Omnibus Obamacare

Presumably, the proposers of affordable health coverage considered the approach of making it affordable by making it cheaper. Unfortunately, "affordable for every American" is so expansive that some people, somewhere, would require subsidy no matter how low the price. So, a subsidy program needed to be a part of it. In addition, insuring illegal immigrants during a period of high unemployment was seriously unpopular, particularly among people who thought universality meant giving it to them first. So we can easily imagine how the proposal emerged as: "Affordable health coverage for all Americans (legal residents only) achieved by giving cash subsidies ("refundable tax credits") to lower income groups, and expanding Medicaid coverage above the threshold". Such embroidering necessarily made it harder to comprehend. Somewhere in its evolution someone also seems to have determined to rescue Medicare from its impending bankruptcy -- while we are at it, so to speak. However both ideas, universal coverage and restructuring Medicare solvency, could be expensive; combining them might make the package insupportably expensive in a recession, but it might also create an opportunity for major progress. It has been sixteen years since the Clinton Plan failed, but a book by Jacob Hacker called The Road to Nowhere outlined Bill Clinton's clever strategy for handling massive complexity: by pouring many pet schemes into one legislative package, planning later to remove unpopular prunes in the House-Senate conference committee, but reorganizing a few surviving plums into a unified plan. The Obama administration seems to be following the same path; modifying the pathway to a Budget Reconciliation Committee added the novel advantage of avoiding the Senate's 60-vote rule, thus requiring only a simple majority to pass. In the flurries of lobbying activity, hospital advocates have suggested uninsured patients just presented themselves to hospital accident rooms, effectively causing other patients to subsidize them. That was somewhat true, but extending the idea to a claim we were already paying for all indigent care, was a stretch by several hundred percent. To go further and proclaim that including indigent care under the insurance coverage umbrella would thus be cost-free, did really strain public credulity. How could it be cost-free and still cost a trillion dollars? Right from the start, this proposal was making itself hard to defend.

Universal coverage is achieved by Mandating It; cost reduction by forcing it.

The Twin Goals of Obama-care

So, at the end of September 2009, the country confronts multiple thousand-page bills from the House of Representatives containing wide assortments of ideas which may or may not survive scrutiny, and a Senate proposal from Senator Baucus (D, Montana) representing the views of the Democrat caucus within the Senate Finance Committee. The British magazine The Economist promptly snorted; Senator Baucus' bill was "Half a loaf, half-baked." Since laws passed by strict party votes are in danger of prompt reversal when the other party next gains majority control, Senator Baucus had been struggling to achieve some Republican support but apparently decided bipartisanship was not worth the delay. Andy Stern, the labor leader, had appeared on a television show offering no arguments at all, merely demanding a vote be taken instantly, presumably before public support eroded. Moderate House Representatives are characteristically most concerned with being turned out of office after passing a controversial proposal. The much more liberal leadership, with seniority because of safe gerrymandered seats, are more likely to honor extreme partisan demands.

Because the Senate thinks of itself as the sensible, deliberative body, oversight of a law remains with its originating committee; because Medicare and Medicaid are amendments to the Social Security Act, the Senate Finance Committee has always maintained jurisdiction over these three social benefit programs. In the House, with turnover every two years, continuing oversight is assumed by the Appropriations Committee, on the grounds that this is the only committee to review every ongoing program, every session. But the realities of the program mix with the quirks of the Senate, and for over forty years whatever the Finance Committee says about Medicare, pretty much goes. During the fall of 2009, this group of old colleagues could be seen on C-Span, gently joshing each other, and even more genially suggesting their disagreements. Each member of Finance belongs to several other committees, but on Medicare, they know their stuff and have a loyal staff to remind them of what they have forgotten. They are considering 550 amendments to Obamacare, and stubbornly defend the right of each committee member of either party to be heard courteously, in spite of what must be a wild frenzy of pressure by unions and partisans, to be done with it. Their patient labors have turned up one issue that party leaders -- especially the Governors -- probably wish they would leave alone.

Blow away the smoke. Obamacare is about fixing Medicaid without admitting who caused it.

The nut of the matter.

The fifty Medicaid programs are a big mess. They are run by state governments with Federal provision of at least 57% of the funds, and in some cases over 80%. Some states offer eligibility to those with incomes only half of the poverty level, others go to several times the poverty level. The tendency is to use the HMO model, but it is an individual state option. Minority groups absolutely hate HMO. The fraud level in Medicaid is by far the largest in the whole government. The quality of care is uneven, but it is always going to be somewhat substandard since it pays well below cost and deals with high-crime populations, amid uncomprehending chronic poverty. It attempts to deal with the deplorable psychiatric inpatient problem, which is in its present state because of bungled regulation. Medicaid under-reimbursement is the main cause of hospital cost shifting, which causes still other distortions. And so on. If you search for explanation of the bizarre statistics on infant mortality, the ranking of U.S. "health care quality" as 19th in the world, etc, the explanation is to be found right here. To the extent that statistics are not rigged in order to make certain countries look good, the poor rank of American healthcare reflects the hideous Medicaid programs. Even the medical profession is largely unaware of the Medicaid issues, because most members of mainstream medicine have long stopped accepting membership in the program because of its laughable reimbursement, and importantly the HMO organizational model makes it impractical to treat the poor free of charge. And finally, hear this: Senator Grassley muttered that 90% of the cost of Obamacare is aimed at fixing Medicaid, and no Democrat on the committee corrected him. When you get down to it, Obamacare is a very expensive program for making Medicaid what it ought to be, and definitely isn't. This would make a perfectly plausible explanation for why it has been so hard to see what the proposal is all about -- it's about fixing the mess which state and federal governments have created, at the same time hoping to devise a similar program for the rest of the country, a "single payer" system. Senate Finance has a difficult tap dance with this one, but they have put their heads down and are plodding on.

Many unexpected developments are still possible in an on-going debate, but it seems timely to examine the Obama proposal as presently visible, at half time, so to speak. What is so far proposed of consequence, and what problems would be cured?

First, nearly universal health coverage is to be achieved by mandates, making it illegal not to be covered, imposing fines for non-compliance. Mandates are always unpopular, but two competing mandates headed for conference committee. Because of the tax preference for purchase of health insurance by employers, we now have a largely employer-based system. Since almost all interstate employers already buy insurance for their employees under coverage of the ERISA law, representatives of large employer groups want their competitors, especially foreign-owned, to experience the same expense. Big employers thus want an employer mandate: employers who do not provide employee health benefits are to be fined. Small employers are resistant to employer mandate, applying the political pressure that increased cost would particularly hurt employment in the present recession, since small employers are the largest source of new jobs in our economy. Employer mandate might insure some uninsured people but most of the uninsured would be unaffected; employer mandate solves little of the intended purposes of this legislation. So, although an employer mandate is on the table, Senator Baucus has now proposed an individual mandate. That is, every person found without health insurance would be fined. Presumably, compliance would be about the same as with the widely-ignored mandate for automobile insurance. Individual mandate creates a political problem of what to do about recalcitrants who are both sick and uninsured, who must then fear punishment as well as illness when they appear for treatment. They are unlikely to forget the congressman who voted to create the outcome of fearing-to-seek-treatment.

A second difficulty with individual mandate is that it exposes a long-standing inequity in the tax law. The main reason we continue a largely employer-based system is that purchase cost is reduced considerably when an employer buys it for an employee. Self-employed or unemployed persons do not receive this tax-discount. It would indeed be desirable to extend this tax exemption to everyone equally, both for fairness and to create portability and mitigate pre-existing condition exclusions. But the employer-based system would lose its main reason to continue, so that consequence must be addressed. Nevertheless, the political consequence of not equalizing the tax would be worse. Compelling millions to buy individual insurance, while at the same time denying them everyone else's tax exemption for it -- is not likely to last long. Give tax exemption to everyone or give it to no one; or give it for a limited amount, but give the same thing to everyone if you hope for re-election. While tax equity is not in the pending legislation, it might as well be, and the CBO should be asked to score it as part of the cost. And finally, no mandate in sight would insure illegal immigrants, who are a large part of the uninsured problem in certain regions. It is reported that sixty percent of uninsured persons are concentrated in five states bordering hispanic United States (Mexican and Florida), a fact that ten senators and several dozen congressmen are sure to notice.

Now turn to the other main objective of this reform legislation, to reduce the high costs of medical care. The poster child of this objective, possibly the main issue for many politicians, is the approaching bankruptcy of Medicare. To skip over the technicalities, the accumulated subsidies of fifty years of Medicare recipients have created unfunded liabilities that make Medicare the largest single debtor on the planet. But ignoring how this growing debt was created, it is nevertheless accompanied by fifty years of promises to every citizen about what they are entitled to. Perhaps it was believed that uproar over reducing Medicare benefits would be softened by burying it in a nationwide reduction of all healthcare costs. But in fact this expansiveness provoked still more confusion that something was being slipped in the back door. In recent angry town meetings which frightened congressmen, held during the August 2009 recess, one speaker after another went to the microphone and said something like,"I have excellent health insurance and I wish everybody else had it, too. " Following which, something was immediately said equivalent to, "But don't you dare take my good coverage away from me to give it to someone else!" And not invariably, but often enough to make it emphatic, some would add, "I voted for you in the past, but I'd never vote for you, again." No doubt, every one of those congressmen was asking how the leaders could get them into such a fix. Why don't we try some thing else? Senator Baucus offered to pay for this reform by putting a tax on health care providers, but every worried citizen quickly sees that taxing providers will raise costs, not lower them. Credibility is waning.

An adage is becoming general: Increasing access to subsidized health care is not compatible with cutting costs, and won't even produce universal coverage. It is increasingly difficult for presidential oratory to reverse that opinion.The Congressional Budget Office has not pronounced the Obama plan an unachievable goal, but after examining an enormous pile of proposals, it amounts to that. They simply said it would cost a trillion dollars, and would still leave 5% of the population uninsured. In one sentence, the CBO probably killed this legislation.

Still, the Obama administration gamely plunges ahead, apparently driven by recollection that defeat of the Clinton health plan was followed by a mass eviction of incumbent congressmen; by this analysis it wasn't a bad plan that made trouble, it was failure to pass the bad plan, which it must be recalled was a universal HMO system. The Clintons avoided public defeat by pulling that legislation away without a floor vote. But they did escape the backlash against what would have been a ruinously unpopular program.

For one thing, the public has always been bewildered by the need for such a rush, such a collision. We are now fighting two wars and struggling with the worst depression since 1930. All three of those major projects are going poorly. Why in the world would we say that reforming health care is our major priority, right now?

This section closes the discussion of the main features of the Obamaplan, and ignores thousands of pages of proposed legislation. It is mainly made up of earmarks, boondoggles and inconsequence -- the usual contents of an annual budget reconciliation act produced at Thanksgiving or the day before Christmas. We do not here discuss tort reform, which at most will produce a study or a pilot program. Nor the public option, which Senator Baucus says cannot pass the Senate, and which former Senator Dole said he heard, but scarcely would believe, that the Public Option is just a smoke screen intended to distract the public while the rest of the bill slips past the uproar of Public Option getting defeated. The fate of the expensive but inconsequential computerized medical record will depend on the precarious health of Senator Byrd of Virginia, who has long held a stranglehold on government computer procurements.

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