(06-14) 04:00 PDT Washington - --
Starting this week, President Obama and Democrats on Capitol Hill will try to do what no Congress or president has done: reform the U.S. health care system. That system accounts for more than $1 of every $6 that Americans spend.
Changing it is a roll of the dice with an outcome that is critical to Democrats' political future and to the nation's economy.
One thing is clear: There will be no free lunch. For all the promise of universal coverage, for all the "billion-dollar bills just lying on the sidewalk" that Obama economic adviser Christina Romer described last week as the monumental waste waiting to be saved, health care reform will be expensive.
It will mean higher taxes and, potentially, lower benefits for many people. It will mean putting the brakes on how doctors and hospitals practice medicine. It may require employers to provide health insurance and individuals to buy it.
None of these things will be popular. Cost containment, identified by the White House as a key objective, never is.
But the alternative - a health system that each year creeps closer to bankrupting more businesses, more individuals, entire states and ultimately the U.S. Treasury itself - is even more costly. All sides agree that the current system is trapped in a vicious cycle of rising costs, rising numbers of uninsured, falling wages and reduced competitiveness.
"Americans are being priced out of the care they need," Obama said Saturday in his weekly radio and Internet address.
That failing status quo is why so many people hope health care reform will pass this year. If it fails, following former President Bill Clinton's path to disaster in 1994, few officials believe anyone will try again for years to come.
"The stars are in alignment," said Fremont Rep. Pete Stark, a top Democrat deeply involved in the House negotiations. "If nothing happens, we're in trouble."
One Senate committee will begin writing legislation this week, followed by the Senate Finance Committee next week. Three House committees are working together in unprecedented fashion so that bills pass both chambers by August, with a unified bill on Obama's desk by October. It is a ferocious timeline. Obama himself has warned that this summer is do or die.
The politics are getting uglier by the day as reform moves from abstractions to legislation. Republican leaders have moved into opposition, with moderates whom Obama needs to make the legislation bipartisan, such as Utah's Orrin Hatch and Wyoming's Mike Enzi, ridiculing proposals as "liberal gobbledygook."
Democrats are split in an ideological fight over whether to offer people the option of a publicly run plan, while conservatives threaten to oppose any bill that includes such a plan and liberals threaten to vote against any bill that does not.
The hope is that whatever reform Congress delivers will give almost every person in the United States access to health insurance at a reasonable cost. It also should start to "bend the curve" of rising health care spending. The reforms under consideration are estimated to cost at least $1.2 trillion in the next decade, and Obama is insisting they be paid for with spending cuts and tax increases.
Changing 'fees for service'
Starting this week, President Obama and Democrats on Capitol Hill will try to do what no Congress or president has done: reform the U.S. health care system. That system accounts for more than $1 of every $6 that Americans spend.
Changing it is a roll of the dice with an outcome that is critical to Democrats' political future and to the nation's economy.One thing is clear: There will be no free lunch. For all the promise of universal coverage, for all the "billion-dollar bills just lying on the sidewalk" that Obama economic adviser Christina Romer described last week as the monumental waste waiting to be saved, health care reform will be expensive.
It will mean higher taxes and, potentially, lower benefits for many people. It will mean putting the brakes on how doctors and hospitals practice medicine. It may require employers to provide health insurance and individuals to buy it.
None of these things will be popular. Cost containment, identified by the White House as a key objective, never is.
But the alternative - a health system that each year creeps closer to bankrupting more businesses, more individuals, entire states and ultimately the U.S. Treasury itself - is even more costly. All sides agree that the current system is trapped in a vicious cycle of rising costs, rising numbers of uninsured, falling wages and reduced competitiveness.
"Americans are being priced out of the care they need," Obama said Saturday in his weekly radio and Internet address.
That failing status quo is why so many people hope health care reform will pass this year. If it fails, following former President Bill Clinton's path to disaster in 1994, few officials believe anyone will try again for years to come.
"The stars are in alignment," said Fremont Rep. Pete Stark, a top Democrat deeply involved in the House negotiations. "If nothing happens, we're in trouble."
One Senate committee will begin writing legislation this week, followed by the Senate Finance Committee next week. Three House committees are working together in unprecedented fashion so that bills pass both chambers by August, with a unified bill on Obama's desk by October. It is a ferocious timeline. Obama himself has warned that this summer is do or die.
The politics are getting uglier by the day as reform moves from abstractions to legislation. Republican leaders have moved into opposition, with moderates whom Obama needs to make the legislation bipartisan, such as Utah's Orrin Hatch and Wyoming's Mike Enzi, ridiculing proposals as "liberal gobbledygook."
Democrats are split in an ideological fight over whether to offer people the option of a publicly run plan, while conservatives threaten to oppose any bill that includes such a plan and liberals threaten to vote against any bill that does not.
The hope is that whatever reform Congress delivers will give almost every person in the United States access to health insurance at a reasonable cost. It also should start to "bend the curve" of rising health care spending. The reforms under consideration are estimated to cost at least $1.2 trillion in the next decade, and Obama is insisting they be paid for with spending cuts and tax increases.
Changing 'fees for service'
Containing costs is the Rosetta stone of health care reform.
Decades of attempts have failed to slow the relentless spending growth that year after year outpaces the economy's growth and people's wages. If reform fails to slow spending growth, reform itself will have failed, leaving businesses and individuals perhaps no better off while dashing Obama's promise that fixing health care will fix the nation's budget problems.
The White House has made clear that it considers cost containment central and many advocacy groups believe reform cannot be sustained unless costs are controlled.
"We believe you need short-term term restraints to slow costs," said Joel Miller, a senior vice president at the National Coalition on Health Care, a powerful new coalition that includes businesses, unions and providers. "Otherwise we believe the program will not be sustainable."
There is broad agreement that lowering costs will require changing incentives for doctors and hospitals - the "fee for service" model used by most insurers and government programs that rewards doctors for the number of tests, office visits or procedures they deliver rather than for whether patients get well.
"That's the whole game," said Hal Luft, professor emeritus of health policy at UC San Francisco and director of the Palo Alto Medical Foundation Research Institute. "How do we rearrange the incentives so we can provide services more effectively, more efficiently and get people what they need."
The wide variation in health care spending across geographic regions shows that savings as high as 30 percent are possible. Studies by the Dartmouth Institute documenting these differences, and a recent New Yorker article describing how doctors have run wild on the fee-for-service model in McAllen, Texas, are the rage in Washington.
The nation is on course to spend an estimated $35 trillion on health care in the next decade, said consultant Robert Laszewski. If as much as 30 percent of that is wasted, it would amount to more than $10 trillion, nine times more than enough to pay for universal coverage.
Taking money from doctors
But cutting waste takes money away from someone. Doctors are at the top of that list.
Interest groups that just weeks ago vowed at the White House to find $2 trillion in efficiencies have begun rebelling. Grace Marie Turner, president of the conservative Galen Institute, said "everybody is fine with 80 percent of the plan, but there's 20 percent they can't live with, and it's a different 20 percent for everybody."
Employers are fine with a public option but don't like the employer mandate. Insurance companies are fine with the mandates, but can't tolerate having a public plan that kills their business model. On each of those issues, the affected group is "going to go to the mat over it," Turner said. "People are increasingly getting ticked off."
Potentially even more problematic is finding the money to pay for covering the 46 million people who lack health insurance. Mandates on businesses to offer coverage, and on individuals to buy it, are likely. But these will require subsidizing those who cannot afford the cost. Congress has received two bits of unpleasant news that make the job much harder.
In the last two weeks, the White House has dashed whatever hopes lawmakers were nursing that they could borrow their way to reform. The White House is aiming at a 50-50 mix of spending cuts and tax increases to pay for universal coverage.
The Congressional Budget Office has made it clear that untested ideas such as increasing preventive care or introducing health information technology, however promising, will not be counted as producing large savings. But the agency will count savings from cuts to benefits in Medicaid, the health care program for the poor, or Medicare for the elderly.
"The things that control costs for certain are politically unpalatable, and the things that are politically palatable aren't proven to control costs," said Ed Howard, executive vice president of the bipartisan Alliance for Health Reform. "That's the dilemma."
Obama on Saturday offered $313 billion in additional savings in Medicaid and Medicare.
Taxing health care benefits
Taxes are the other part of the equation. Senate Finance Committee Chairman Max Baucus aims to go where the money is - the enormous tax exclusion of employer-provided health care benefits. Obama trashed Republican Sen. John McCain for proposing that during the presidential campaign, but the White House is ready to embrace it.
The idea is loved by economists but hated by labor unions that have negotiated lavish health care packages, as well as higher-income workers who would suddenly see part of their health benefits taxed.
Obama favors reducing mortgage interest, charitable gifts and other tax deductions for high-wage earners, but that has little traction in Congress. Even a new "sin tax" on sugary drinks has been floated, but it would only provide comparative pocket change.
The money fight alone is enough to kill reform.
"To me, that's the most treacherous debate," said John Rother, policy director for the American Association of Retired Persons. "Raising taxes in the middle of recession is always politically treacherous but you need almost all these ideas together to pay for health reform. If any one of them goes down, you don't have the money and the whole thing starts falling apart."
Congress takes on health care reform
Health care reform legislation will be proposed in both chambers of Congress beginning this week. Its broad outlines are likely to include:
Cost: $1.2 trillion over 10 years to provide universal health insurance for all Americans, including an estimated 46 million uninsured. The nation is expected to spend $35 trillion on health care, half of it by the government, in the same period.
Insurance exchanges: National or regional clearinghouses would let individuals and businesses buy insurance and allow the government to impose new regulations. Democrats and the White House favor a government-run plan, which insurance companies oppose.
Mandates: Employers, with the likely exception of small firms, would be required to offer health insurance or pay a penalty. Individuals would also be required to carry insurance. Subsidies would be offered to people with lower incomes to help them pay for coverage.
Spending cuts: Cuts will be made to Medicare and Medicaid, especially what are considered overpayments to health maintenance organizations operating in the Medicare Advantage program.
Tax increases: The tax exclusion on employer-provided health care may be limited. Expensive plans may be taxed, while high-wage workers might pay a tax on their health benefits, or a combination of both.
Payment and delivery reforms: Lawmakers will try to change incentives - such as widely used fee-for-service payments to doctors and hospitals that reward providers for tests, office visits, procedures and hospital admissions but discourage preventive care.
information at SFGate News
