Obamacare Is At War With Itself Over Future Costs
Big Pharma, for example, is in line to get just what it wants. The Senate health panel’s bill protects biotech companies from generic competition for 12 years after their drugs go to market, which is guaranteed to keep prices sky high. Meanwhile, legislation expected from the Senate Finance committee won't allow cheaper drugs to be imported from Canada and won't give the federal government the right to negotiate Medicare drug prices directly with pharmaceutical companies. Last month Big Pharma agreed to what the White House touted as $80 billion in givebacks to help pay for expanded health insurance, but so far there's been no mechanism to force the industry to keep its promise. No wonder Big Pharma is now running "Harry and Louise" ads -- the same couple who fifteen years ago scared Americans into thinking the Clinton plan would take away their choice of doctor -- now supportive of Obamacare. Private insurers, for their part, have become convinced they'll make more money with a universal mandate accompanied by generous subsidies for families with earnings up to 400 percent of poverty (in excess of $80,000 of income) than they might stand to lose. Although still strongly opposed to a public option, the insurance industry is lining up behind much of the legislation. The biggest surprise is the AMA, which has also now come out in favor -- but only after being assurred that Medicare reimbursements won't be cut nearly as much as doctors first feared.
But all these industry giveaways are obviously causing the healthcare tab to grow. And as these long-term costs rise, the locus of opposition to universal health care is shifting away from industry and toward Blue Dog and moderate Democrats who are increasingly worried about future deficits. My sources on the Hill tell me there aren't enough votes in the House to get either major bill through, even with a provision that would pay for it with a surcharge on the richest 1 percent of taxpayers. House members don't want to vote for a tax increase before their Senate counterparts commit to one. Yet the Senate continues to be in suspended animation because Max Baucus and his Senate Finance Committee still haven't come up with a credible way of paying for health care. In his testimony last week, Elmendorf favored limiting tax-free employer-provided health benefits, but organized labor remains strongly opposed.
Obama has less than three weeks before August recess. Chances are dimming that he can get some form of universal health care passed in both Houses before the clock runs out. The Democratic National Committee is running ads favoring passage in Blue Dog states and districts, but that won't be enough. Now is the time for the President to begin twisting arms and knocking heads. To control long-term costs, he'll also have to take away some of the goodies that have been promised to the health-industrial complex, and maybe even cross Big Labor. He also needs to come out clearly and forcefully in favor of a way to pay for the whole thing -- ideally, in my view, a surtax on the top.
Ah yes . . . .
The snakes begin eating their own tails?
We have quite a few of those snakes 'round the Cafe.
You'll know them by their so-called progressive conservative sneers...
~OGD~
July 20, 2009 12:37 PM | Reply | Permalink
Obama is NOT going to cut off the gravy train to folks like Big Pharma. First, wouldn't be the right neolib approach. Second, and related to the first, campaign contributions, you know.
Don't blame me; I voted Green.
July 20, 2009 10:39 PM | Reply | Permalink
The WH budget update is due in mid-July and has now been postponed to mid-August.
Why would that be, anything to do with growing deficit, reduced growth and employment assumptions and the musical chairs of passing health care before the budget is released to the public?
So yeah Reich is correct when he says that "now is the time for the President to begin twisting arms and knocking heads".
It will be much more difficult for Obama to lead the country towards bankruptcy after mid-August.
July 20, 2009 2:10 PM | Reply | Permalink
Where was your concern about national bankruptcy when George Bush was president? Twit.
July 20, 2009 3:54 PM | Reply | Permalink
No one -- NO ONE -- could have turned this effed up economy around in 5 months, Lalo, so what is your point? Do you wish that the geezer and the barbie were running the show? No? Then I guess you just like to sit back and bitch. Well, that is what you do best, but it sure isn't very productive or helpful either. I have yet to see a positive suggestion or opinion from you.
July 20, 2009 5:00 PM | Reply | Permalink
Let's not fool each other.
The only "productive" or "helpful" solutions you're ever going to accept will be those that parrot your own.
There's more than enough people on TPM who have memorized and internalized the talking points as well as you did. So if anything I have to say really bothers you that much, you can easily avoid developing the foam at the mouth by skipping my comments.
July 20, 2009 8:42 PM | Reply | Permalink
Thanks for this setup . . .
OK ... You're a twit!
~OGD~
July 22, 2009 6:19 PM | Reply | Permalink
Dr. Reich, is it the fear of rising deficits that's motivating the blue-dogs to oppose universal health care? I thought it was a case of politicians facing funding cut-offs from the health-care industry that was feeding their opposition. The former would almost be a first while the latter is merely political business as usual.
Until politics no longer makes policy, affordable health-care will remain a luxury available only to special interests (and politicians.)
July 20, 2009 2:14 PM | Reply | Permalink
Matt Yglesias nails it
July 20, 2009 3:10 PM | Reply | Permalink
I keep coming back to Richard Kingdon...policy windows open and just as surely they close
The window's open now for health care. And again with Kingdon, as Yglesias notes, the policy kit is full of the right tools - some assembly required but batteries included
It isn't brain surgery
Either the Democratic Congress has the will to pass reform now or they don't
July 20, 2009 3:14 PM | Reply | Permalink
I'm sure Richard's a sharp guy too, but it's John Kingdon
July 20, 2009 3:15 PM | Reply | Permalink
Let's hear it for Harry and Louise
Mark Blumenthal won't look a gift horse in the mouth
http://www.pollster.com/blogs/health_care_costs_vs_coverage.php
July 20, 2009 3:26 PM | Reply | Permalink
If Congress can only devise a plan that sends more money to the moneyed interest groups that already wield too much influence it will only hasten the collapse of the health care system and/or the economy.
July 20, 2009 3:31 PM | Reply | Permalink
Mr. Reich, the whole point of reform is *lower* costs, not higher costs. Paying for health care reform by taxing benefits is the opposite of reform - it would raise costs, not lower them. The House is right to tax the rich - why does taxing benefits have such allure to you?
Perhaps you think it might lower costs. But if cost increases led to more efficient care, we'd have the most efficient system in the world. They don't - and they won't. Taxing benefits is both bad policy and a massive political mistake for the dems.
It's mind-boggling that anyone comes back to it when there are many other better alternatives... like say, treating unearned income as taxable under Medicare FICA, which raises ~$30 billion a year if you exempt pension and 401k income. There's another good tax on the rich that would pay for health care... what's up with you and taxing benefits?
July 20, 2009 3:32 PM | Reply | Permalink
Pete - I don't think many health economists doubt that reform that includes a public option will lower costs - possibly up to a trillion dollars or more over ten years in comparison with our current trajectory. The problem is those lower costs will accrue to the economy as a whole. Reform legislation will increase federal costs, and even though net savings to consumers outweigh that increase, it's the increased cost to the government that is driving the debate.
July 20, 2009 5:10 PM | Reply | Permalink
Yes yes yes yes and maybe. I'm not sure increasing federal outlays under health care are the crucial factor driving the debate. I think it's more about a combination of industry and interest group pressures. Remember, the same set of actors who pushed the Iraq war and it's massive spending now are posing as fiscal conservatives. Spending, per se, isn't the issue. It's what the spending is for. Meanwhile, code phrases like "bi-partisan" and "get our spending under control" are - and always will be - the code lingo for satisfying right wingers and industry interests. Thanks for the thoughtful response.
July 21, 2009 12:00 AM | Reply | Permalink
The "whole point" of health care reform is universal coverage, not lower costs. Lower costs are an outcome of properly designed universal coverage systems. If universal care meant higher costs, support for universal care would still be the only morally defensible position. Since well-designed universal care actually means lower costs, those opposing it on the basis of cost are ignorant or are in fact ideologically opposed -- or dedicated to the profits of certain sectors of elites above all else, which amounts to being ideologically opposed.
July 20, 2009 5:13 PM | Reply | Permalink
Bravo! It should be noted that those Blue Dogs who dither about deficits are the same folks who believe optional foreign wars are free.
July 20, 2009 8:03 PM | Reply | Permalink
Skybolt, I think you misunderstand what I am saying - I mean costs for individuals. We need to get those costs in particular under control. That's the central issue... at least to me. Universal coverage is clearly a major goal. But even the House bill doesn't include illegal immigrants (which it should).
Increasing cost is the crucial problems that Americans are facing. Declining quality/access is the flip side of cost increases, but cost is the driver. That's why reform is more likely today than in the '90s - more people are feeling it.
The uninsured - and I hate to say it because it sounds mean - are a little bit of a side issue to the politics... except to the extent that the insurance companies want their business and that progressives like myself want it to happen. But as a politically relevant issue, it pales in comparison to the changes for Americans who already have insurance. Remember: over 90% of voters already have health insurance. Most of those are not realistically worried about losing it... but they are worried about cost.
July 21, 2009 12:08 AM | Reply | Permalink
Is there an opportunity to take the least-cost-effective DoD project and trade it for the increased cost of universal health insurance?
Surely there's some project that can be sacrificed, in exchange for having a healthier pool of young adults to recruit.
July 20, 2009 3:33 PM | Reply | Permalink
Deep-six a few of the useless planes that keep getting funded because they are being built in a particular Senator's state. Bingo: Health reform paid for.
Once everyone is covered (with a mandate) so that healthy and sick, young and old, all pay in, it WILL cost less for each individual. Get rid of profits, and it will be on a par with the best health-care programs around the world, which have better outcomes than we do, BTW.
July 21, 2009 9:27 AM | Reply | Permalink
"Meanwhile, legislation expected from the Senate Finance committee won't allow cheaper drugs to be imported from Canada and won't give the federal government the right to negotiate Medicare drug prices directly with pharmaceutical companies."
What is the policy justification for this? Is there one? ("Because we can" doesn't count).
July 20, 2009 3:48 PM | Reply | Permalink
It's because the Canadian drugs are really, really, really dangerous. The last time I was driving in Canada I had to swerve right and left, avoiding all the dead Canadians who had keeled over after taking their medications!
They are just protecting us, you know. We can bring back wine from France, rum from Jamaica, Tequila from Mexico, any kind of food (except veggies and meat) from just about anywhere, but we can't get cheaper prescriptions from Canada?
No one in his/her right mind doubts that big Pharma is protecting its ass/bank accounts by paying off Congress for this policy. Fortunately, it is pretty easy to circumvent the law.
July 21, 2009 9:33 AM | Reply | Permalink
The idea that any of these bills represent "Obamacare" is disingenuous. Perhaps to his political detriment, these bills are being written by the dysfunctional Congress who would never do anything to upset their paymasters.
The essence of the problem right now is that progressives have really only been interested in the universality aspect. The basic political argument is that we should pity those without care, or inadequate care (a sizable minority, but still a minority--after all 50) and the rich should pay for it. From a budgetary standpoint is almost has to cost more money.
The alternative argument is that health care is way too expensive and is going to break the budget, not just of families but of retirees and workers. We are all paying way too much, and we should all get the benefit of serious reductions in cost. Furthermore, a system that provides more cost effective care can afford to provide everyone with insurance coverage.
These two arguments are not mutually exclusive, but they lead to very different ways of arguing and promoting the needed reforms. The argument for universality has always had the weakness that it promises concrete benefits for only some while imposing the (budgetary) costs on everyone. The argument for the latter has the weakness of imposing costs on a few (doctors, hospitals, insurers) to provide benefits for many.
The advantage of the latter approach is that there are many, many concrete examples of how to deliver health care more efficiently--at higher quality and lower cost--and the incentives to back that up are not really that controversial (paying for quality not quantity is a refrain heard from both sides).
July 20, 2009 3:48 PM | Reply | Permalink
Universal healthcare is a sine qua non for avoiding fiscal catastrophe because of health costs. People without insurance will delay visiting the doctor's office, and visit the ER instead when their issue can no longer be avoided. That is a major driver of cost escalation in the US. That and the byzantine record-keeping that keeps clerks in the health insurance industry employed.
July 20, 2009 4:43 PM | Reply | Permalink
Actually no you are wrong. The uninsured visiting ER's is not the major cause of cost escalation. It is the major cuase of the uninsured getting worse care then they should, and being subject top great economic insecurity. It contributes somewhat, but it is not by any stretch among the major factors driving cost for everyone else. Just google "rising health care costs" and read reports RWJ, Kaiser, McKinsey , MedPAC, etc...
We have a universal (for those over 65) single payer system in Medicare and it still has significant problems slowing cost escalation. The biggest reason is (1) inefficient delivery of care and (2) payment incentives that reinforce #1. There are however numerous providers who are doing an excellent job providing high quality care at much lower costs (in fact improving quality lowers cost as Edwards Deming showed so many years ago). They include MAyo Clinic, Intermountain Health, Geisinger Clinic, Kaiser, Group Health of Seattle, Billings Clinic, Marshfield Clinic, Cleveland Clinic, Denver Health. There are others. And it is no accident. they all intentionally eschew quantity for quality. Evidence based medicine for pretending that doctor's intuiton is best.
The problem is that Medicare payment rules penalize eficiency and reward quantity of care.
We can have a single payer system that continues the perverse incentives of MEdicare and fails to reward efficiency. We can have the system we have now with better payment incentives and all providers delivery care like those institutions named above.
July 21, 2009 12:31 AM | Reply | Permalink
Keep in mind that Medicare ONLY covers older people, who take more medications and have more health problems because of aging. If Medicare, or something like it, were across the board, and included (in premiums) those who are healthy and young, and paid for the health care of those who need it from that very large pool, the Medicare equivalent would be far better off financially, and premiums would also be affordable.
July 21, 2009 10:31 AM | Reply | Permalink
You are confusing level and growth. Medicare insures a more costly population so the level of spending per enrollee is higher than for those 18-64. Th epoint is that the cost of medicare is growing. Why? because there are fewer people with low costs? Becuase of the sam ethings driving general health care costs--technology, inefficency, fee-for service payment system, aging (the medicare pop is getting older in part because they are healthier).
The question for any payment system whether it can control costs while maintaining access and quality. It's not automatic. it requires the right incentives and the right care delivery practices.
July 21, 2009 10:57 AM | Reply | Permalink
But you are ignoring your very own words! Yes! Older people cost more (in terms of health care). Young people generally cost less. If both those groups pay premiums, then the cost of paying in will be less per person, and the risk will be shared across the board. If we include all in that group, there is a much larger contributing base.
Oh, why am I repeating myself? The fact of shared risk is out there, and has been replicated in every developed country in the world except ours. We have a terrible system with terrible outcomes, yet people continue to scare the uneducated populace who live for sound-bites into voting against their own best interests.
There is nothing else to be said -- the facts are out there. It is a matter of accepting reality or not accepting it.
July 21, 2009 9:41 PM | Reply | Permalink
Yeah he'll be real sure to take the advice of someone who was part of an administration that failed horribly at health care. Right.
July 20, 2009 4:14 PM | Reply | Permalink
"But all these industry giveaways are obviously causing the healthcare tab to grow. And as these long-term costs rise, the locus of opposition to universal health care is shifting away from industry and toward Blue Dog and moderate Democrats who are increasingly worried about future deficits."
I call bullsh*t. The Blue Dogs never had trouble driving up deficits for tax cuts for the rich or open-ended, off-budget war funding. This is political cover for doing the work of the insurance companies who employ them.
July 20, 2009 4:50 PM | Reply | Permalink
YES! The Blue Dogs are more than happy to vote for tax cuts for rich fucks with money they borrow from the Chinese. Lowering the capital gains tax with borrowed money makes sense .... but providing healthcare to millions of hardworking Americans is just a bridge too far .... for DEMOCRATS ?!?
What I am starting to really understand is how completely whored out most congressmen really are. The commons sense, practical, money saving, life saving options are all 'off the table' and the greedy insurance and drug corporations are letting us all know that they OWN THE GOD DAMNED TABLE!
American democracy is a lie and a joke. This country is owned and operated by corporations and their whores.
July 20, 2009 6:19 PM | Reply | Permalink
Mostly that's because they've been able to buy a compliant, profit-driven media to inculcate millions of Americans in the belief that it's government that they have to fear. Unfortunately, that effectively neuters our only counterweight to corporate power and control.
July 20, 2009 6:45 PM | Reply | Permalink
Right again. When the media corporations got their Republican whores to loosen the ownership rules it was the beginning of the end of democracy. With the passing of Walter Cronkite it has been disheartening to see what has become of the "news business" in this country. I believe the heart of democracy has substantially shifted to the internet where sites like TPM are keeping facts front and center. Sadly the millions and millions of average Americans just drift with the tide to a state of utter misinformation.
July 20, 2009 7:10 PM | Reply | Permalink
"I regret that in our attempt to establish some standards, we didn’t make them stick. We couldn’t find a way to pass them on to another generation..."
Walter Cronkite on his greatest regret.
July 20, 2009 7:34 PM | Reply | Permalink
I'm pleased Robert Reich is discussing the Congressional cave-in to big PhRMA and BIO. One wonders if some in the Democratic leadership think a deal with PhRMA and BIO is key to short term success in the health care bill... but in doing so, as Professor Reich notes, it raises questions about how anyone can pay for the bill. Biosimilars (biogenerics) is another important piece of this.
July 20, 2009 4:56 PM | Reply | Permalink
Sure, Reich - all we need is to tax a few people a little bit more and we'll have all the health care we need. Because politicians never promise more than they can deliver, right? And there's nothing wrong with taking other people's money to pay for your own promises, right? Good thing we had an idea like that in 1983 when we "fixed" Social Security, because that program is working like a champ!
July 20, 2009 5:59 PM | Reply | Permalink
"there's nothing wrong with taking other people's money to pay for your own ...."
In case you have been living in a cave for the last 10 or 20 years the rich and the super rich in America have been TAKING ALL THE MONEY and piling up personal fortunes unlike anything since the robber barons of the 1920's. The percentage of national wealth accumulating at the very top 1% is staggering and the loss of income at the poor, working, and middle class has been a quality of life nightmare. The very idea that the rich can game the system with bending every law in their favor and never admit that that is "taking other people's money" is totally dishonest. The productivity of American workers has been going steadily up while their incomes have been stagnant or falling. Who exactly is taking money from who???
July 20, 2009 6:35 PM | Reply | Permalink
Politicians are taking money from taxpayers – that was my point. And in your attempt to argue with me, you claimed that the rich steal from the poor by "bending every law in their favor." You say I’ve been living in a cave…do you know who writes the laws around here?
July 21, 2009 2:48 AM | Reply | Permalink
R-i-g-h-t Freedomhasvalue, social security is a big loser of a program. People just hate that darn social security! Best example of a worthless government program around. And you know what galls me to?! The child labor ban. Why shouldn't 10 year olds work in mines again... that'll learn 'em.
Go back to conservative alterna-world, freedomhasvalue... or maybe try arguing from the real world for once not from ideological fantasy land.
July 21, 2009 12:12 AM | Reply | Permalink
People in the real world remember that Social Security was amended in 1983 - taxes were increased and the retirement age was raised - and yet the program still makes promises it can't keep. In the real world, we call that an unfunded liability. If a private sector employer set up a pension plan that worked like Social Security, he would be put in jail for violating ERISA. Ever heard of ERISA Pete? It's a federal law - in the real world - that established minimum funding requirements for private sector pensions, but the scumbags in Congress conveniently chose not to hold Social Security to the same standard.
Similarly, we have a career politician (Reich) claiming that a benign tax on a small group of people will provide us with a health care utopia, as opposed to a bottomless pit of tax increases and service cuts that result from the inevitable realization that once again, politicians made promises they had no hope of keeping. In the real world, people don't fall for the same lies from the same people over and over again.
Time for you to ride your unicorn into the money tree forest.
July 21, 2009 2:44 AM | Reply | Permalink
I wasn't aware that Social Security has stopped making payments to retirees. When did that happen?
July 21, 2009 10:34 AM | Reply | Permalink
It didn't. Social Security is perfect, and trillions of dollars in unfunded liabilities don't matter as long as the checks written today can be cashed. The best way to provide financial security for today's seniors is to steal from their grandchildren. And thankfully, we have career politicians like Reich proposing a health care system that will work the same way.
July 21, 2009 2:42 PM | Reply | Permalink
Social Security has always been funded by the upcoming generation. That is how it started -- how else? That is not stealing from the next generation; it is simply trusting that the system will continue. Social Security, unlike health care can be managed mathmatically. Whatever is needed can be predicted and put into the current taxation program. It is ridiculous that people making 100,000 dollars a year are contributing the same amount as those making millions or billions. Once that inequity is solved, you can just shut your pie hole about Social Security dying on the vine.
Take your scare language and use it in church, which is the only place it belongs.
July 21, 2009 9:34 PM | Reply | Permalink
SS did NOT start as a “pay-as-you-go” program. It started in 1935 with a reserve fund that kept it fully funded. In 1939, parasite politicians saw a big pile of money in the SS reserve and decided they couldn’t wait to spend it, so they amended SS to make it the “pay-as-you-go” sham we have today. It might help if you took a minute to look at the Social Security Administration’s website – you might actually learn something, like (1) the original intent in 1935 was to keep the program fully funded and (2) the SSA’s own actuaries say the program currently has an unfunded liability in the trillions of dollars.
While you’re at it, you should learn something about what an unfunded liability is. “Trusting that the system will continue” is how Bernie Madoff managed his clients’ money.
Your inability to understand how SS works explains a lot about your position on health care.
July 22, 2009 4:37 PM | Reply | Permalink
If Reich is calling it "Obamacare," the battle is already lost.
July 20, 2009 10:29 PM | Reply | Permalink
It would be interesting to find the correlation of particular senators who are BOTH whining about the costs of having universal health care AND doing the bidding of the big health interests who want to maintain their profits, hence inflating costs. It would also be interesting to find the correlation b/t particular senators who support the undesired-by-the-Pentagon F22 fighter jets and their costs concerns.
As for paying for it, in addition to the tax on the wealthy, what about taxing pollution -- not a politically controversial carbon tax (in this context) but taxing, say mercury emissions, including those "within" legal limits. There are a number of toxic pollutants that pose health hazards that could be taxed, both reducing their incidence while raising needed revenue -- "socially beneficial taxation".
I keep raising this idea but not getting any comment about it from Robert Reich. please RSVP
July 21, 2009 6:46 AM | Reply | Permalink
Sorry, cloudy. He never responds, regardless of how thoughtful the response, and how much effort you put into responding to his comments.
July 21, 2009 9:46 PM | Reply | Permalink