Despite budget pressures, President Obama to his credit has not backed off his commitment to universal health reform. But the devil is in the details. And if he is not careful he could end up with a reform that is worse than nothing.
A crucial question is whether the law will include a public, Medicare-style plan. This public plan could be used by people who otherwise lack good insurance, or by employers who conclude that the public plan is a better deal for themselves and their workers.
The public plan would be the gold standard of both good coverage and cost-containment. Without the public option, a system to cover everyone by relying on the existing private insurance industry will realize few cost savings. The result would be increased pressures over time to cut care and shift out-of-pocket costs from insurers to consumers.
The administration's projections have relied heavily on the supposed savings of better use of computerized medical records and an end to the extreme variation on treatment patterns and costs. However, absent a single unified system, or a strong public option, neither better computerization nor voluntary pledges to cuts costs will realize major savings.
In a meeting with Democratic senators midweek, Obama pledged his support for the public option. But given his desire to work with the insurance companies and get some Republican support as well, the real question is whether he will put his prestige on the line to keep the public option in the bill. He pointedly did not say that he'd veto a bill without a public option.
The U.S. health care system is the most expensive and least cost-effective in the advanced world mainly because private insurance companies waste about 25 cents on the premium dollar on claims, profits, administration, and marketing. They have no serious financial incentives to emphasize prevention, and every possible incentive to avoid sick people. Doctors and hospitals, meanwhile, make their money from increasing costs.
Other countries get getter results at lower cost because a universal system naturally emphasizes wellness and prevention, and spends its money on the most cost-effective treatments, not the most expensive ones. Every nation faces similar inflationary pressures because of advances in technology and an aging population; but other advanced countries, using single-payer systems, do a fine job of covering everyone for ten percent of GDP or less, while we spend upwards of 15 percent and leave out nearly fifty million souls and under-insure tens of millions more.
Obama's plan is a variant of an astute strategy first proposed by the political scientist Jacob Hacker as solution to two political obstacles to health reform. First, how to enlist the uninsured and the anxious insured in the same coalition? Second, how to build momentum for a single-payer system recognizing that there are not the votes to legislate it all at once?
Hacker's insight was that if the government offered a public insurance option, people who liked their present private insurance could keep it, while others could elect the public plan. Coalition problem solved. And the superior efficiencies of the public plan would gradually and inexorably overtake the rival private plans over time. Momentum problem solved.
But political scientist Hacker may have downplayed one key political detail-the immense power of the private insurance industry. Not surprisingly, the industry's stance is that any public plan must compete on disadvantageous terms. And most Republicans oppose a public plan outright.
President Obama, the great conciliator, has chosen to work with the private insurance industry rather than targeting it as the primary obstacle to meaningful health reform. Periodic leaks from the White House suggest that if push came to shove, Obama would ditch the public plan in order to get a bill through Congress.
Sen. Max Baucus of Montana, chair of the Senate Finance committee, is no enthusiast of a public plan. After the New York Times last week reported Baucus sparring with Sen. Ted Kennedy on whether to include a public plan, the two senators quickly cobbled together a statement insisting they were really in harmony.
However, in the push to get legislation in the face of fierce industry and Republican opposition, a good public plan could well be tossed overboard. That would leave a legacy of expanded coverage, but a time bomb of exploding costs resulting in underinsurance and a squeeze on actual care.
Personally, I would much rather see President Obama going to the country, making clear that the obstacle to real reform is the private health insurance industry, and battling for public health insurance. That, however, is not the president we have. We'll see what kind of public plan, if any, survives.
A version of this piece first ran in the Boston Globe.
