Obama tackles another big one: health-care reform
Will the popular president be able to get health-care legislation passed, amid ballooning federal deficits? Look for a partial version, if that.
President Barack Obama's domestic agenda will be put to test next week when his health-care reform legislation officially is introduced in the Congress. The din this week over Guantanamo, interrogation techniques, and related issues has obscured developments relating to the health-care issue. The final outlines of the legislation are not yet in place, as relevant Congressional leaders are bargaining within their own parties and, in the case of the Senate, across party lines in an attempt to frame legislation that can be enacted.
Some of the following may seem inside baseball. But in the end these details will be important in determining if the 2009 Obama proposals are enacted or flounder, as Clinton health proposals did 15 years ago.
Moderate House Democrats, known as Blue Dog Democrats, have mounted a small rebellion against Democratic House leadership, claiming that they (as well as House Republicans) have been frozen out of discussions on the legislation's content. The Blue Dogs number about 50. A related organization, the New Democrat Coalition, has expressed similar sentiments. Perhaps 100 House Democrats altogether follow a moderate Blue Dog-NDC line. On the other flank, about 100 Democrats in the Progressive, Black, Hispanic, and Asian-Pacific Islander Caucus are pushing for a more expensive and government-centered proposal than the Blue Dogs will entertain.
Three key Democratic committee chairs are taking heat from both flanks: Energy and Commerce Chair Henry Waxman, Ways and Means Chair Charles Rangel, and Education and Labor Chair George Miller. House Speaker Nancy Pelosi generally leans toward the liberals; her deputy and sometime rival, Majority Leader Steny Hoyer, sides with the moderates.
On the Senate side, Finance Committee Chair Max Baucus has determined that no health bill can pass there without a sprinkling of Republican votes. He thus has been working with Republican Senators; his aim, he says, is to produce a bill that can get 70 Senate votes (meaning at least 10 Republicans would have to sign onto an eventual bill).
Obama earlier this month convened a media event at the White House which included health-sector, labor, and business leaders who said they shared his objective of enacting reforms which would a) reduce health-care spending growth; b) improve quality of care; and c) expand coverage to those presently without health insurance. Trouble is, depending on the legislation's final content, those objectives could prove mutually exclusive. The past track record is not promising. Whenever cost-containment measures have been taken, accompanying expansions of coverage have been thrown in to attract Congressional votes. In all cases, costs thus have increased.
Chances for a so-called single-payer plan, run by the government, are zero. Debate now centers around the notion of whether a government plan should be established to compete with private health-insurance plans, presumably driving premiums downward. Cost and reach of such a plan also are in doubt.
Most in the Congress, without regard to party, are nervous about the price tag of a comprehensive plan. With trillions already committed to financial rescue, economic stimulus, and an auto bailout — guaranteeing $1 trillion-plus annual budget deficits for at least the next decade — projected costs of the eventual Obama proposal are being estimated at an additional $1 trillion. (The Obama administration concedes these costs but has budgeted only $635 billion for them.)
The final version of the Obama 2010 budget, released last week, projects annual deficits totaling $7.1 trillion between 2010 and 2019, added to the $1.8 trillion projected for 2009. By the end of that period, the ratio of publicly held federal debt to GDP (Gross Domestic Product) would reach 70 percent, up from 41 percent last year. The Congressional Budget Office, using a less optimistic scenario, estimates deficits of $9.3 trillion between 2010 and 2019 with a debt-to-GDP ration of 82 percent by 2019.
Despite these daunting numbers, there is an emerging consensus among insurers, health-care professionals, business, and labor leaders that the present system needs overhaul. But, inevitably, the tensions between cost containment and expansion of coverage will be felt in the legislative process.
Obama is pressing forward on the health issue because he understandably believes his own popularity and leverage are higher now than they likely will be next year. On the other hand, the scheme's prospective costs are so high that only the most liberal and safe-seat incumbents are comfortable with its prospective outlines.
Outlook: Obama has said he wants health-care legislation passed this summer. Some kind of bill no doubt can be passed by then. But, to get passage, both the administration and Democratic Congressional leaders may have to settle for incremental, less expensive changes than they are discussing today. Obama has chosen a strategy of bold public advocacy but has left the legislation's content to a surprising degree in Congressional hands. Future political-science journals no doubt will be filled with retrospective articles relating the hows and whys of this effort's eventual success or failure.
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Comments:
Posted Fri, May 22, 8:49 a.m. inappropriate
Fine piece, once again, Mr. Van Dyke. I, too, will be curious to witness the outcome of such a struggle, though I hope to a great degree that Obama has his way. However, one comment I have is in relation to your words:
(Obama) has left the legislation's content to a surprising degree in Congressional hands
Yet, what we don't know, is how much he is working behind the scenes with Congressional leaders when doing so.
I look forward to your next piece.
Posted Fri, May 22, 10:36 a.m. inappropriate
The deficits are really spooky, especially if there are very uncertain payoffs associated with them. Investing in a child's education is going to increase their earning power, and therefore the tax revenue they will generate. Investing in Chrysler? I'm not so sure.
The percentages of GDP are hard to digest. Here's another way to look at things. The population of the US is about 300 million.
To fund a deficit of 1 trillion per year, that means each of the 300 million needs to loan our government $3,333. For a family of four, that works out to $13,332.
THese are sobering numbers, but what's even scarier is to think of doing this every year for the next 10 years. Assuming the trillion addition al borrowed each year includes interest already on the $13,332 we borrowed, at the end of 10 years, the total we owe back would be $133,320.
How in the name of goodness is any of this spending going to generate the cash flows necessary to pay down that kind of debt?
I do not see where this money is going to come from. China? Well, to put things in perspective, if they have 1.3 billion people, and they wanted to loan us a trillion, it would work out to about $800 per person per year. Obviously, the full trillion won't come from China. But given Japan's demographics and impending retirement needs, it probably won't come from there. It probably won't come from Europe. They are simply not growing fast enough. Maybe it will come from the Oil states? No guarantees there either. I don't know how much we pay for oil each year, but I bet it is a fraction of a trillion.
I sent a letter to my congressman asking if he was going to pony up $13,332 to buy T Bills for his family (at what, 2% interest?). I got a generic answer back. Are there any Crosscut readers who are going to buy $13,332 in t bills for their family of four in 2009, in 2010, and in years to come?
Posted Fri, May 22, 11:34 a.m. inappropriate
sjenner writes: "How in the name of goodness is any of this spending going to generate the cash flows necessary to pay down that kind of debt?"
Inflation. Lots and lots of inflation. Welcome to Weimar America.
Posted Fri, May 22, 3:18 p.m. inappropriate
Responding to Jenner and Breneman: It is not only the U.S. entering a dangerous debt box. You may have seen in this a.m.'s WSJ the report that, between 2008-2013, net-debt-to-GDP ratios will rise in Japan from 110 to
120 percent; in the U.K. from 49 to 97 percent; and in Germany from 62 to 72 percent. Buckle up.
Posted Fri, May 22, 10:40 p.m. inappropriate
Japan and Europe are going to be in even worse shape because of their demographics. Japan is aging very rapidly. They simply do not have children. Most countries in Europe are facing the same demographic crunch as well. This will result in fewer people to slough the next round of debt off to, or to raise taxes on to cover health and transfer payments, and in Japan's case, a need to stop buying T bills / stocks and other savings, and start selling.
This is why I ask "who's going to buy this stuff." Seriously. We need to think 10 - 20 years out. Who will be buying in 10 - 20 years? Will these mega deficits somehow shrink?
Inflation is not a plausible answer. Investors will just buy the inflation-adjusted TIPS bills. These are not a perfect hedge for people who need to sell, the value of the principal can go down, but if people plan on holding them to maturity then they are a viable option. We saw in the 70s how inflationary expectations absolutely ruined many dreams. I hope we don't get anywhere close to that stage again.
Speaking of the 70s and inflation - Paul Volcker has not been in the news at all since joining the Obama administration in some sort of a capacity. I wonder if he was just window dressing? He has invaluable lessons for us.
Posted Fri, May 22, 10:57 p.m. inappropriate
Solution: Write a check monthly for health insurance. No more employer subsidies; no more 'free' health benefits for KING COUNTY, METRO, TEACHERS, BOEING, MICROSOFT, ETC. No more golden retirement health insurance for auto workers, retirees, etc. Until health insurance is divorced from employment and until it is never a tax free benefit deduction there will not be a solution. A patchwork system that focuses on 130,000,000 workers that fails to insure 305,000,000 total bodies is a brain dead loser.
Posted Fri, May 29, 6:11 p.m. inappropriate
I think it was a mistake to: (a) keep single-payer advocates from the table - all alternatives should be considered; and (b) to have the crocodiles, i.e. the industry interests, so closely involved in the solution.
I worked in health care for ~ 5 years. My entire department was responsible for analyzing patient and financial data. Imagine the gazillions of different health plans: coverages, premiums, deductibles, etc. Now, imagine instead that everyone had the same "base" set of coverages, with steep co-pays for optional items. Imagine the employers could add on to this base with blocks of additional coverages. Portable coverages that way. Think a more-efficient cable TV system where you had a base set of channels and could add a sports block or a culture block, and so on. But, in health care's case, every employer - or individual, for that matter - would have the same blocks to choose from. Imagine how much simpler health care would be. Of course, that's not the total solution. Electronic medical records. Billing begins at $X (= the amount where it's actually cost-effective, whereas now bills are sent for $5 that cost more than that for processing). Preventative coverage through age 19 (cheaper than E.R. visits). Start with the simplest, if there is one. Work towards the hardest. But, get going!