obama, health care, obama town hall, barack obama
Alex Brandon/AP
President Barack Obama at a town hall meeting on health care, Wednesday, July 1, 2009, at the
Northern Virginia Community College in Annandale, Va.

Deconstructing the Democratic Plan for Health Care

July 14, 2009 05:30 PM
by Jill Marcellus
With President Obama’s August deadline for reform fast approaching, House and Senate Democrats are scrambling to transform his health care wish list into actual legislation. What are the principles, obstacles and criticisms of ObamaCare and its congressional adaptations?

Obama’s Promises, Congressional Delivery

Expressing willingness to compromise on the specifics of health care reform, Obama has repeatedly insisted that legislation simply must “uphold three basic principles: first, that the rising cost of health care has to be brought down; second, that Americans have to be able to choose their own doctor and their own plan; and third, all Americans have to have quality, affordable health care," according to a statement available on the White House Web site.

As abstract principles, these are fairly uncontroversial, but few can agree on how to achieve them. Congressional Democrats have translated Obama’s preferences into two primary plans: the Senate Health, Education, Labor and Pensions (HELP) committee’s Affordable Health Choices Act, and the House’s “tri-committee proposal,” created by the three House committees that oversee health care. These bills, however, are only starting points, with Finance Committee Senators negotiating for a more conservative bill, according to The San Francisco Chronicle, and “Blue Dog” Democrats, a fiscally conservative coalition, raising objections to the plans’ proposed funding.

A Mandate to Shop (at the Health Insurance Exchange)

All plans under discussion strive for universal coverage, and adopt an “individual mandate” as the means. This requires every American, unless proven financially incapable, to buy health insurance. Opponents argue that the mandate, which was opposed by Obama in the 2008 election, notes Bloomberg, is government coercion, and unnecessary if health care is affordable. Supporters insist that health care will never be affordable if the uninsured continue to burden emergency rooms, and if young and healthy—and thus inexpensive—Americans refuse to pay into the system.

The HELP and House bills complement the individual mandate with an employer one, or rather a variation on it known as “pay or play.” Together, supporters insist, the two mandates help create a “shared responsibility” for universal coverage, though critics worry that they will hurt small, struggling businesses. In the Senate HELP bill, companies with 25 or more workers must either cover 60 percent of their workers’ coverage or pay a $750 annual fee per full-time employee (or $375 per part-timer). Although the exemption for small firms alleviates some concern, other critics, reports CNNMoney.com, worry that employers would actually drop insurance under the HELP bill because it would be cheaper to pay the $750 fee than continue to sponsor their current plans. Such critics prefer the House proposal, which compels employers to pay at least 72.5 percent of the cheapest plan for employees, or contribute 8 percent of payroll to an “exchange” for their workers’ insurance.

That exchange is the Health Insurance Exchange, a centerpiece of the HELP, House and Obama plans. The House plan advertises it as a “transparent and functional marketplace for individuals and small employers to comparison shop among private and public insurers.” Overseen by a new Health Choices Administration, the exchange would enforce reforms, help consumers choose from a selection of basic plans, and provide subsidies to the low- and middle-classes.

A Public Option … or a Private Compromise

Perhaps the most contentious item on the Democratic reform agenda, the public option threatens to become the sticking point in health care negotiations. A market-based alternative to the single-payer systems of Canada and the U.K., a public option is a government-run insurance plan that would compete against the private insurers.

Democratic supporters praise it as an essential tool to lower costs and indirectly regulate the insurance companies. In an open letter to congressional reform leaders, 16 Democratic Senators insisted that a public option will allow the government to set “the standard for quality, efficiency, and cost [and] will create incentives for healthy competition," The New Republic writes.

Opponents to the option counter that far from inspiring competition, it will put private insurers out of business. Dr. Mark McClellan, former Medicare director under George W. Bush, cites the market dominance of Medicare to argue that a government option’s “lower costs will tend to drive people into the plan,” according to The New York Times. Thus, it would be the “first step” to nationalized health insurance, Republican Senator Charles Grassley warned on “Face the Nation.”

Although Obama has expressed strong support for a public option, his administration has carefully left room for negotiation, The Wall Street Journal observes. White House Chief of Staff Rahm Emmanuel told The Journal that although the goal of creating a “means and a mechanism to keep the private insurers honest” is “non-negotiable,” the “path” to that goal is open to debate. One potential compromise is a “trigger mechanism,” which would launch a public plan only if the private insurers failed to remain competitive. Another alternative is a “network of nonprofit cooperatives” to compete in the wider, for-profit marketplace.

The public option in the HELP bill would be run by individual states, while the House plan would operate the government plan through its Exchange. The Senate Finance Committee, however, is tilting toward the cooperatives compromise.

Cost-Efficient Reforms

Dismissing claims that a health system overhaul is unaffordable, Obama vows that he can fund universal coverage partly through cost-efficient reforms. Speaking to the American Medical Association, he advocated streamlining Medicare, cutting “inefficiencies,” and approving the use of some generic drugs to help keep reform “deficit-neutral in the next decade," The White House Web site reported in a press release.

Obama’s first major target is bureaucratic waste, which he plans to combat through an electronic health records (EHR) database. Analysts consulted by CNNMoney.com claim that an “estimated $700 billion a year is wasted on unnecessary tests and mistakes that a computerized system could help avoid.” Obama insists that, although it requires an initial $20 billion investment, EHR would ultimately save money and improve the quality of health care.

More controversially, Obama advocates for a new scheme to reimburse doctors. By basing doctor bonuses on patient outcomes and by bundling payments, he wants to switch from “a model that rewards the quantity of care” to one that rewards “the quality of care.” Featured in the HELP bill, this scheme relies on the “patient-centered medical home,” described by BusinessWeek as “the office of a primary-care doctor where patients would go for most of their medical needs.” Betsy McCaughey, former New York lieutenant governor and prominent reform critic, worries in The Wall Street Journal that the medical home will be “this decade’s version of HMO-style insurance,” with strict restrictions on care due to unmanageable costs.

McCaughey’s critique, however, relies partly on a Congressional Budget Office (CBO) evaluation of the HELP plan that has since been updated. According to new CBO analysis, the HELP bill, when combined with expected changes in Medicare, will cost an improved $1.1 trillion over ten years and will cover 97 percent of Americans.

Divisions over Funding: The Deal-Breaker?

Reform’s $1 trillion price tag has sparked a congressional civil war, with some Democrats threatening to defect over funding plans they view as fiscally unacceptable. While many agree to cost-saving Medicare reforms, House Blue Dogs and Senate Democrats object to the House’s plan to raise $550 billion over ten years by increasing the income tax of the wealthiest Americans, according to The New York Times. In the Senate, negotiations stalled when prominent Democrats overruled a plan to tax employer-based benefits, forcing congressional leaders, The Washington Post reports, to consider new taxes on capital gains, sugary drinks or the most generous benefit packages.

Unlike in the 1990s, when industry opposition successfully derailed Clinton reform efforts, these divisions among Democrats form the greatest current threat to reform. Obama has courted drug companies, the insurance industry, and medical professionals, winning agreements from them to reduce the rise in medical spending by 1.5 percent, cut $80 billion over 10 years in pharmaceutical spending, and gain $150 billion in savings over 10 years from hospitals. The New York Times reports that since these savings are bought at the expense of other quid pro quo costs, they are likely exaggerated, but the deals’ real purpose might be to neuter industry opposition. As prominent Democrat Tom Daschle told The Times, the agreements will make Obama’s most powerful potential opponents “owners of this process, and as owners they have to continue to defend it and support it.” 

In that case, the Democrats have only to unite their own ranks—and find the funds—to overhaul the health care system.

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