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Health Reform: The Fateful Moment

Barack Obama has long emphasized the importance of reforming American medical care, both as a candidate in the 2008 election and as president. During the month of June, however, he dramatically increased his efforts to secure major reform legislation by the end of the year.

The President is using his oratorical skills to rally support for reform. In a series of speeches and town hall meetings, Obama made his case for expanding insurance coverage and controlling medical spending. Speaking before the annual meeting of the American Medical Association in Chicago on June 15, for example, he painted a familiar, distressing portrait of a health care system that costs too much, leaves too many Americans without adequate insurance, and too often provides substandard care. The President warned of the dire consequences if these problems were not promptly addressed:

Make no mistake: the cost of our health care is a threat to our economy. It’s an escalating burden on our families and businesses. It’s a ticking time-bomb for the federal budget. And it is unsustainable for the United States of America.

Yet as the President expands his involvement in the health care debate, health reformers have concluded that time is not on their side. Delay and the President’s popularity might well ebb. Congress could become more cautious as the 2010 elections approach. The longer the health care debate drags on, the more time opponents have to mobilize against and foster public anxiety about reform. And with federal budget deficits soaring, the political opportunities to finance expanded health insurance coverage may fade.

Democrats have consequently sped up congressional debate on how to change health care. By July, committees in both the House of Representatives and Senate were writing and amending ambitious legislation. The goal was to pass bills in both the House and Senate by the August recess. A conference committee will then have to reconcile the differing bills, though President Obama has said that he wants Congress to have legislation ready for him to sign by October 15.

1.

The fear that a promising start to reform could unravel arises from past experience. That, after all, is precisely what happened to the Clinton administration. In 1993, as in 2009, the US appeared to be on the verge of enacting comprehensive health reform. Then, as now, a Democratic president came to the White House with sizable Democratic majorities in the House and Senate. With increasing costs and growing numbers of uninsured, the administration believed it had a public mandate for reform. There was consensus on the need for change from a variety of interest groups, including businesses threatened by rising health insurance bills. Clinton’s plan proposed both to achieve universal coverage and to control costs by requiring employers to pay for their workers’ health insurance, establishing a system of regulated competition between private insurers, and setting limits on increases in health insurance premiums.

Despite seemingly favorable conditions, the Clinton administration’s campaign for health reform ended disastrously for Democrats. Its Health Security Act never came close to passing Congress and in the 1994 elections the party lost majorities in both the House and Senate. It is little wonder, then, that in 2009 the Obama administration and congressional Democrats have tried, above all else, to learn from the Clinton debacle.

In that respect, Tom Daschle’s book Critical: What We Can Do About the Health-Care Crisis offers an unusually helpful primer on the Obama administration’s approach to health reform. Before a controversy over Daschle’s tax problems led the former senator to withdraw his candidacy, he was President Obama’s nominee for secretary of health and human services (HHS) and choice as the White House’s health care “czar.” One of Daschle’s coauthors, Jeanne Lambrew, is now in the Obama administration as director of HHS’s Office of Health Reform. Moreover, Daschle’s views about how to pass health reform—including the imperative of a new president acting immediately—are clearly evident in the administration’s strategy.

According to Daschle, Clinton’s reform failed largely because of timing. Protracted battles over the administration’s other policy proposals, as well as crises abroad, delayed action on health care, eroded Clinton’s popularity, and gave the opposition time to coalesce. Powerful industry groups—including the Health Insurance Association of America and the National Federation of Independent Business—fought intensely against the Health Security Act. The Clinton administration, Daschle writes, ignored congressional leaders and excluded health industry groups from the planning process, which “bred resentment.” Finally, the Clinton approach to reform—emphasizing the transformation of private health insurance—took too little account of the political reality that “many people who have insurance now are satisfied with it, and are wary of changes.”

Daschle’s proposed health reform, aimed at achieving universal coverage, emerges from this reading of history. As one major step, he wants to expand existing public programs, including Medicaid and the Children’s Health Insurance Program.1 He also favors a national insurance pool in which Americans could choose from among private plans or from a new public plan modeled on Medicare. In such a pool, private plans would be barred from discriminating against sicker persons, whether by refusal of coverage or higher premiums. Employers would have to provide workers with insurance coverage or pay a tax to finance the insurance pool. Individuals would be “mandated”—required by law—to obtain insurance coverage or pay a penalty. This is not, Daschle emphasizes, a “pure model” that relies exclusively on the government as a “single payer.” Rather, it is a “hybrid solution” that maintains both public and private insurance, making it, according to Daschle, “politically and practically feasible.”

2.

If Daschle’s strategic and substantive prescriptions seem familiar, that is because the Obama administration and congressional Democrats are essentially following the recommendations of Critical. Despite urgent policy matters on many fronts, the Obama administration has decided, as Chief of Staff Rahm Emmanuel put it, to “throw long” and push for bold health reform this year, capitalizing on Barack Obama’s popularity and on an economic crisis that has given additional support for federal activism. Mindful of the difficulties in securing a sixty-vote, filibuster-proof majority in the Senate, the Obama administration successfully pressed Congress to create an alternative path to reform by adopting reconciliation rules (which the Clinton administration was unable to do). Under those rules, if Congress does not act by October 15, the Senate could pass health care legislation with a simple majority of fifty-one votes.

Other lessons from the Clinton debacle are evident in the White House’s strategy. Obama left primary responsibility for drafting the health reform plan to Congress. Though the President has articulated broad principles he would like to be followed—including adopting some kind of public insurance option and reducing overall costs—he has indicated that he is flexible about how Congress translates those principles into legislation. Wary of how the Clinton health plan frightened middle-class insured Americans, the Obama administration has emphasized that Americans who are satisfied with their present coverage and doctors can keep them.

Taking another lesson from 1993–1994, Obama and Senate leaders have sought to avoid a multifront war with the health care industry and business community by including both in discussions about reform. That has meant negotiating pledges by industry groups to back reform provisions (a promise by drug companies to offer discounted medications to some Medicare beneficiaries is one example).

The Obama administration’s strategy of moving quickly, co-opting potential opposition, and deferring to Congress has mostly worked. In the first half of 2009, health reform legislation moved further and faster than many anticipated. The administration benefited from the determination of Democratic leaders, such as Senate Finance Chair Max Baucus, to pass ambitious legislation this year, as well as the Democrats’ relative unity—as compared to 1993–1994—on how to proceed. There is, in fact, broad agreement among congressional Democrats on a series of measures to expand insurance coverage. Those include (1) making more Americans eligible for Medicaid; (2) providing tax credits to Americans with modest incomes to help them afford insurance; (3) establishing a health insurance exchange that offers a range of coverage options; (4) regulating private insurers so they can’t turn anyone away, while also limiting their ability to charge sicker and older customers higher premiums; and (5) requiring individuals to obtain health insurance or pay a penalty, though persons for whom coverage was deemed unaffordable would be exempt from this mandate.

These measures, common to the various health reform bills now before the House and Senate, reflect what Obama proposed during the 2008 presidential election, with one notable exception. As a candidate, Obama criticized an individual mandate, but as president he has stated that he could support such a requirement if there were an exemption for financial hardship.

3.

The main outlines of health reform legislation that could become law this year are thus already visible. Yet as Congress drafts legislation, a number of difficult issues, from how to pay for reform and control costs to the inclusion of a public insurance option, will have to be resolved. There are profound divisions among Democrats in Congress over how such questions should be addressed and how necessary it is to attract Republican support. The fate of Obama’s health reform effort depends largely on how the administration and congressional leaders cope with these difficulties.

In the Senate, the two committees with primary jurisdiction in health care—the Finance Committee and the Health, Education, Labor, and Pensions (HELP) Committee—are preparing separate bills that are to be merged into a single bill. The HELP Committee, chaired by Massachusetts Senator Ted Kennedy, is the more liberal of the two. In June and early July, HELP drafted legislation, with Connecticut Senator Chris Dodd overseeing the proceedings in the absence of Kennedy, who has brain cancer. These hearings were marked by sharp partisanship, with John McCain deriding the committee’s legislative process as “a joke.”

In mid-June, the Congressional Budget Office (CBO) estimated that a preliminary version of the Kennedy plan would cost $1 trillion between 2010 and 2019, raising criticisms that it was too expensive. Dodd, however, was not concerned with Republican opposition: “My goal here,” he asserted, “is to write a good bill…not bipartisanship.” On July 2, the CBO estimated that the HELP Committee’s full bill would cost about $600 billion over ten years, though that estimate does not include the costs of a planned Medicaid expansion. On July 15, the committee approved the bill in a party-line vote.

In contrast, Max Baucus, the Montana Democrat chairing the Senate Finance committee, has been working on a bill intended to draw support from a small group of Republican Senators, including Iowa’s Chuck Grassley, as well as Democrats. Trying to secure Republican votes, Baucus has committed to keep the legislation’s cost to no more than $1 trillion over a decade.

In the House, on July 14, Representatives Charles Rangel, Henry Waxman, and George Miller—the Democratic chairs, respectively, of the Ways and Means, Energy and Commerce, and Education and Labor committees—jointly introduced a health reform plan known as the Tri-Committee Bill, which reflects the preferences of House liberals. It includes provisions that establish a Medicare-like public option for Americans under age sixty-five, and subsidies for low- and middle-income Americans to purchase insurance that extend to 400 percent of the federal poverty level ($43,000 for an individual, $88,000 for a family of four). It also requires that employers either provide health insurance coverage to their workers or pay up to an 8 percent payroll tax to the federal government.2 Smaller businesses with payrolls under $250,000 would be exempt from that tax.

  1. 1

    The creation of a Federal Health Board is a crucial component of Daschle’s reform plan. The health board draws on two institutional models, the Federal Reserve and the Base Realignment and Closure Commission. Both institutions are devices to restrict the scope of congressional policymaking in controversial issues, whether setting interest rates or closing military bases. A Federal Health Board would be comprised by “respected experts,” as Progressives in the early twentieth century recommended. The board would, Daschle envisions, “make the tough changes that have eluded Congress in the past,” including “ranking [medical] services and therapies by their health and cost impacts.” Yet the search for specialized and disinterested competence to supplant legislative influence in health policymaking, as the recent debate over federal funding for comparative effectiveness research illustrates, is certain to cause political controversy.

  2. 2

    The House Tri-Committee Bill also calls for establishing a “new independent Advisory Committee, with practicing providers and other health care experts” that would recommend what medical services a “basic benefits package” would include. This is a truncated version of the Daschle model of a Federal Health Board discussed in footnote 1.

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