From the May 4, 2009 America Speak On
May 4, 2009
by Tevi Troy
The stars are aligned for some kind of big health care deal, and the papers are full of discussions and speculations about a variety of possible scenarios. Getting to the point of the deal, however, will be difficult. According to various sources inside and outside of the room, some of the internal divisions in Congress make the Cold War look warm, and the relationships among key health policy players are more like rival high school cheerleading squads than important deliberative bodies.
Should Congress sort out its disagreements and put forth a major reform, that will clearly have a huge impact on our health care system. Government already accounts for about 46% of our approximately $2.5 trillion health care spending, and the creation of a public health insurance option – which would be the most likely outcome – will put us over the 50% tipping point of federally funded healthcare.
A publicly financed plan would likely, at great expense, help reduce the approximately 46 million uninsured Americans, but it may be too blunt an instrument for the task. As Jason Fodeman points out in last week's Washington Times, the 46 million uninsured are uninsured for a variety of reasons. About 20% of them are uninsured by choice – they are young and healthy people with high enough incomes to pay for health insurance but choose other priorities for their discretionary income. Another 25% are eligible for federal health programs but choose not to enroll. Another group, of uncertain size, are illegal immigrants, who are by statute ineligible for federal benefits.
The cost of a one size fits all approach to the diverse group of the uninsured would have high costs, financial and otherwise. From a dollar perspective, the Obama administration has already called for a $634 billion "down payment" on health care. The final cost will likely be much higher. But a larger, and non-monetary cost, would be if the existence of a government-subsidized public plan drives employer sponsored plans out of the market. If this were to happen, many Americans who like the benefit packages they get from their employers would lose that option. A better approach might be to build on the employer sponsored model by giving amending the tax code to give individuals the same tax breaks that businesses now get for providing insurance to their employees. In this way, self-employed and unaffiliated individuals would have an easier time purchasing their own private health coverage.
Even if there is no grand health care agreement this year, it is likely that the Obama administration will cite a number of recent legislative developments, the expansion of SCHIP – the State Children's Health Insurance Plan, the stimulus package's $20 billion for electronic medical records and its expanded COBRA subsidies for the unemployed, an additional $10 billion to NIH, and this summer's mandatory adjustment to the physician's sustainable growth rate (SGR), and claim that they have made major changes. This could give them the credibility to go back to voters in the 2010 and 2012 legislative elections and the 2012 presidential election and take credit for a "down payment" on health care reform.
At the same time, health care watchers need to keep their eyes peeled on what the new administration is doing and will do from an administrative, non-Congressional, perspective. Some of these policy changes, such as the expansion of federally funded stem cell research, writing the rules for the new $20 billion health IT subsidies, bio-defense procurement policies, and the management of the FDA drug and device approval process, will have a huge impact on the shape of health care in the years to come. Stay tuned for updates on these important developments.
Tevi Troy is a Senior Fellow at Hudson Institute and served as the Deputy Secretary of the U.S. Department of Health and Human Services from 2007 until 2009.
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