Monday, August 17, 2009


With the jettisoning of the public plan, White House, Congress and American Public are finally warming up to the endgame of Health Care Reform; the debate is nearing cloture.

Neither President Obama had campaigned very actively on Public Plan (unlike John Edward for a single payer system) nor he had been strongly after it. So clearly it was something of a 'tradable' item for a while. What is unclear is what would President get in return of that.

Sen. Lindsay Graham explained Republican case against Public Plan in an interview published by Ezra Klien (the go to media guy in this debate) in Washington Post. His main contention was that already substantial portion of American life - after retirement - is governed by Government (Medicare); with a Public Plan more of pre-retirement life span will also come under government control. He also contended that Public Plan with government backing would drive out the Private Plans from the market. This also has the potential where government will land up in paying major subsidies for the public plan. In other words, it is extremely difficult to strike the balance between a public plan living well with private plans and at the same is not a deficit busting government program. The chances of this all resulting into a single payer system are high and no matter of what, Americans for sure are not ready for such a pervasive government involvement in their health care.

So the question is what would President Obama get in return of dropping a public plan? Actually speaking nothing much. There were no votes for the plan in Congress and hence it got dropped. Next, then is it a start of the slippery road where many more things will be dropped too? Quite likely yes.

Take for example, changes in the delivery system - paying doctors and hospitals for result of the treatment instead of paying for services offered; the core reform which most experts agree upon. Again, no chance that it will get through this time. So in a way Congress is unlikely to undertake anything which control costs in fundamental way. Same goes for President's proposal of iMAC - an independent body of experts - to control costs of Medicare. With the ruckus of Palin ignited 'pulling the plug on Grandma' resonating all over America (or at least that is what Media is portraying); there is no likelihood that Congress folks will be courageous to hand over their responsibility of setting Medicare prices to an independent body. Sen. Snowe has been openly against that proposal early on. So all in all, that means Medicare costs will not be controlled too. Third, with no Public Plan (for whatever reasons); any other possibility of controlling costs is also gone. (These Congress folks and our President must be delusional to think that rural electric co-operatives can be a model for co-op based medical plan or like FedEx and UPS co-existing with USPS, a public plan can co-exist with private plans. Comparing apples with oranges is not right.) Trading of Public Plan is acceptable as long as non-Congressional mechanism to control Medicare costs and core reforms of delivery system are enacted. In absence of those and no Public Plan, America will be back to the square one - health costs increasing at a faster rate than the general inflation. That means so called health reforms will not change anything there.

This brings us to the last part of coverage. With so much ground already conceded to the opponents of reforms, President Obama is likely to insist on increasing some coverage. At least on paper he has some purported savings from Drug Industry and Hospitals. So he will be very eager to en-cash that. As the nature of the Congress is when it comes to spending any more money; they will come very easily on the board and some coverage expansion will pass. But what about funding that with hard currency? No way, with Rangel's taxing rich guys non-starter (for right reasons); there will not be any enthusiasm to alter employer tax benefits for health insurance. President Obama, after having conceded so much, will like to extract his pound of political flesh and that will be 'protecting middle classes from taxes' - read that as no reforms in employer tax benefits.

So the only thing which will pass will be more restrictions on Insurance companies and their plans as well as health care insurance exchange in some limited form. By then Congress and President Obama would have spend around One Trillion Dollars to increase coverage for many Americans. But as the funding will be incorporated with quite 'weak provisions' to realize those sources, the cost will be paid upfront and in the end it will directly come from the regular budget while increasing the deficit further. In nutshell, endgame of these reforms will be nothing but what Congress does best and what Presidents always tolerate most - spend more money with 'smoke screen' of reforms.

Good that President Obama is doing all this in his first year because whatever silver of political capital he has, he will spend then and there. Down the road when 'credit score' of White House is quite less; he will not be able to afford any such expensive agenda.

I wish I would be proven wrong. But the way the whole debate has been structured by President Obama and Public's reaction there after; anything good coming out (except expansion of coverage of those many deserving folks and more discipline on insurances) is unlikely. As Fareed Zakeria mentions in his WaPo column, America essentially does not have any ability to solve her long term, slowly advancing crisis in any responsible manner. It is sad. This means continued erosion of America's competitiveness as businesses loose on employer benefits.

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