April 29, 2009

April 29, 2009 | Commentary on Health Care

Health Care Debate: A Crisis in Four Acts

If you are waiting anxiously for Washington to begin the gigantic health care reform debate, you're way out of the loop. President Obama, with his big majorities in Congress, has already enacted huge chunks of his health care agenda.

Look what just happened:

Act I: President Obama proposed a massive expansion of Medicaid and SCHIP, the creation of a new federal agency to undertake "comparative effectiveness" research into medical treatments and procedures, and a major federal "investment" in health information technology. They rolled through Congress. All of these items, amounting to a 10-year cost of roughly $200 billion, are now law.

Within days of his inauguration, Congress enacted a sweeping reauthorization and expansion of the State Children's Health Insurance Program (SCHIP), at an estimated $65 billion over 10 years. Originally designed for children in poor working families, SCHIP has been expanded up the income scale well into the middle class, and will now include families making more than $62,000 annually. If taxpayers pick up the health care tab for employees' dependents, there's no point in employers doing so. Depend on them to dump the kids into the government program. The result: more middle-class families become dependent on government health care, courtesy of the taxpayer. SCHIP expansion was the first big slap in the face of welfare reform.

Act II: Obama's economic stimulus bill. It was the vehicle for an additional $87 billion in Medicaid spending over the next decade. Medicaid is a poorly performing $350 billion welfare program, with low quality of care and a high usage of hospital emergency rooms.

The stimulus bill imposed no serious requirements on states to improve Medicaid quality, to reverse its horrendous record of poor quality, to encourage innovation in the financing and delivery of Medicaid services, or to prod states to get serious about their own budgetary shortfalls. On Bailout Hill, that would be asking too much. But with massive Medicaid funding and SCHIP expansion, Obama scored big on expanding government control over the health care system.

The stimulus bill was also the vehicle for a major $20 billion "investment" in health information technology, setting up a centralized coordination and oversight over the development of information technology and medical records. The bill also included the creation of a 15-member Federal Council for Comparative Effectiveness Research.

In language accompanying the House version, the Council would have had the power to block usage of drugs or medical procedures that the bureaucrats deemed too expensive. In the Senate version, senators proposed restricting its scope to clinical effectiveness, not cost effectiveness. But that restriction was dropped in the House-Senate conference. Not good.

Act III: Obama's budget proposal, just passed by the House and Senate, includes a reserve fund of $634 billion for health care reform over the next 10 years. But most experts expect the real costs will well exceed $1 trillion. In effect, President Obama says that we are spending $2.4 trillion on health care, that we are spending too much, that we are not getting value for our spending, and that we need to reduce health care spending. So what does he do? His budget adds another additional $193 billion annually by 2019 in new health care spending!

Next Up: the unveiling of a federal health insurance reform bill. Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, and Sen. Edward M. Kennedy (D-Mass.), chairman of the Health Education Labor and Pensions Committee, are both working on big health reform bills. House and Senate Republicans are reportedly also drafting major alternatives for the next phase of the debate. Expect the details of these bills to surface in June.

Baucus, in particular, has outlined an agenda that's virtually identical to the Obama agenda, including the creation of a new government-run health plan to compete with private health plans in a national health insurance exchange, which Obama has described as a regulatory "watchdog" over private health insurance.

The creation of a new government-run health plan to compete with private health plans is emerging as the hot-button issue. Most experts don't buy the argument that you can create a level playing field between a new government-sponsored enterprise, backed by taxpayer subsidies, and private health plans, which would have to absorb their own losses.

The fact is, most Americans say they're satisfied with their existing private health insurance; 82 percent in a recent survey ranked their coverage as excellent or good. No wonder President Obama has repeatedly said that if you like the private insurance you have today, you will be able to keep it under his health plan.

But it's hard to see how the president can keep that promise under the structure of his reform plan and the new incentives he has created. The reason: he has not only proposed a new government-run health care plan to compete with private health plans, but has added an employer mandate. Employers would have to either offer an approved health plan or pay a tax. If employers know that the taxpayers are going to pick up the tab in a new government health plan -- one that will be artificially cheaper because of taxpayer subsidies -- expect a lot of employers to dump millions of Americans out of their existing private coverage into the new government-run health plan.

A top econometrics firm, the Lewin Group, surveying the possibilities of a new government plan, has estimated that anywhere from a little over 12 million to as many as 119 million Americans could be dumped, or transitioned out of , their existing private coverage.

Act IV: The summer debate on budget reconciliation. President Obama and the Congressional leadership must soon make a key decision: whether to consider health insurance legislation on its own, as part of the regular order, and try to forge a bipartisan compromise, soliciting good ideas from conservatives and Republicans in reforming the health care system. Or whether they will plunge ahead, as they did on the stimulus bill, drop any pretense at bipartisan reform of the health care system, and fold health care reform legislation into the budget reconciliation bill.

If they go the route of budget reconciliation, that deprives the Senate Republicans of the opportunity to filibuster or shape the health care bill. For all practical purposes, that would end the prospect of any meaningful input into the content or direction of health care reform. It could be an ugly business, especially with the downturn in the economy and people losing jobs also losing their insurance. The result: even more millions of Americans could end up dependent upon government health programs.

Robert E. Moffit, Ph.D.,is Director of the Center for Health Policy Studies at The Heritage Foundation.

About the Author

Robert E. Moffit, Ph.D. Senior Fellow
Center for Health Policy Studies

First Appeared in Human Events