Health Care Reform: The Beach-Reader Edition

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By now you surely know this much: It’s August, there’s still no health reform bill in either chamber, and that’s a political setback for Barack Obama. This scorecard is not trivial. In a democracy, the politics matter.

That said, we’re talking about society-defining public policy here. How we get and pay for health care affects where we work, where we live, how long we live. It’s an industry that’s more than $2 trillion large, accounting for more than 16 percent of our gross domestic product in 2007. And our debt-ridden government already kicks in a whopping 40 percent of that money.

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In short, health care reform presents many members of Congress with the most consequential and complex decision they’ll ever make on our behalf. So the policy details matter, too, and we’ve all got to know them. Problem is, the political fight is about to make an already dense debate incomprehensible.

Everybody involved is promising to come at you hard this month. House GOP leader John Boehner of Ohio will bring the fear: Big Brother wants to control your doctor. Speaker Nancy Pelosi (D-Calif.) is gunning for the insurance industry: It’s greedy, wasteful and craven. And the White House will narrow its focus on agreeable consumer protections—rather than the system-wide overhaul it’s pursuing.

What actually matters in this din of spin?

First, a resource for industrious readers: [Go here http://healthreform.kff.org/]. That’s the Kaiser Family Foundation’s Web site dissecting the reform debate, with a mix of plain-language tutorial and wonky research. It’s not 101, but it’s accessible info from a nonpartisan, nonprofit source.

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For everybody else, at minimum you must know that the whole messy business now boils down to two questions: What, if any, public insurance plan will be created, and how will we pay to cover the roughly 50 million Americans who are currently uninsured? There are many, many other questions, but these are the fundamental ones upon which Congress remains the most deeply divided.

QUESTION #1: The Public Plan vs. Co-ops

President Obama has pushed the idea of creating a public insurance plan since his 2008 campaign, though with varying intensity and commitment. The idea is to contain the private sector’s excess—inflated costs, cherry-picked customers, dodged claims—by forcing it to compete with a government-run plan.

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Ted Kennedy’s Senate Health, Education, Labor and Pensions Committee (appropriately known as HELP) already passed a bill with a public plan. But the crucial Sena te Finance Committee—where bipartisan negotiations are unfolding—is leaning toward a bill that wouldn’t include one. Rather, Finance Committee Chairman Max Baucus (D-Mont.) and his colleague Sen. Kent Conrad (D-N.D.) want to build nonprofit cooperatives to compete with private insurers.

What’s a nonprofit cooperative? In the specific sense—meaning what Baucus, Conrad and the Finance Committee Republicans are considering—we don’t know, ’cause they’re not saying. Obama claimed in his news conference—you know, the one that turned out to be about Skip Gates rather than health care—that Finance hasn’t even told him what’s up. (Politically, Baucus and his buddies are likely keeping their cards close to see what’s possible in September.)

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In the general sense, though, an insurance co-op is like any other co-op. The members run it, so they’re looking out for consumers rather than corporations. They’re not pursuing profit, so presumably they lower costs. And if a co-op is large enough and geographically broad enough, it’s got purchasing power that can also make it cheaper than private insurers.

Critics—including many of the Senate’s most powerful Democrats and the House leadership—call all of the above nonsense. They ague that the only version of a co-op that would be big enough and strong enough to truly compete with the insurance industry is a version Republicans won’t support. And the whole point of creating co-ops rather than just offering a public option is to get bipartisan support. At minimum, any competitive co-op would have to be national in scope, would need a massive upfront investment of public money and would have to pay providers bargain-basement rates.

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The House, meanwhile, is all but certain to pass a bill with a public plan in September. But the central questions for the House’s public plan mirror those for Senate Finance’s co-op: Who gets to join, how much public money goes into it and will it be allowed to wrangle cheaper payments to providers? The last of these three has been the most contentious.

Aside from these details, two facts will be key to cutting through this month’s rhetoric on government’s role in health care. First, remember that 40 percent figure: Public money already accounts for nearly half of the health care market, but that covers only the most expensive parts—the poor and the elderly. And that’s not counting the $246 billion in annual revenue lost by not taxing health benefits. Second, Medicare is a government-run plan that seniors really like.

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QUESTION #2: The Price Tag

Everyone’s come to agreement on a number: $1 trillion. That’s the most this thing is allowed to cost over the next 10 years, and it’s proven a tough bar to get under.

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The problem is the “universal” part of universal coverage. Recent reports suggest that Baucus’ bill won’t include a mandate that everyone get health coverage. But the idea otherwise enjoys wide support, including from the insurance industry, which sees a huge market expansion. And if there’s going to be a mandate, it’s pretty clear that the government is going to help those who can’t pay for it. That’s been a loud refrain for Obama, who strongly opposed a mandate in the campaign.

Which means the biggie cost of reform is subsidizing coverage for a good chunk of those who don’t currently have it. Two-thirds of today’s uninsured live at less than 200 percent of the federal poverty level. We’re either going to have to expand Medicaid or fold these folks into the public plan at reduced cost.

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The White House and the Senate HELP bill would pay for that by making employers that don’t offer coverage kick in for the public plan instead. Obama has also argued that we’ll get savings through better use of information technology and by generally running things more efficiently. The Congressional Budget Office, however, is not buying any of it and has repeatedly tallied proposals at above the magic $1 trillion number—and worse, hasn’t predicted any slowing of the growth of overall costs.

So the cost question remains the largest stumbling block. House legislators have debated exactly how much subsidy to give out for a public plan. But the real money is in new taxes—which should tell you all you need to know about why this piece will remain the most contentious.

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Obama—mindful of his no-new-middle-class-taxes vow—has refused to support taxing employee health benefits. That’s unfortunate, given that there’s a good argument that the only way to truly pay for reform is by taxing employee health benefits. ( I’ll leave it to Robert Reich to make the case.) The president’s rhetoric aside, the GOP is not the only Beltway player putting its political future ahead of America’s health.

Obama instead supports an idea in the House bill that would drop a new tax of 1 to 5.4 percent on households making more than $350,000 a year. Expect that basement to rise before the bill gets all the way through the House.

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But then again, expect just about every detail above to change before a bill arrives on the president’s desk. And expect the volume of debate to go way up. After all, they’ve gotta shout loud enough for you to hear it on the beach.

Kai Wright is a senior writer for The Root.

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