Health Care: Time to Cross the Rubicon, Mr. President!
Marshall Auerback argues that there’s still a chance for meaningful health care reform.
Many people are lamenting the apparent death of the health care bill in the aftermath of Scott Brown’s election. They shouldn’t be. Congress and the President should use the opportunity to reconstruct a more sensible piece of legislation.
The Reconciliation Route
Senate Democrats, in particular, should not obsess about the number 60. The absence of a so-called super majority of Senators does not preclude the possibility of passing significant health care reform, even the approach is ultimately more piecemeal and incremental. There is still ample opportunity to implement legislation in the Senate via reconciliation (a parliamentary maneuver which allows legislation to pass with a simple majority vote). It’s more democratic: 2 or 3 Senators should not be able to hold an entire piece of legislation hostage to their own narrow political interests, as Senators Lieberman and Nelson, amongst others, were able to do under the previous legislation.
In response to the “incrementalists” Paul Krugman argues the difficulty of going the reconciliation route, noting that the procedure is basically limited to matters of taxing and spending, and so won’t address important aspects of reform like the ban on pre-existing conditions. What Krugman fails to recognize is that the current incarnation of the bill would have done nothing to stop the abusive practice of denial based on pre-existing conditions, as Yves Smith and I have previously highlighted.
Krugman also embraces the principle flaw inherent in the whole reform effort. Both the House AND Senate versions of the bill entrench the centrality of private health insurance companies. But health care, as L. Randall Wray and others have pointed out, is not a service that should be provided by private health insurance companies in the first place.
‘Game Changers’ and ‘Curve Benders’
Contrary to what the President suggested last week, bad salesmanship was not the main problem with this bill. There were lots of unattractive substantive elements, such as reductions in spending on Medicare to “pay” for the bill’s “reforms”; misconceived taxes on “Cadillac plans” to “reduce” health care costs and “fund” reform; a focus on costly end-of-life care (requiring “guidance” from an “independent group” outside of “normal political channels”), and a giant loophole on pre-existing conditions (which is why the 150,000-strong nurses union opposed the bill). All of this occurred against the backdrop of vague, incomprehensible talk by the President and his budget director, Peter Orszag, about “game changers” and curve-benders”, along with arguments that “we’re going to have to change how doctors think about health care and how patients think about health care”. Fine for a symposium debate, but this kind of talk will hardly ease the fears of the average voter, whose main concerns are: “Will I get coverage?” and “How much will it cost me personally?”
Remember the Alternative Minimum Tax (AMT) which was introduced almost as a footnote to Reagan’s tax reform bill of 1986? At the time, it seemed like a relatively small item, as the threshold for the AMT was set at a reasonably high level and it didn’t catch a lot of people initially. But of course, as time went on and incomes rose, more and more of the middle class got trapped by it.
The same thing would have almost certainly occurred in regard to the so-called “Cadillac tax” proposal to tax on high-cost health care premiums. Given that neither the House, nor the Senate, versions of the bill contained any serious proposals for cost containment, health insurance premiums likely would have continued to skyrocket, which would have likely guaranteed that more customers would be hit by the tax as time went on. It is hard to see how pricing disclosure via national exchanges would significantly change that element, especially given that the health insurance industry is an oligopoly dominated by a limited number of private companies, with no competition from a now-killed public option alternative. True, in the absence of any kind of reform, rising health insurance costs are still likely to remain a reality, but minus the punitive taxation provisions contained in the current bill, which would simply add to the problems of a highly stressed, debt-laden American consumer.
Insurance-dominated Health Care Doesn’t Work
Rapidly rising private health insurance costs have depressed American living standards over the past quarter-century. And an insurance-dominated health care program is a horrible way to construct an effective health care system: the benefits of extending health insurance coverage are almost certainly overstated and are not likely to make a major dent in our two comparative gaps: we spend far more than any other nation but do not obtain better outcomes and in important areas actually get worse results. Private health insurance, in fact, represents yet another facet of the ongoing financialization of our economy — credit default swaps, instruments to facilitate speculation in vital commodities such as energy and food, exotic home mortgage products — all of which enable Wall Street gamblers to speculate-and-profit on outcomes with no social benefit to the rest of us.
In addition to the huge rents extracted from the economy, private health insurance creates other problems. As L. Randall Wray has noted, your friendly health insurance company sells you a policy, and then denies your claim due to the existence of pre-existing conditions (of which you might have been totally unaware), or simply because denial is more profitable and you, as the aggrieved victim, are likely to lack the funds for a court battle. Bankruptcy is often the end result (according to Steffie Woolhandler, two-thirds of US bankruptcies are due to healthcare bills).
My proposal: use Senate reconciliation and expand Medicare via the Senate’s buy-in provisions. The CBO has already signed off on this as a means of saving money (”budget savings” is nonsensical concept, I know, but let’s go with it, as it provides the necessary political cover for what is essentially a budgetary procedure). More importantly, if more Americans can do a buy-in with Medicare, it creates more cost control (because there’s a genuine “public option” competitor). It also helps to solve the problems of pre-existing conditions, because Medicare does not deny coverage on this basis.
Allowing a Medicare buy-in to Americans under 65 would give people a genuine alternative to private insurance and thereby render the pre-existing question moot. It would also lower Medicare costs by expanding the risk pool of patients (the great bulk of medical expenses are accounted for by a small number of people, mostly the elderly, requiring very expensive treatment). And it would substantially enhance the global competitiveness of American corporations. After all, in what other country in the world is health care a marginal cost of production for business?
Towards Single Payer
A Medicare buy-in gets us closer to single payer, which control health care costs by cutting down on administrative complexity and making bargain with suppliers, especially drug companies, possible. This proposal would give American health care consumers far more bang for their buck than the current legislation, which looks set to go down in flames.
Yes, what I’m proposing is politically difficult. The financial reform bill efforts have already illustrated the potently of lobbying. But, as the festering populist reaction in Massachusetts demonstrates, the foes of reform can overreach and trigger a significant backlash. Hopefully, President Obama and his party will recognize this and mobilize current voter discontent. Scott Brown’s surprising election win has bloodied the Democrats, but one hopes that the President and his party recognize that, like Shakespeare’s Macbeth, they are
Stepp’d in so far that, should I wade no more,
Returning were as tedious as go o’er.”
Time to cross the Rubicon, Mr. President!
Roosevelt Institute Braintruster Marshall Auerback is a market analyst and commentator.