Suarez, Essdras M/ Globe Staff
Today, Congress began considering the President’s 2010 Budget. Congress will certainly make some changes to the proposals that Obama has laid out. The good news is that it sounds like lawmakers want to stick closely to the major elements that Obama wanted. We’ll see if that actually happens. I have a feeling this is going to become a major fight.
In my second installment for Budget Week, I’m going to look at the health care proposals in the 2010 Budget. I’ll outline them and pose the question: will Republicans join the President in reforming our health care system? What are the prospects of health care reform being a major bipartisan breakthrough? But first, I want to look at how broken our health care system is.
If you have ever lost your job and lost your health insurance, you know that the system is broken. I recently had to choose between my health and my wallet when I was in between jobs and I didn’t have health insurance. I became very sick and had to go to the ER. When the doctors recommended some very expensive tests, I declined, risking my health because I feared that the tests would get me in serious financial trouble. A woman I met recently had to pay $18,000 out-of-pocket to a nursing home for her husband even though they are separated. He only has Medicaid, and it doesn’t cover nursing home costs. Since he couldn’t pay, lawyers for the nursing home demanded that she pay for him. She did so, taking most of the $18,000 out of her 401(k) and putting the rest on credit cards. She then decided to quit her job so that the state would have to pay. Financially, it was better for her to do so. This is the crazy system that we have, causing fear and financial disaster in people’s lives.
Here are some sobering facts about the costs of health insurance from the National Coalition on Health Care:
- The United States spends about $2.2 trillion a year on health care, which is about $8,000 per person.
- Health care costs constitute 17 percent of all spending in the United States, and that number is growing so rapidly that it will be 20 percent in 2017.
- We spend 4.3 times more on health care each year than we do on national defense.
- Workers are paying $1,600 more in annual premiums than they did in 1999.
- A Harvard study recently found that over 50 percent of all bankruptcies in the US were partly the result of medical expenses.
- Every 30 seconds, an American files for bankruptcy because of a serious health problem.
- About 1.5 million families lose their homes each year due to unaffordable medical costs.
- The United States spends six times more per capita on the administration of the health care system than its peer Western European nations.
The Wall Street Journal recently published a very useful graph showing how dramatically our spending on health care has been increasing over the past 50 years:
And in terms of limited access to our health care system, consider these facts courtesy of the Department of Health and Human Services new HealthReform.Gov website:
- From 2000 to 2007, the proportion of non-elderly Americans covered by employer-based health insurance fell from 66% to 61%
- An estimated 87 million people - one in every three Americans under the age of 65 - were uninsured at some point in 2007 and 2008.
- More than 80% of the uninsured are in working families.
I could go on and on, of course. You get the idea, and you’ve probably seen many of these figures before. Most politicians, whether they are Democrats or Republicans, believe we need to reform our health care system. The problem is how. The President’s budget is the first step in achieving his twin goal of 1) lowering health care costs, and 2) making health insurance affordable so that every American can have access to it.
If you are wondering why people keep calling President Obama’s budget “bold”, look no further than his health reform proposals. It turns out that the $634 billion that the President is proposing to spend on health care reform over 10 years almost didn’t make it into this budget. Jonathan Cohn, one of the best journalists on health care that we have, has written a piece in the New Republic about the near-death experience of health care reform in this budget. His article, “Stayin’ Alive“, is essential reading for anyone who is interested in this issue. Based on more than a dozen interviews with senior administration officials, it tells the story of how Obama’s senior advisors, including David Axelrod and Larry Summers, cautioned him against tackling health care early in his administration. These advisers were worried about increasing the deficit further during a recession, and wondered whether tackling the complexities of health care would distract the President and his senior staff from focusing on the recession. It also appeared to be a move fraught with political risks for the President. But one member of the administration strongly resisted this message of caution: Barack Obama. It also appears that health care reform was the most pressing issue in discussions and debates about the budget in the White House. As Cohn writes:
“There was no aspect of the budget that the president spent more time discussing,” says one senior adviser, noting that it was the primary topic in four of the seven budget deliberations that Obama personally attended.
Cohn’s piece offers some insight into just how committed President Obama is to reforming our health care system. While that commitment is evident in the large amount of money that Obama wants to put aside as a “down payment” on health care, what is surprising is that, as of now, there is no specific plan for health care reform. Here’s what the budget says about the matter:
[T]he Budget sets aside a reserve fund of more than $630 billion over 10 years that will be dedicated towards financiing reforms to our health care system. The President recognizes that while a very large amount of money and a major commitment, $630 billion is not sufficient to fully fund comprehensive reform. But this is a first crucial step in that effort, and he is committed to working with the Congress to find additional resources to devote to health care reform. The Administration will explore all serious ideas that, in a fiscally responsible manner, achieve the common goals of constraining costs, expanding access, and improving quality.
The President does go on to outline eight principles that will guide his work with Congress in reforming the health care system: 1) Protect Families Financial Health, 2) Make Health Coverage Affordable, 3) Aim for Universality, 4) Provide Portability of Coverage, 5) Guarantee Choice, 6) Invest in Prevention and Wellness, 7) Improve Patient Safety and Quality Care, and 
Maintain Long-Term Fiscal Sustainability. But there are no details in his budget that speak to how to achieve these broad goals.
If health care reform passes this year, I believe the strategy that Obama is pursuing may be one of his savviest political moves as president. Most experts believe that to achieve universal coverage, the federal government will have to ultimately spend at least $1 trillion. By offering a “down payment,” which may constitute over half the total cost of achieving reform, while simultaneously providing little details of a plan, Congress can have the opportunity to play a major role in crafting that plan. In stark contrast to the strategy pursued by President Clinton in 1993 when the health reform effort was conducted through private meetings in the White House, then presented to Congress, Obama’s strategy works in just the opposite direction. A large part of the funding for reform will be available first without opponents of the President latching on to one detail in the plan that they don’t like. The hard part will be the details, but that will come later, and with lots of input from all sorts of people–insurers, businesses, doctors, nurses, both parties in Congress, voters, etc. The wide range of input that will go into formulating the plan will add legitimacy to a very major change to our economy that is being proposed. A sense of legitimacy will increase the chances that a major health reform law will achieve final passage in Congress this year.
But where will we get $630 billion over the next ten years for health care reform? The budget identifies several areas of savings. First: reduce Medicare overpayments to private insurers, which currently amount to about 14 percent in waste. Second: reduce drug prices by increasing access to generic drugs and increase the Medicaid drug rebate from 15.1 percent to 22.1 percent. Third: save billions of dollars that are lost each year by cracking down on overpayments and fraud in the Medicare and Medicaid programs. Fourth: provide hospitals with incentives and penalties to reduce the rate of hospital readmission. Fifth: require that hospitals meet specific quality of care measures in order to receive Medicare payments, thus saving over $12 billion over 10 years. Sixth: reform the physician payment system so that quality of care, rather than quantity of care, is the primary measure of compensation. Seventh: limit the rate of itemized deductions for families with incomes over $250,000 to 28 percent, which would raise $318 billion over ten years.
So, a significant part of the funding for Obama’s health care proposal in his budget will be increased taxes on the wealthy. Therein lies the potential for trouble. So I leave it to the reader to consider: will this plan be able to win support, particularly with Republicans, if a major piece of its funding would be increased taxes on those making more than $250,000?