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What Obama Can Learn from Arnold

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Monday Governor Arnold Schwarzenegger, whose own attempts at statewide health care reform failed last year, hosts a White House summit in L.A. on national reforms.

Schwarzenegger stirred a little controversy when he called Obama "scrawny" during the presidential primaries, but, ironically, it was the Governor who couldn't do the heavy lifting that real change in health care requires.

What's not likely to be talked about Monday is the lesson that Obama can learn from Schwarzenegger's failure. Here it is: Real reform is not about who pays for health care, but how much insurance companies, drug companies, hospitals and doctors are allowed to charge.

Schwarzenegger, in his 2007-2008 attempted overhaul, never seriously targeted cost control. His so-called "shared responsibility" approach focused on making taxpayers, employers, and individuals pay for private insurance policies without taking on out-of-control premiums and charges. The state's nonpartisan legislative analyst burst that fiscal bubble when she declared the plan unaffordable. Cost control is impossible when premium costs, deductibles and the cost of care are left to insurance companies, HMOs, hospitals and the doctors themselves.

Unfortunately, this "shared responsibility" concept is catching on in Congress, which is just as afraid of the whole medical-insurance complex as Schwarzenegger, and even more dependent on its campaign contributions.

The chief architect of the a federal health care overhaul in the U.S. Senate, Finance Committee Chair Max Baucus, sounded much like Schwarzenegger recently in calling for individuals to be "responsible" for purchasing health insurance as a tradeoff for insurers' agreement to sell policies to everyone. Sen. Baucus received more campaign contributions from the pharmaceutical and health insurance industries than any other current Democratic member of the House or Senate, and is the third biggest recipient overall.

Obama needs to draw a line with the "mandatory purchase" crowd. When running for office the president was clear about his opposition to mandatory private health insurance. He said, "The reason people don't have health insurance isn't because they don't want it, it's because they cannot afford it."

What the president must do to make health care affordable is to stop medical price gouging and build as big an alternative as possible to private insurance for those who cannot get or afford coverage otherwise. This was his campaign pledge. The notion of a "public option" like an expanded Medicare is not popular on Capitol Hill because it would require insurance companies to get lean or die. On the other hand, embracing mandatory purchases of insurance could evict Obama from the White House in four years.

Under the "shared responsibility" proposal, when an employer doesn't offer insurance, or pays only a fraction of premium costs (and an individual doesn't qualify for government assistance), Americans will have to reach into their pockets for uncontrolled premiums, deductibles and co-pays. Only 16% of Americans support the idea that every citizen should be required to show proof of a health insurance policy when told they would have to pay for it, according to a national poll conducted for Consumer Watchdog.

The notion that employers, middle class Americans and taxpayers can foot the bill for "universal" private health insurance policies is more specious than ever in this economy. Federal data for the first time shows medical cost inflation falling sharply (and no doubt temporarily), to less than 3% for the past year, because of the recession. Yet insurers are demanding double-digit premium increases on individual policies.

Cost control is no easy proposition. But keeping insurers in charge is not going to get us there.

Already Obama has specified some important and difficult cost reductions. He's embraced "comparative effectiveness," which requires knowing which treatments work and which don't or are even harmful. This particularly scares the pharmaceutical industry, which pushes patented drugs that are too often no better than a current generic. He's also fought for more transparency in hospital and doctor charges, and backs digital medical records that can cut fraud, waste, duplication and costly medical errors.

The next step for Obama is a structure to standardize and rein in the medical insurance complex's charges. He'll face a dirty fight with all kinds of scare tactics about regulation being "socialized medicine." But Americans are not going to be happy with endless taxpayer subsidies for the bloated and irrational medical and insurance bills they now receive.

The federal government has tools Schwarzenegger did not to curb medical costs. That's one more reason for Obama not to follow Schwarzenegger into the morass of simply pushing costs around. Schwarzenegger is a master marketer, but his health reform debacle is an adventure that doesn't need a federal sequel.