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Obama Healthcare 2.0

Thursday, April 2, 2009

The president’s opening offer of healthcare at a teaser rate fails to deliver what we actually need, value, and can afford.

The release by the Obama administration of its initial budget “outline” reinforced its strong commitment to step on the health spending accelerator, notwithstanding some rhetorical cover suggesting purported cost savings within its roadmap for universal coverage. Any selective application of the budgetary brakes would only maneuver around some tight political corners, because the overall goal is to re-allocate any “savings” to spend more and more, with Washington in the driver’s seat.

To be sure, the impact of annual budget documents, as first submitted, tends to be exaggerated. The president’s budget primarily provides a political marker suggesting the policy paths for future action. Even when such budgets profess to lay out master plans for vast sums of public funds flowing out over the next ten years, their transitory shelf-life reminds one of Dallas Cowboys running back Duane Thomas’s description of his first Super Bowl in 1970: “if [it’s]the ultimate game, how come they’re playing it again next year?”

Once one blows away the political smoke, there remains little evidence in the budget of a serious commitment to deliver more substantial and lasting savings.

In any case, President Obama’s preliminary budget framework would make the healthcare sector that some critics claim is already too “unaffordable” even more so. The soft numbers presented in the budget amounted to $634 billion over ten years, tucked within a reserve fund that serves as a “down payment” for comprehensive health reform more likely to cost at least twice as much. This initial tranche of subprime financing at a teaser rate would come predominantly from the usual suspects—reimbursement cuts imposed on focus grouptested targets (drug companies and private insurers) and higher taxes on the $250,000-plus income club. Once one blows away the political smoke, there remains little evidence in the budget of a serious commitment to deliver more substantial and lasting savings. Proposals for overhauling inefficiencies in the care delivery system, sensitizing the privately insured to value trade-offs, and reacquainting senior beneficiaries with the full costs of their Medicare entitlements remain either illusory, underdeveloped, or discarded in this initial Obama budget.

One should not be surprised. The healthcare portion of this budget is largely an extension of broader bait-and-switch tactics, for which the primary objective is to quickly lock in long-term structural changes in who controls healthcare choices. Left to less-urgent “out years” will be worries about how to renege on the too-generous terms of offers of universal coverage, comprehensive benefits, and lower list prices.

The short, postcard version of Obama’s health reform pitch to the public represents a faith-based initiative that straddles the line between audacity and mendacity: Insurance coverage for everyone; more choices that include keeping what you already have; choices that will cost less but offer better benefits because “someone else” will pay more; reductions only in waste; and new wellness interventions that will make us all healthier anyway.

Assuming that last year’s presidential campaign rhetoric tries to engage the reality of legislative enactment and administrative implementation, the president’s health plan will rely on five new tools and structures:

  • A national health insurance exchange would facilitate centralized regulation of insurance offers and purchase—purportedly to reduce administrative costs and provide a broader menu of choices, but ultimately to crowd out competitive variation and meaningful choice within private insurance.
  • The exchange would include a new public plan option, the favored choice within the exchange menu to serve as a halfway house to Medicaid-for-all coverage much further down a political road.
  • Additional expansion of public program insurance coverage would build on the loosening of income-based eligibility limits for Medicaid and the State Children’s Health Insurance Program (SCHIP) in the recent stimulus package and on the crippling of private plan options in Medicare.
  • Mandates to ensure health coverage would start with employers but eventually move to all individuals, at least until affordability and enforcement hurdles become too visible and insurmountable.
  • Launching of more aggressive comparative effectiveness research would provide pseudo-scientific cover for the ensuing budgetary need to restrict coverage and limit reimbursements for higher-cost benefits, treatments, and products.
The short version of Obama’s health reform pitch to the public represents a faith-based initiative that straddles the line between audacity and mendacity.

Beyond this sketchy framework, the president appears to be ready to subcontract most of the operational details behind this plan to the Democratic leadership and committee chairmen on Capitol Hill. However, the clock is ticking as this latest window for political opportunism will narrow after this year. Although fiscal price tags seemed to matter little just months ago, ongoing difficulties in stimulating a stagnant economy may soon overload our political willingness to double down on bets on change we cannot quite believe in. At that point, we might begin to re-open the health policy debate to consider what we actually need, what we value, what we can afford, and the limits of what we can do through politics as usual.

Thomas P. Miller is a resident fellow at the American Enterprise Institute. He is a former senior health economist for the Joint Economic Committee of the U.S. Congress.

FURTHER READING: Miller wrote a Q and A on the uninsured for The American and tackled the topic of what to do about Medicare inHitting the Snooze Button on Our Medicare Fiscal Alarm Clock.” Dr. Scott Gottlieb recently examined comparative effectiveness research and found there can be a “downside to creating a centralized decision-maker to evaluate the value of new medical products.”

Image by Darren Wamboldt/The Bergman Group.

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