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Health Care Reform End Game Emerges

Democrats are wrestling with the size and scope of the public option, trying to make it more palatable to moderates.

by
Rich Baehr

Bio

October 30, 2009 - 12:02 am

The Obama administration and Democrats in Congress have pledged to pass a major health care reform bill by the end of the year. It will provide access to most of the uninsured through insurance reform and subsidies to help pay for coverage, bend the cost curve  in both the private insurance market and Medicare, and improve quality.

Far more likely is that at most one of the three — improved access — will result from passing any of the variations of ObamaCare now being discussed exclusively among  Democrats in Congress and White House officials.  Since the Democrats are far more concerned with expanding access than driving down costs or enhancing quality, all of the bills are heavily loaded in this direction.

The president has also pledged that all new spending will be paid for through taxes, fees, or reduced spending elsewhere and that total new spending will be less than $900 billion over ten years. Now, add in one more detail to satisfy progressive Democrats who long for a single-payer national health care system: there should be a “robust” public option (a foot in the door to achieving this goal). This may mean a public plan which competes with private insurers everywhere, competes only in states that “opt in,” competes only in states that don’t “opt out,” or will be “triggered” in all states or in some states based on what happens in the private market the next few years. And the public option will either set rates at Medicare plus 5% or through negotiations with providers.

If anyone wonders why support for health care reform is lagging, you can attribute it to skepticism about the wizardry that can produce a health reform bill that meets all of the announced three goals or to the inability to make any sense of the public option options. One does not have to be intimately familiar with the thousand-plus pages in each bill passed in the five House and Senate committees to conclude that the expansion in access  will likely drive up health care costs and reduce overall quality.

As the pubic mood on the economy and the country’s direction sours, it is not surprising that fewer Americans (only 23% in a recent Rasmussen poll) today regard health care reform as a top priority for the country. This is especially true given the rising unemployment rate, rising number of home foreclosures, and stunningly large federal budget deficit of $1.4 trillion in 2009 and projected at $9 trillion more for the next ten years.

Senate Majority Leader Harry Reid has now taken a public stand on how to meld the two differing versions of a reform bill passed by committees in the Senate  — what he calls a public option with an opt-out provision. This, along the continuum from 90-pound weakling (a trigger, favored by Maine’s Olympia Snowe) to robust (the public option everywhere, favored by “progressives”), is stronger than an opt-in public option (favored by Delaware  Senator Tom Carper).

As soon as he announced his intentions,  two Senate members — Joe Lieberman of Connecticut, an independent who caucuses with the Democrats, and Snowe, the only Republican to have supported any version of reform in any of the five congressional committees — indicated their disapproval. Lieberman went as far as saying he would support a Republican filibuster if a bill came up that was similar to the one Reid described.

Two other moderate Democrats — Blanche Lincoln of Arkansas, facing a tough re-election fight in 2010, and Ben Nelson of Nebraska — also suggested they may go the same way. The 60 or 61 votes that seemed to be available to break a filibuster for a bill that looked like the Senate Finance Committee bill was now down to 57 to 59 for the new Reid version of the bill.

Illinois Senator Dick Durbin backed Reid, saying Reid’s hand was forced by liberals in the Democratic caucus who threatened not to support a bill without a public option. It is, of course, odd to hear Durbin describing pressure on Reid from liberals, as if to suggest that Durbin is not himself one of the most liberal members of the Senate. In any case, it seems to me very unlikely that liberals in either the House or Senate, most of whom have very safe seats, would block a bill that got them 80% of what they wanted with a reform package — especially if such obstruction resulted in killing the chances for major reform this year and perhaps for years to come (if the GOP rebounds in the 2010 elections).

Their threats seem less real than the chance that moderate Democrats, whose political careers  could depend on their vote on this bill, decide the safer course is to vote no if a bill seems to be too much a product of the progressive caucuses in both Houses and if it seems to threaten the private insurance system while running up the deficit .

A head count in the House, where Democrats have a near 80-seat margin, suggests that Speaker Pelosi did not have even 200 votes (218 needed) for a bill that resembles the one passed by the three committees in the House, with a public option paying rates of Medicare plus 5%. Some moderate Democrats in the House voted for the committee bills, expecting that the Senate would save them and force a more moderate final bill to the floor after a conference committee compromise was reached. Now it appears Speaker Pelosi has compromised and the public option will have payment rates negotiated with providers rather than set according to the Medicare rate scale.

No one is sure exactly how this will work or why it will save money for individual insurance purchasers, but it will create a lot more jobs for new government rate negotiators. Most important, Pelosi will claim it is a robust public option.

It is possible that Reid’s gambit was more directed at energizing the progressive base nationally to support his re-election effort in 2010. (He currently trails several of his potential opponents.) If Reid is forced to cave later and accept a Baucus-like bill without a public option, he can point to his statement this week as proof he fought the good fight first. For a day, Reid is the champion of the left.

I continue to think that Democrats have too much invested in this effort to let it die. So a very complex and not very tasty sausage will be made to get 218 votes in the House and 60 in the Senate, and that suggests the moderates will get enough to make it at least palatable. The progressives will hold their noses, rant about the opportunity that was missed, and vote yes.

Lost in all of the skirmishing is the fact that no major piece of domestic legislation that changes so much of the economy has ever passed Congress on a straight party-line vote. The media seem to be unaware of this or reluctant to discuss it. Some Democrats seem aware of this, which is why there has been so much courting of Senator Snowe in order to provide a veneer of bipartisanship to what has been from the beginning a highly partisan effort.

Even more important is that all of the versions of the bill will, in short order, significantly increase costs in  the private insurance market and likely run up much bigger federal deficits. Two serious studies have made the case for such an impact on private insurance premiums

In short, if the penalties for not buying insurance are small with an individual mandate (only $750 in the Baucus bill), then the healthy will pass on buying the new policies, but the unhealthy will buy them.  It is not hard to figure out what happens to premiums in that case, though administration media hack Linda Douglass is unhappy with the conclusions of the studies. If there is a public option that only pays Medicare rates plus 5%, private insurers will be charged more by providers (cost shifting).

With an employer mandate, since it is far cheaper to pay an 8% tax for not providing insurance than to provide insurance to employees, many companies now providing insurance may opt to pay the 8% penalty and drop their coverage. That means the amount of subsidies paid for by the government could be far larger than estimated. The members of the House and Senate are hanging on every CBO estimate scoring a new version of the bill, but how does one score a bill with an opt-in or opt-out public option, not knowing which states will be part of the system?

Democrats have also become concerned that the alleged budget neutrality of the various bills (achieved by not including the cost of the $250 billion ten-year fix for physician payments under Medicare) results from front-ending of new fees and taxes and back-ending of new benefits, a toxic political formula for Democrats running in 2010 when the economy may still be very weak. So expect to see more front-ending of benefits, which will increase the cost of the package, requiring even more new fees, taxes, and phantom savings in the Medicare program (more waste, fraud, and abuse to be identified and wrung out of the system).

While the odds still slightly favor  passage of a reform bill this year, the juggling act that is going on at the moment includes lots of balls in the air and jugglers with less than world class skills.

Richard A. Baehr is the co-founder and chief political correspondent for the American Thinker. For his day job, he has been a health care consultant for many years doing planning and financial analyses for providers.
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