Health Reform 2.0

Sen. Tom Harkin put the point well when he described the health bill as a "starter home." What Harkin neglected to mention is that the home isn't built yet, and the construction zone is in the path of a hurricane -- the fast-approaching storm of runaway health costs and hard-core conservative opposition.

In the face of these challenges, reformers have three great priorities: implementing the law, protecting and defending it from the already-mounting attacks, and renovating and improving Harkin's "starter home" to make it a sustainable structure. The next health-care battle will require organization, narrative, and strategy at least as much as the last did. And this time, reformers will need to call plainly for a greater government role -- armed, if they take their three big tests seriously, with concrete examples of government getting things right.

Wilbur Cohen, the architect of the last landmark reform law, liked to say that policy is "1 percent inspiration and 99 percent implementation." But Cohen's Medicare was a model of simplicity compared with the current law. To overcome deep-pocketed interests and reassure a skeptical public, Cohen's heirs largely eschewed the simple approach to expanding coverage embodied in Medicare: that is, expanding public insurance. (The big exception, of course, was the public-insurance option, which didn't make it into the law but remains vital.)

Instead, the law is a series of big patches to our patchwork system, and primary responsibility for most of them resides with the states. While the state lawsuits under way are almost certain to crumble, that will not stop states from fumbling the establishment of the exchanges, the regulation of insurers, or the expansion of Medicaid. In many states, the wisest course would be to have the feds take on the difficult task of creating an exchange. But wise advice is not always heeded. Reformers should be pressing state leaders to enlist the assistance of the federal government and to craft cross-state solutions in less populated regions.

Rest assured: Insurers and providers will be doing everything they can to shape what states do. Just because they received major concessions doesn't mean they won't push for even more. Reformers, backed up by the federal government, will need to push back.

Reformers also need to recognize that the polarized partisan battle did not end on the night of March 21. It simply entered a new phase -- from ground warfare to guerilla battle.

The first rule of guerrilla warfare is to strike where least expected. The big fights over the individual mandate are mostly a diversion from the fateful struggles to come. These skirmishes will concern the greatest fault line of contemporary American politics -- financing.

Financing is the soft underbelly of health reform. The health-care bill relies on a grab bag of revenue sources. Over the long term, if costs grow more quickly than these sources, federal deficits and the pressure to cut subsidies for coverage will grow. Both outcomes would undermine the ability of reform to achieve its promise and public confidence in the law.

Reformers should not underestimate the power of the GOP anti-tax crusade -- or, for that matter, the party's anti-regulatory zeal. The tax provisions in the bill will be an inevitable target, and if Democrats lose the White House, a vulnerable one. Also in the crosshairs will be the interlocking requirements on employers and insurers designed to ensure that public financing is backed up with employer contributions and insurance-company restraint. We can also count on Republicans to continue to oppose changes in Medicare designed to build on its past success in restraining costs (though, fortunately, most of these changes are out of Congress' hands).

The sad truth is that conservatives need to win only one critical guerilla battle to undermine the law. Reformers need to win every one.

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If reformers play just defense, however, they will be stuck protecting a law that has two serious problems: It is not designed to ensure that everyone is covered, and it is not capable of seriously reining in medical inflation.

Moving toward seamless coverage is the easiest fix, at least in policy terms. In our predominantly employment-based system, there are only two routes to broad guaranteed coverage -- requiring that employers provide coverage or contribute toward its costs, on the one hand, or severing the financial link between employment and health insurance by raising the funds for subsidized coverage through alternative means, on the other.

The current law is an uneasy hybrid of these two approaches: (weak) requirements on the largest employers but none on those with fewer than 50 workers and no guarantee that those not covered through employment will receive insurance through Medicaid or the exchanges. From a policy standpoint, the creation of a new funding stream outside of employment -- say, a value-added tax -- has a lot going for it. Politically, however, the most promising route may be to build on the existing law to fill in its gaps. And the key to doing so is to make it easier and more attractive for employers, particularly small employers, to buy coverage through the exchanges. After all, the exchanges will provide a much broader choice of plans, at better rates, than small employers can gain on their own.

None of this will matter much, however, if costs aren't contained. And here we reach the weakest foundation of Harkin's starter home. All the reform ideas that would have provided big direct savings -- from serious administrative streamlining to explicit review of private premiums to the public insurance option that I have long championed -- were either sidelined or neutered as they ran the gauntlet of affected interests. Indeed, the public-option debate was a case study in why cost control is so hard: Conservative Democrats first effectively stripped out the tools of cost control that would have allowed the public option to compete aggressively with private insurers. Then, they complained that the public option wouldn't control costs!

No one who has studied the medical market in recent years can fail to recognize the unhealthy consolidation that has taken place. An ironic coda to the public option's demise was the release this February of the American Medical Association's latest report on insurance competition. Its verdict? A "near total collapse of competitive and dynamic health insurance markets," with more than half of metropolitan areas dominated by a single insurer enjoying at least half the market (up from 40 percent of areas in 2008). Of course, what the AMA neglected to mention is that massive consolidation has also taken place on the provider side, with most metropolitan areas dominated by a single hospital or flagship system.

Comparative-effectiveness research, changes in Medicare payments, encouraging greater competition through exchanges, even taxing high-cost health plans -- none of this will seriously restrain costs without the creation of countervailing power to pressure consolidated insurers and provider systems to change their prices and practices. And the only place where this power can ultimately come from is the public sector. For better or worse, the ultimate fate of reform hinges on progressives' efforts to rehabilitate American government.

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Reformers won the war in 2010, but they lost the battle for public opinion: Americans were convinced that reform was needed but not that government could do it. Reformers cannot afford to lose the second battle for public opinion.

Winning will require organization and narrative. It will also require that reformers coalesce around a broad strategy, as they did in the pivotal years leading up to March 2010. That strategy should have two prongs: the case against insurers, and the case for government.

Private insurers are partners in the new law, but their cooperation will not be automatic, and a tough approach to insurers is the single most important precondition for long-term success. The largest private insurance companies are a gift to populist critics that just keeps on giving. To put the law in place, federal and state officials need to keep putting insurers in their place -- prominently and without apology.

But making a case against insurers is not enough to justify positive government action. And continuing government action is essential if reform is to succeed. Reformers surely need to make the case that the law passed was in Americans' interest. But they should not be afraid to also point out where the law needs to be strengthened, especially when that also means pointing out where private insurers continue to fall short. Just as Medicare's early inability to control costs colored perceptions of the program for decades, public and elite views of the current law's effects are likely to gel before the coverage provisions of the law take full effect in 2014.

In the process, reformers should revive the public option. A simple Medicare-like public plan could build on the provisions of the law that create at least one national nonprofit plan. Regardless of the near-term political prospects, the public option is a clear and simple goal that links concerns about health security, the affordability of coverage, and the nation's larger fiscal challenge. It is popular. It will save serious money. And it can function as a sword of Damocles: If insurers fail to live up to the obligations of the law and tackle rising costs, they will face the only form of accountability that really matters in the private market -- losing customers.

The passion that pushed health-care reform to the top of the political agenda should not be sidelined by technocratic concerns or triumphant complacency. In politics, sometimes the best defense is a good offense.

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