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Delay helped to doom the Clinton plan's political prospects, so the Obama administration is moving quickly to push reform forward. The Clinton administration developed a remarkably detailed, 1342-page plan that provided opponents with an inviting target. In contrast, the Obama administration has not released a plan, instead offering up a list of eight principles — its plan, in other words, is not to have a plan. And whereas the Clinton administration handed down its plan to a Congress that it mistakenly assumed would follow its lead, the Obama administration is giving Congress primary responsibility for drafting legislation.
Congress, too, is applying lessons from the 1990s debacle. Key Democratic lawmakers are substantially more unified around health care reform than their predecessors were 16 years ago. They have decided that this year offers the best chance for passing comprehensive reform and are therefore moving quickly. They are also striving to build support among stakeholder groups that helped to kill the Clinton plan, including business and the insurance industry.
Thus far, the strategy of using the Clinton plan as a "reverse playbook" to guide health care reform in 2009 appears to be paying off. However, better strategy can carry reform only so far. The chances of legislative victory ultimately depend on solving a tricky puzzle: how to pay for health care reform.
The political arithmetic is daunting. The plan outlined by Barack Obama during his presidential campaign would offer universal access to health insurance by creating new private and public insurance options for the uninsured, along with subsidies for lower-income persons to purchase coverage. (A proposal outlined by Senator Max Baucus [D-MT] takes a similar approach.) The costs of such a plan are somewhere in the neighborhood of $1 trillion to $2 trillion over 10 years.
To be sure, the $100 billion to $200 billion a year in new spending would represent only a modest increase for a health care system that already spends over $2 trillion annually. But such economic perspective does not make the political task any easier. Even if universal coverage saves money in the long run, congressional pay-as-you-go budget rules and the administration's commitment to health reform that pays for itself mean that reformers must find money to finance a substantial insurance expansion. The $1.7 trillion federal deficit also looms over the health care debate, with fiscally conservative Democrats in Congress demanding that reform be fully funded in exchange for their support.
Where, then, can reformers get the money? It is tempting for Congress to count on savings from health information technology, prevention, pay-for-performance systems, a primary care "medical home," and other measures that aim to improve medical care delivery and health outcomes. Unfortunately, there is not solid evidence that these measures will save much money.1 The Congressional Budget Office (CBO), the independent scorekeeper for legislative costs, will consequently not score much in the way of savings from these policies.2
In 1993, the Clinton administration faced an analogous dilemma when the CBO took a skeptical view of the cost-saving potential of managed competition. The administration's health plan therefore contained politically controversial caps on national health spending to satisfy the CBO and budget rules. In 2009, though, there is apparently little appetite in Washington for adopting serious, system-wide, explicit cost controls that would generate savings. That puts more pressure on Congress and the administration to identify revenue options that are capable both of passing political muster and of generating substantial funds.
Options that meet both those requirements are hard to identify (see Table 1). Increasing "sin taxes" on tobacco and alcohol does double duty, by raising revenues and reducing consumption of products than can have harmful health effects. Taxing cigarettes has proven an especially popular means for funding health insurance expansions. Public health advocates similarly covet a new federal tax on soft drinks or other high-sugar products in the name of reducing obesity rates.3 Sin taxes, however, raise only modest amounts of money. Generating more funds requires raising such taxes to levels that are difficult to support politically.
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Changes to the tax exclusion, however, face resistance from unions, some employers, and many workers who will not welcome a tax on their health benefits.4 There also would be serious problems with implementing a cap on the exclusion, including the prospect that persons who are in higher-cost insurance pools (e.g., because their company has an older workforce) could be unfairly penalized. An additional political problem is that not only did President Obama oppose the proposal by Senator John McCain (R-AZ) to end the exclusion during the 2008 campaign, he also promised not to raise taxes on persons making less than $200,000 a year.
Congress will thus have to take the lead if the exclusion is to be modified, though reaching agreement on how to limit the exclusion will be difficult. Still, it is a sign of health care reform's rising prospects — as well as the limited potential of other financing alternatives — that bipartisan support for this option is increasing.
Medicare and Medicaid savings offer an additional financing source (see Table 2). In his 2009 budget plan, Obama called for a total of $316 billion in savings (over 10 years) from these programs to fund health care reform. That included $177 billion from reducing Medicare Advantage payments to private insurers, whose current overpayment makes this a politically attractive savings option.5 The other Medicare and Medicaid cuts proposed by the administration are moderate enough to be politically feasible. Securing substantially more savings in Medicare and Medicaid, however, could prove difficult. Given the ongoing economic crisis and the states' fiscal straits, Medicaid requires more, not less, federal spending. Medicare offers many opportunities for savings that the CBO will score, but the medical industry will resist additional cuts in program spending.
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Inasmuch as they compel persons whose coverage will not be fully subsidized by the government to purchase insurance, individual mandates are also a funding source. Bipartisan agreement on an individual mandate is feasible, especially since the insurance industry regards mandates as an essential accompaniment to reforms that would limit insurers' ability to engage in medical underwriting. A mandate, though, is only as good as its enforcement mechanism, and a tax penalty for Americans who do not obtain insurance will be controversial. Furthermore, most uninsured persons have low incomes and require government subsidies to obtain coverage, which limits the revenue that an individual mandate can realistically produce.
There is, then, no easy way to pay for comprehensive health care reform. Congressional leaders reacted coolly to the Obama administration's proposal that reform be funded partly by reducing itemized tax deductions (including charitable donations and mortgage interest) for higher-income persons. Yet all the funding options contain various levels of political poison.
Indeed, financing will probably have to be patched together from a combination of controversial sources. If that combination yields less revenue than required, then reformers may have to retreat from the goal of providing all Americans with comprehensive insurance. One possibility for limiting the reform is for Congress to define a minimum benefit standard with substantial cost sharing for patients, which would reduce federal costs (though it could also ignite a debate over what constitutes adequate coverage). Another approach would be to phase in any expansion of coverage.
Decisions about how to pay for health reform may ultimately hinge on a procedural maneuver. Democratic leaders in Congress, with the prodding of President Obama, have agreed to a budget resolution that allows them to use the reconciliation process to enact health care reform if Congress does not act by October 15 of this year. Reconciliation fundamentally changes the politics of health reform. Legislation considered under reconciliation rules cannot be filibustered in the Senate, meaning that Democrats would need only 51 votes to pass a health care bill, thereby obviating the need for Republican votes. Reconciliation would give Democrats more say over financing, benefit, and cost-control provisions. But it would also mean that Democrats lose bipartisan cover for making controversial choices.
Regardless of who makes the choices, assembling a workable financing plan is an extraordinary challenge. The fate of health care reform in 2009 rests largely on reformers' ability to solve the financing puzzle.
No potential conflict of interest relevant to this article was reported.
Source Information
Dr. Oberlander is an associate professor of social medicine and health policy and management at the University of North Carolina, Chapel Hill, and a visiting scholar at the Russell Sage Foundation, New York.
References
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