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Watching Out for the Details in Healthcare, and How Hard the White House Pushes for Them
In an interesting piece in Sunday's New York Times Magazine, Matt Bai suggests that the White House has learned the main lesson of Bill Clinton's failed attempt at universal health care, which is not to deliver a finished product to Congress but instead give Congress a set of goals and let it decide how to reach them.
The question to my mind is whether the Obama White House has over-learned that lesson. Without strong White House leadership, individual members of Congress are particularly susceptible to the threats and promises of powerful lobbies. A statement of White House goals that leaves the details to Congress will likely result in legislation that superficially meets those goals but whose details undermine them. That's the biggest danger now with the inchoate healthcare legislation.
Fortunately, the White House now intends to get more involved in the emerging healthcare bill. Following are the three biggest issues where powerful lobbies on the other side are working the details to their advantage. The question is how hard the Obama White House will push back.
1. A real public option or a public option in name only? Big Pharma and Big Insurance are dead against, and are pressuring lawmakers. Republicans are also opposed. The President said he wants a public option. But the real question is whether he'll be willing to allow the public option to be watered down into essentially nothing (broken up into regional or state-run plans, or be required to charge the same as private insurance, or be triggered only if private insurers and pharma fail to bring down costs and extend coverage). If the President wants Republicans on board even though he doesn't need them (the bill requires only 51 Senate votes), he will have to buy a watered down version.
2. A requirement that all businesses "pay or play," or a broad exemption for smaller businesses? Most emerging versions of the bill require employers to supply health insurance for workers or contribute to the cost of a plan, but exempt small employers. The issue to watch is how "small employers" are defined -- and how many, as a result, won't have to either pay or play. Small business lobbies are all over the Hill arguing for a broad exemption. Republicans agree. The White House will have to push back very hard to include enough businesses to make "pay or play" work.
3. Additional tax revenues from taxing employer-provided benefits on higher-incomes or from limiting deductions on higher incomes? Congressional Dems originally nixed the second and haven't supported the first. Organized labor is dead-set against taxing any employer-provided health benefits because it doesn't want to set a precedent that might someday erode all such benefits. Accordingly, the White House is signaling it won't take this route. Yet there's powerful resistance on limiting deductions for higher incomes, from many of the beneficiaries of these deductions (such as big charities and state and local governments). Unless the White House demands that those deductions be limited for all taxpayers earning over $250,000 a year, adjusted for inflation in future years, it won't have enough revenue to support the overall bill.
So the question right now is how hard the President will push to get a real public option, a broad mandate, and enough revenues to support universal health care. The Republicans are showing remarkable unity, as they did on the stimulus package and the budget. Yet the President seems intent on a bipartisan bill. Meanwhile, Pharma, Insurance, charities, state and local governments, and labor are all putting maximum pressure on individual Democrats. Yet the President seems wary of twisting arms. What's the result? Keep your eyes on the details.
The question to my mind is whether the Obama White House has over-learned that lesson. Without strong White House leadership, individual members of Congress are particularly susceptible to the threats and promises of powerful lobbies. A statement of White House goals that leaves the details to Congress will likely result in legislation that superficially meets those goals but whose details undermine them. That's the biggest danger now with the inchoate healthcare legislation.
Fortunately, the White House now intends to get more involved in the emerging healthcare bill. Following are the three biggest issues where powerful lobbies on the other side are working the details to their advantage. The question is how hard the Obama White House will push back.
1. A real public option or a public option in name only? Big Pharma and Big Insurance are dead against, and are pressuring lawmakers. Republicans are also opposed. The President said he wants a public option. But the real question is whether he'll be willing to allow the public option to be watered down into essentially nothing (broken up into regional or state-run plans, or be required to charge the same as private insurance, or be triggered only if private insurers and pharma fail to bring down costs and extend coverage). If the President wants Republicans on board even though he doesn't need them (the bill requires only 51 Senate votes), he will have to buy a watered down version.
2. A requirement that all businesses "pay or play," or a broad exemption for smaller businesses? Most emerging versions of the bill require employers to supply health insurance for workers or contribute to the cost of a plan, but exempt small employers. The issue to watch is how "small employers" are defined -- and how many, as a result, won't have to either pay or play. Small business lobbies are all over the Hill arguing for a broad exemption. Republicans agree. The White House will have to push back very hard to include enough businesses to make "pay or play" work.
3. Additional tax revenues from taxing employer-provided benefits on higher-incomes or from limiting deductions on higher incomes? Congressional Dems originally nixed the second and haven't supported the first. Organized labor is dead-set against taxing any employer-provided health benefits because it doesn't want to set a precedent that might someday erode all such benefits. Accordingly, the White House is signaling it won't take this route. Yet there's powerful resistance on limiting deductions for higher incomes, from many of the beneficiaries of these deductions (such as big charities and state and local governments). Unless the White House demands that those deductions be limited for all taxpayers earning over $250,000 a year, adjusted for inflation in future years, it won't have enough revenue to support the overall bill.
So the question right now is how hard the President will push to get a real public option, a broad mandate, and enough revenues to support universal health care. The Republicans are showing remarkable unity, as they did on the stimulus package and the budget. Yet the President seems intent on a bipartisan bill. Meanwhile, Pharma, Insurance, charities, state and local governments, and labor are all putting maximum pressure on individual Democrats. Yet the President seems wary of twisting arms. What's the result? Keep your eyes on the details.
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Robert - Your commentary is provocative, as always. I would like to ask the following question, not rhetorically, but from genuine ignorance. Health care costs more in the U.S. per capita than in other industrialized nations, which generally provide universal coverage that is not only less expensive, but which also yields better national health statistics (judged by the criteria of life expectancy and infant mortality). How much of the excess cost here reflects excess profits (principally flowing to drug companies but also insurers), and how much simply reflects the inefficiency of a fragmented system that imposes inordinate costs due to duplication of services, facilities, and paperwork?
I bring up this question, because a public option has the potential to control excess profits via competition, but to what extent could it eliminate inefficiencies? The latter have been the target of single-payer advocates, but as I've suggested elsewhere,single-payer is not a politicallly realistic expectation in this nation at this time.
June 8, 2009 1:03 PM | Reply | Permalink
The public option can eliminate redundancies but only if it's national. If it's broken into regions or left to the states to administer, we'll have problems. The public option is strongest if its federally run and not answerable to state regulators.
June 8, 2009 1:41 PM | Reply | Permalink
Leaving it to the states is a road to disaster. Many states, especially the ones with an inordinate amount of repuglicans in control, have a tendency to give the big guys sway over the public. For instance, when I turned 50, my monthly premiums jumped from $300 to over $800. When I asked the state insurance guru why, I was told that once people reach 50, their life problems begin to become apparent and it costs insurance and HMO's more money to treat. I countered but that's what insurance is for ... to offset one person's illness off those still healthly. It bounced off deaf ears. Last thing we need is for some petty state official in the pocket of a corporate insurance, HMO or drug company allowing special rules to be followed for business to profit off those they insure.
June 9, 2009 7:52 AM | Reply | Permalink
If you go to page 13 of this oecd study:
http://www.olis.oecd.org/olis/2009doc.nsf/LinkTo/NT00000B6A/$FILE/JT03259332.PDF
You'll see on the top graph, that the government in the U.S. already pays out as much in health care, per capita, as the government in any other first world country, except Norway.
What this tells me is that the government is already spending as much as it needs to spend, to give us all insurance coverage, if we went the single payer route.
In other words, medicare for all, if done tomorrow, would basically be free and require no new taxes. (I'm sure there would be some transition costs).
My question is this:
Instead of "public option" - why not go "Private Option".
Why not just flip the switch and go 'medicare for all' but if you want to stick with what you have, you can - you'll just have redundant coverage.
If private care is great, maybe some folks will keep that.
You go to work next monday, and you can tell your employer that you decided to keep the insurance they give you...
- or -
....you can tell them to cancel the insurance and just give you the money in your pay check instead.
It seems to me medicare for all would still be cheaper than the partial, public option.
Just cover every body. It's already paid for.
And if people want to continue with what they've got, then they are double covered.
Leave them a 'private option'
If I'm the health care industry, the deal I would be angling for is that the government just nationalize and consolidate us. Buy out our interest and we'll stop resisting you.
June 9, 2009 10:12 AM | Reply | Permalink
Some quick back-of-the-envelope calculations:
Typical administrative costs for Medicare are 2-4%. For private insurance it's 15-20% and for employer-based group insurance it's 10-12%. (I'm working from memory here, so these figures might be off a bit, but I'm pretty sure they're in the ballpark.) A reasonable estimate would be a 10% savings for moving people to a government plan. But most health care DOLLARS are already paid out of government-provided health care, so the overall savings would be considerably less than 10% - perhaps half of that.
A bit more than 10% of the people currently have no health insurance, but again, since the people with the highest health care costs (mainly the elderly) are already in government-provided health care, the cost of insuring the uninsured would be considerably less than 10% of the total health care pie.
The long and the short of it is that the savings in administrative costs would be (very) roughly the same as the cost of insuring all the uninsured - at least within a few percent one way or the other.
June 8, 2009 5:09 PM | Reply | Permalink
I believe the number for all private insurance is much higher. I believe it is 31% on average (administrative costs, which includes advertising, claim denial, and of course, profit).
So we could insure all the uninsured, and lower the costs for everybody else as well.
Single payer would be cheaper than what we're doing now, in other words.
-- ARG
June 8, 2009 6:16 PM | Reply | Permalink
I'd be surprised if it's as high as 30%. Also, remember that most people with private insurance get it in group plans through their employer, and the admin costs for those plans are much lower. In actuality, few people buy health insurance in individual policies - it's just too damned expensive - so these high administrative costs don't really contribute that much to the overall costs.
The other thing to keep in mind is that most of the DOLLARS spent on health care in the US are ALREADY covered by government-run healthcare. As a result, both the costs and cost-saving to be had by moving the uninsured to a government-run plan are smaller than the percentage of people involved.
June 8, 2009 6:35 PM | Reply | Permalink
I've had to purchase my own health insurance since Bu$h was in office because the benefits offered were less than what I could get thru a private policy. For the last 4 years I've had a corporate health policy that was pure crap. I had to do all the leg work, pay for services, print out forms, make copies and mail them off only to get two-thirds to three-fourths of my bills reimbursed. And those were only bills for medical services I had to have. I have other medical problems that I can't get medical attention for because I don't have the disposable income to pay first then wait months for a partial refund. If the Congress doesn't push hard for the public healthcare, then I don't see the point in voting for either party ... neither are interested in the public good - only the corporate good.
June 9, 2009 8:01 AM | Reply | Permalink
Here's a source for the 31% number, Physicians for a National Health Program (PNHP):
http://www.pnhp.org/facts/singlepayer_faq.php#administrative_costs
And I see highplainslawyer has posted a link to the original study, further downthread.
So it's really 31%. Compared to 3% for Medicare. Update your savings calculations accordingly. :-)
-- ARG
June 9, 2009 12:46 PM | Reply | Permalink
i think that, as with the issue of an overall economic platform, progressives need to take a COLLECTIVE political approach, rather than this idea of urging individuals to call their Congresspeople.
The whole rhetoric of "bipartisanship" coming out of the Obama Administration in this political context sounds like an invitation to a 'public-option' charade that really is only a hollow shell, something that could draw at least some GOP votes.
COLLECTIVE pressure needs to be brought on the Obama Administration generally on this, and even more generally (as I've outlined in several previous Reich columns) economic policy. The fudgy-"Democrats" and the Obama Administration are the ones who must collectively face collective heat from progressives, with threats of primary challenges in the latter, and a real highlight on the Obama Administration (not just in some particular small policy areas, but overall) and the question of backtracking
June 8, 2009 3:21 PM | Reply | Permalink
Let's be realistic here. (I'm always told universal healthcare is unrealistic). If this is a bipartisan bill it will be a sham and it will be a great, big fat sham for which the Democratic Party will get lasting blame.
You can't tax middle class health benefits and give people nothing in return. Who in their right mind is going to sign on to that?! Not me. Why on earth would I agree to have my employer paid benefits taxed if the bill does little more than offer a guaranteed welfare program for big insurance and big pharma? If the plan isn't truly universal it's a safety net full of holes. It's worthless. The Republicans will nickle and dime it to death in the future and the only thing left will be that tax on my health benefits and those mega profits for insurance and pharma.
Is the Democratic Party committed to universal healthCARE or not? Apparently not! the Democratic Party is committed to lobbyists and so risk averse that Republicans might as well be running Congress and the White House. Republicans are going to just love the bipartisan aid to corporate America's stockholders (who will not be taxed).
What is the point. If you can't do it right, don't do it.
And Professor Reich -- whatever happened to progressive taxation? Income tax? Capital gains? Estate? Why do you keep pretending that the only place you can go for tax revenue is to the benefit packages of the working middle class?
June 8, 2009 7:07 PM | Reply | Permalink
There's a very simple swap that I, as a middle class worker, would like to make. I would like to take the healthcare premiums that I pay now, with pretax dollars, and give them to the government, also as pretax dollars, in exchange for health coverage that I expect will be more generous in its benefits and will at worst cost the same as I'm paying now and that I expect will cost less.
June 8, 2009 9:14 PM | Reply | Permalink
Heck, they can take what I pay now, keep the administrative overhead savings, and I'll happily chip in extra if it'll get everybody covered.
It's worth it to me even if I think about it selfishly. The healthier everyone around me is, the easier it is for me to stay healthy.
All health is public health.
June 8, 2009 10:53 PM | Reply | Permalink
Well a big AMEN to you Bluebell! The Republicans are over the top and clearly don't care about "the American people" and the Democrats are fairly worthless, so a bipartisan result is not actually worth bothering with--we will only get screwed again.
And furthermore, why do we even allow this to be called a discussion of "health care"? This is NOT a discussion of health care, it is a discussion of health insurance--which has very little to do with actual health care.
June 8, 2009 11:38 PM | Reply | Permalink
If the "tax on benefits" is really just a tax on businesses which drop employee coverage so the government can do it, then it is a good idea. As I see it, an employee could chose to keep whatever plan his employer provides, or opt into the public option. (No intelligent human being would buy an individual policy from an insurance company.) Now some businesses would see this as a way of reducing their costs - cancel the health insurance benefit and let Uncle Sam take care of that. Those businesses should be taxed to make up a big part of that savings.
Other than that, income taxes should be increased a bit to cover the shortfall. Since those taxes must remain progressive, it would be the wealthy beneficiaries of the Bush give away who would be paying most of that tax.
June 8, 2009 9:01 PM | Reply | Permalink
See this is what I want... a choice between what my employer offers and a public option. If I choose the public option, I should get taxed by the government, but that tax should be levied before my income tax so anything I pay for the public health insurance option shouldn't be counted as income when I pay my income taxes.
If I stay with my employer based plan, then nothing should change. I pay my premiums pre-tax and if my employer contributes to it, so do they.
That technically gives the private insurers a leg up... if my employer pays part, then my premium with the private insurer could be less. But the only thing that matters to me is getting the most benefit for the least cost.
So... keep the principle in the current law that health expenses should be paid with pre-tax dollars and give me a choice between a public and private option. How hard is that to figure out?
June 8, 2009 9:08 PM | Reply | Permalink
Ah, but the corporatists want to tax your health benefits AND deny you the public option. Oh, we so do need to watch every letter and comma of that fine print. So then you may well wind up losing your employer paid benefits and be forced to buy a for profit plan. If this bill screws things up good, it could kill employer paid insurance without providing a safety net.
What I just do not see at all is a real commitment to that safety net. This thing starts out underfunded and you know it's going to cost more than they say it's going to cost.
June 8, 2009 9:43 PM | Reply | Permalink
The "tax on benefits" does not impact the employer and goes directly on the "income" employees "receive" for having such a benefit. It is a passthrough tax to an employee receiving benefits, ie--the tax is on the employee, not the company.
The government currently taxes life insurance as a "benefit" that employees receive. I believe this was passed under Bush, but this year the IRS has mandated that you actually know you are paying this tax and is reflected on your paystub.
In the past, Companies could "hide" the tax, even though you were paying for it just as an "added cost" of your life insurance.
Both Republicans and corporations love this idea of employees paying for the benefits they receive. This has been pushed by Republicans for a long time.
June 9, 2009 8:25 AM | Reply | Permalink
The one thing that is not being mention in this debate is removing the profit from health care.
As long as the providers as well as the insurance industry see health care as just another way to get rich, it will not matter one bit how it's provided or payed for.
The for profit hospitals, labs and medical associations need to be controlled as well. Even those affiliated with religious groups, such as Florida Hospital here in Florida - supposedly a not for profit organization - rake in ungodly fees which are used to line the pockets of the administrators and directors.
C
June 8, 2009 9:10 PM | Reply | Permalink
Republicans have no interest in anything other than obstructionism because they fear that the implementation of true universal coverage that contains a bona fide public option will undermine their political cause for years. As a result, crafting and passing a plan through the budget reconciliation process is the only viable option.
June 8, 2009 10:08 PM | Reply | Permalink
A bipartisan bill on this issue is a loser for the Democrats. When this thing is signed, people who earn in the 7 to 15 dollars an hour range need to see results. Let's say you work retail in a small business and currently don't have health insurance. Being human, you have developed a sore tooth. It's in the back and you can tell it's getting worse. So you go to the dentist and the guy lectures you because you haven't been going to the dentist. Then he gives you the report: you need a root canal. "How much?" You ask him. "$750," he tells you, "and then you'll need a crown."
Under the existing system, a person in this predicament is completely out of luck. No money to cover it, and no insurance.
Democrats need a plan that provides a genuine solution for the aforementioned scenario, and others like it. People need to see affordable health care, not a dizzying network of meaningless provisions. Workers in the 7 to 15 dollars an hour range need to be able to get medical check-ups like everyone else. If the new plan does not provide a solution for what is currently unaffordable, then it's little more than a sham and a vehicle for empty rhetoric on the campaign trail. And people will notice.
June 9, 2009 8:16 AM | Reply | Permalink
Private insurers mark up premiums way more than 15% for profit and overhead. There was a Frontline special from a year or so back in which it was revealed that in one recent year, one dollar out of every $700 spent on health care in this country flowed into one health insurance CEO's pocket. We could have provided health care to half a million people for what this one guy was paid for doing - what? Maximizing profits for shareholders, not providing health care.
The crux of the issue here is that some things aren't appropriate as for-profit businesses, health care being probably the best example one could ever think of. We have a system in which the people we pay to cover health care costs stand to earn greater profits by committing fraud, i.e., not paying to cover our health care costs. Human nature being what it is, if you set up a system in which some people profit by allowing other people to die, people are going to die. As they have been here for several decades now. We don't have a "free market" in health care - what we have is the collusion of a few entire industries to maximize profits because, where else are you going to go for health coverage? The insurers squawking about "competition" is rich, given all that they've done to squash it. Profit motive is driving the increase in costs in health care more than any other single factor, and if we aren't going to address that fact, we'd be better off doing nothing at all and waiting a few years until the whole behemoth crashes to the ground under its own bloated weight. At least then it will have to actually be fixed, rather than patched over with a bandaid that does nothing more than keep the current system on life support for a few more years, all the better to further pick our bones clean, while in the meantime continuing to allow a million people per year to go bankrupt and hundreds of thousands more to be legally preyed upon by insurers denying payment for care.
It may be that we can't get to the ideal right now - that is, single-payer coverage. But if we can't get a cheaper public insurance option, or some legislation limiting profits and/or costs for procedures or medicines, and requiring that insurers pay all legitimate claims, we'd be better off to do nothing at all.
June 9, 2009 9:06 AM | Reply | Permalink
If we want a public option, we have to apply pressure to our *Democratic* senators (forget the Republicans) who are not yet on record as fully supporting one.
I called Sen. Bill Nelson of Florida yesterday. He's yet to come out in favor or against which means, he's getting pressure from the insurance lobby to oppose the public option. Pressure from his constituents -- unrelenting pressure from hundreds of calls jamming his phone lines -- may cause him to support a public option.
I urge all who live in a state with one or two Democratic senators to call today and apply the pressure. Then, email everyone else you know and ask them to do the same. Baucus, Wyden, Nelson, Nelson, Conrad -- all Dems -- are all resisting the full public option. And all are capable of being swayed one way or the other either by constituents or lobbyists. That's probably true of every senator who hasn't made his or her decision on the matter public.
Find your senators' phone numbers here:
http://www.senate.gov/general/contact_information/senators_cfm.cfm
Don't just email. Call. Do it now.
Do nothing. Get nothing.
June 9, 2009 10:16 AM | Reply | Permalink
Actually, the New England Journal of Medicine printed a study determining that some 31 percent of US health care dollars, or more than $1,000 per person per year, went to health care administrative costs. http://www.pnhp.org/publications/nejmadmin.pdf
When one looks at comparative results and costs throughout the world, it is apparent that the U.S. is not getting the most "Bang for the Buck."
While we spend 15.2% of GDP for healthcare, the U.S. only ranks 37 out of 190 countries. France, which ranks number 1, devotes 11.2% of GDP to healthcare. The U.K., which ranks 18th, devotes 8.2% of GDP to healthcare.
In 2006, Americans spent an estimated US$6,714 per capita on health care, while Canadians spent US$3,678. This amounted to 15.3% of US GDP in that year, while Canada spent 10.0% of GDP on health care.
Obviously, it is possible to obtain more and better service for less money. The experience of other industrialized nations suggests that we could cut healthcare costs by 30% and improve the level of care provided.
The goal of any market system is to maximize profits. The question is whether this is an appropriate goal in the context of health care.
June 9, 2009 10:42 AM | Reply | Permalink