administration proposed a “catastrophic” plan to cover the most serious illnesses, but under pressure from organized labor, which wanted a “comprehensive” single-payer plan, Kennedy rejected the offer again and now there are nearly 50 million Americans lacking health insurance.
In the final months of his life, Kennedy told the Los Angeles Times that he regretted both instances in retrospect.
A modestly priced hybrid program is affordable, workable and likely to be popular. Accepting this plan means: a) the American people get universal health care; b) the insurance industry gets 50 million more customers; c) many young people will get jobs in an expanded health care industry, which can’t be outsourced to the Third World; and d) Obama gets a platform to run on. For him, it’s a “win-win-win-win” situation.
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