The Republicans have all but given up offering any substantive ideas for healthcare reform; they simply want to kill it and harm President Obama and the Democrats. At the same time, there are critical areas of disagreement among those who sincerely want to get the job done. Let’s explore some of those areas.
1. Level of subsidies
A main provision of healthcare reform is likely to be an individual mandate, requiring everyone who doesn’t have insurance to purchase it. Since healthcare is extremely expensive, this could cause serious economic hardship to low and middle-income persons unless they’re given sufficient financial assistance. Nothing would be worse than instituting a mandate only to force tens of millions of people into spending almost all of what little disposable income they have on healthcare. Olympia Snowe, one of two Republican senators actually negotiating in good faith with the Democrats, has made it clear that she will not support any package that doesn’t include generous subsidies. House Democrats are in almost universal agreement with this position; with midterm elections coming up in 2010, nothing would be more politically damaging than passing healthcare reform without adequate funding. However, the bill reported out of the Senate Finance Committee last week contained notably less generous subsidies than those in the House bill; the differences will have to be reconciled.
I would err on the side of generosity, both because of the equity issue and the politics; middle-class families should not be burdened with a new mandate that doesn’t come with completely, or almost completely, offsetting government assistance.
2. Total cost
Various numbers have been floated, ranging from $700 billion to $1.2 trillion over 10 years; but, as I have noted earlier, the cost issue is largely a sideshow. The difference between generous proposals and those that would seriously harm the purchasing power of tens of millions of Americans is in the range of $30-$40 billion a year, which is little more than a rounding error in the federal budget. Compared to the cost of the Iraq War, Bush’s tax cuts for the rich, and the Medicare prescription drug bill, the cost of insuring all Americans is cheap, and certainly reasonable. Those who, after the last eight years of profligate spending, have suddenly become “deficit hawks” only want to derail President Obama and the Democrats. Instead of complaining about the costs, they should be applauding how relatively inexpensive the proposals actually are (and the extent to which Obama intends to pay for most of it through cost-saving measures).
3. Competition across states
This issue doesn’t get as much attention as it deserves. As the law currently stands, states are in charge of regulating private healthcare insurance markets and residents are not allowed to shop across state lines. This has created a large number of state insurance markets that are highly concentrated, and in which residents have only one or two providers to choose from. The results are predictable: high insurance rates driven by monopolies and an inability to create large pools with greater bargaining power. Any serious effort at reform must include national pooling so that an individual in, say, California can buy a policy from any market in the country; this would go a long way towards increasing competition and bringing down costs. It is unclear whether such a provision will make it into a final Democratic bill, but it should.
4. The public option
No issue is more contentious than whether to allow the government to offer a Medicare-like policy which citizens could choose instead of the private insurance options. Proponents contend that a public option is the only way to keep private insurance companies honest, force them to reduce administrative and overhead costs, and ultimately “bend the long-term cost curve downwards”. The logic is compelling: public programs like Medicare and Medicaid have far lower administrative costs than private insurers, and can use their leverage to negotiate lower prices with hospitals and pharmaceutical companies (though Medicare is specifically prohibited from the latter under the terms of the prescription drug benefit).
Opponents of the public option view it as a “Trojan Horse” on the way to a single-payer, Medicare-for-all system; they contend that a government-run plan would undercut private insurance because it wouldn’t have to operate at a profit, and would therefore drive private insurers out of business. Proponents counter that a public option that must operate strictly based on fees collected, absent government funding, would create a level playing field and would not have any unfair advantage.
Not all industrialized countries with universal coverage have a public option—some are single payer (Canada and the U.K.) while others (such as Switzerland) rely solely on competing private insurers. If private insurers are strictly regulated, almost like public utilities, a public option is not necessary to bring down costs. Without such regulation, however, a public option is necessary; private insurers have every incentive to maximize profits and find every means to keep costs soaring. Since it is unlikely that the Congress has the will to enact robust private insurance regulation, a public option will ultimately be necessary in the U.S. to bring down long-term costs.
Aside from the above issues, there is widespread agreement (even among many Republicans) on some core elements of healthcare reform—the elimination of exclusions for pre-existing conditions, the decoupling of insurance from jobs (i.e., a job loss would not mean the loss of insurance), hardship exemptions for the very poor and small businesses, caps on both the percentage of one’s income and total payments to insurance companies, and the need for universal coverage.
Reaching agreement on the last 20% will be difficult, but this is what politicians are elected to do. By Thanksgiving, probably, we will know if they are up to the task.
Jason Scorse