Is Obama Naive About the For-Profit Health Industry's Commitment to Real Reform?

[Updated on May 11.]

Optimism is a virtue; it leads us to see the best in people despite their flaws, and to envision a better future even when we can clearly see the obstacles that lie in the path to that future.

But blind optimism is no virtue. Naive or overeager optimism can lead us to ignore the fact that most people have mixed motives, and to cling so tightly to our vision of an idealized future that we become blind to the practical challenges we need to overcome to reach it. Wiser optimists trust - but verify; they have faith in the better, without ignoring the worse, angels of human nature.

On Sunday afternoon, two senior Obama Administration officials unexpectedly called a telephonic press conference to announce what they cast as a tremendous, positive new development in the healthcare reform effort. And they seemed genuinely, sincerely excited about this mysterious new development -- excited enough to buzz every national journalist's BlackBerry with an invitation to the conference call in the middle of Mother's Day. Because the President himself will be announcing this development officially on Monday, they embargoed the information (forbade reporters from releasing it) until 9 pm ET Sunday, and made the call -- arranged by the White House press office -- "on background," asking not to be identified by name or position.

Quite a buildup. So what was the big news? Simply this: a coalition of health insurance, hospital, pharmaceutical, and physician trade groups, plus a major union, will promise the President Monday that they will reduce the rate of future growth in the cost of healthcare by 1.5% per year for the next decade.

That's it. And the President will be announcing it himself Monday morning [update: according to CNN, 12:30 ET, 9:30 PT], presumably with equal excitement. [More HuffPost reporting on this call here.]

The big news, in other words, is that healthcare will continue to be increasingly expensive for consumers, employers, and governments, but not quite as quickly as it was going to be. 7% per year inflation will become 5.5% per year inflation -- that is, if the participants keep their promise. Which, according to the officials, they'll do, not because there's any kind of enforcement mechanism - there isn't one - but simply because they're "Americans."

(That's a quote from one of the administration officials, by the way: these for-profit healthcare industry groups are going to reduce costs, and potentially profits, simply because they're good "Americans.")

The senior administration officials were hyperbolic about this news. One, focusing on the political battle to enact healthcare reform, called the trade groups' pledge "a game changer."

The other official, focusing on economic issues, saw this as nothing less than the salvation of the entire federal budget:

"I don't think there could be a more significant step to help struggling families and to help the federal budget than reducing the growth rate of healthcare spending by 1.5 percentage points per year. With regard to the federal budget... the only way that we are going to restore the nation to a sound fiscal path over the long term is to reduce the growth rate in health care costs... Reducing the growth rate of health care costs overall by 1.5% per year would virtually eliminate the nation's long term fiscal gap. ... This, by an order of magnitude, is far more important [than Social Security or related reforms] to the fiscal trajectory that we're on, especially over the long term, than anything else that could be done."

Remember, we're talking about slightly reducing the rate of growth in health care costs, not a reduction in health care costs themselves. That's what's supposedly going to save both American families and the nation's fiscal problems "over the long term."

The journalists on the call, understandably, were more skeptical. The biggies queued up to ask questions: reporters from the New York Times, Wall Street Journal, Associated Press, Washington Post, NBC News, CNN, Los Angeles Times, Reuters. Some asked for wonkish, green-eyeshade details (answers were rarely forthcoming).

Other reporters questioned what mechanisms were in place for making sure those promises are kept (answer: there are none). In response to a question from Reuters, one of the officials put his trust in the bully pulpit and the Fourth Estate, saying, "I don't know how many of you have made, in-person, a commitment to the President of the United States... There will be accountability not only through regular check-ins with the President of the United States but also through the media, because I have no doubt that you all will be checking up on them."

The other official simply believes that pharmaceutical, insurance and hospital trade groups are acting in patriotic good faith, saying, "These are very sophisticated trade associations which in the past have, one could argue, dragged their feet when it came to the subject of health care reform and certainly cost containment. [Now they're] coming forward voluntarily, approaching this President and saying, we want to be part of the solution, we want to be part of getting health care reform done... That fundamentally aligns these major provider groups with the President's goal of getting health care reform done this year. That is a game changer in our opinion."

Eliza Marcus of Bloomberg and Michael Fletcher of the Washington Post asked outright whether the healthcare industry was buying something with this concession. One of the officials dismissed the possibility, denying that there have been any discussions at all about the public plan or any other quid pro quo and instead casting the industry coalition's promise in purely patriotic terms: "They put it to me that everybody must share responsibility.... [T]hey want to get everybody covered... and they said to me, we know we have to do our part.... [T]his is them coming forward as Americans to get this done."

At face value, the health industry groups' announcement is good news. Even Paul Krugman, a consistent Cassandra of late, seems pleased. What's puzzling is the Administration's eagerness to accept it at face value. The group making this pledge includes private health insurers, medical device manufacturers, a pharmaceutical manufacturer, and the pharmaceutical manufacturers' trade group (PhRMA).

If you want a sense of how loyal and reliable this group is, you may be interested to note that PhRMA is represented in these negotiations by former Congressman Billy Tauzin, who (as a Democrat) co-founded the anti-progressive Blue Dog Coalition, then left the party to become a Republican, fought for pharmacy industry interests while in office, and finally began working on PhRMA's payroll literally the same day he left Congress. PhRMA (pronounced "Pharma") has never in its existence made a concession without something being in it for them. Most (though not all) of the groups participating in this initiative historically have opposed health care reform, and most are large donors to the Republican and Vichy Dem politicians who are preparing to mount a political and rhetorical battle against health care reform, as evidenced most recently by the leak of Republican pollster Frank Luntz's crassly cynical talking points memo (teaching opponents of healthcare reform how to "spin" Obama's plan so it sounds like Mandatory Gay Nazi Communism).

The biggest concern most members of this "patriotic" coalition have about Obama's reform plans is his intention to include a "public plan" -- i.e., a Medicare-style, government-run health plan that anyone could subscribe to, just like they can subscribe to Blue Cross, Kaiser or any other private insurance. That government-backed option terrifies the for-profit healthcare industry, because they know they can't compete with it. Medicare, for all its faults, still has the lowest administrative costs than any other health provider in the country; it has no need to deliver profits to shareholders, its executives are paid far less than their counterparts in the private sector, and it delivers competent care to millions of Americans who otherwise would go uninsured. Not only is a Medicare-style public health plan a competitive threat to the for-profits, but it's a political threat as well: for-profit providers know that if millions of Americans sign up for federally-run, nonprofit healthcare and see that it actually works -- that their fears of rationed care and needless deaths aren't borne out -- then the inertia towards single-payer healthcare for everyone may become an unstoppable juggernaut.

For that reason, it's hard to believe that a coalition including PhRMA, Kaiser, the nation's largest hospital coalitions, and other for-profit providers aren't angling, at a minimum, to curry enough favor with the Administration that Obama feels obligated to drop the public plan option -- just as he "compromised" on aspects of FISA, healthcare components in the stimulus package, and other controversially progressive aspects of his original platform. But the senior Administration officials speaking to reporters on Sunday seemed genuinely nonplussed that anyone would think such a quid pro quo might be under, if not on top of, the negotiating table.

The last question of the conference call, happily, went to me. I wanted, first, to confirm that the grand announcement was merely about a reduction in cost increases, not a reduction in cost, and second, to know whether Obama, himself, still considered a public health care option to be beyond negotiation. I figured, if Obama is unstinting in his support of the public option, it doesn't matter what the trade groups think they're buying with this concession, right?

I didn't like the answers I got, though. The first told me that the Administration is getting too excited about too little; a reduction in the rate of growth is less relief than American families and employers need, and the second fell short of the adamant reassurance I wanted to hear. But decide for yourself:

Bellows: "I have two questions. The first is following up on Michael Fletcher's and Eliza Marcus' questions: is the President still insistent that a public health plan will be among the options offered to people, or is that a bargaining chip in any way? And the second question, following up on Andrew Beatty's: is it correct that the cost per capita will still increase, just not as much as it previously was projected to?"

Senior Administration Official #1: "On the second question, the answer to that is yes. Again, what we're talking about here is reducing the growth rate, so yes, health care costs, you should anticipate health care costs will continue to rise, but achieving a slowdown in the rate at which they increase is a, would be a huge accomplishment in terms of freeing up resources for other priorities and in terms of relieving pressure on the federal budget."

The official continued with a justification for accepting continued healthcare cost increases:

"One of the reasons that you should expect health care costs to continue to increase is not only that the population is aging, which puts some upward pressure on health spending, but also that as incomes rise over time, it is natural that people want to spend part of their additional income on health care...."

On whether the public plan is non-negotiable:

Bellows: "The second question?"

Senior Administration Official #2: "On the public plan, this event with the President tomorrow [Monday] is not about the public plan, we've had no discussion with this group about he public plan, in fact, if I look at the list of trade associations that are part of this, there are different views about it, but the President likes the public plan, it's part of his campaign plan [sic: platform?]."

My beef? Simply that liking a plan is weaker than labelling it non-negotiable. The lack of adamancy troubles me.

One of the Obama administration's mantras is "don't let the perfect become the enemy of the good." But in these times, with Obama's still-strong mandate for change and the American people's rare but undeniable hunger for reform, their motto ought to be: "Don't let the good be the enemy of the perfect."

Radical health care reform -- reform that doesn't shave health care costs for regular people and their employers, but slashes them; reform that doesn't force single-payer healthcare on the American people, but demonstrates that it can work well and therefore sets the stage for their eventual acceptance of it -- is within Obama's grasp. He'd be wrong to settle for merely "good" health care -- for health care that merely slows the rate at which costs increase, or health care that doesn't include a government-payer option to demonstrate that a government-sponsored plan can provide better care at lower cost than profit-driven private plans. He would, to paraphrase Chief of Staff Rahm Emanuel, be wasting a crisis.

Anyone paying attention to the economic policies of industrially successful nations knows that single-payer, low-cost healthcare is key to America's future. By taking for-profit corporate lobbyists like Billy Tauzin at their word, by considering their unenforceable promise of future good behavior as if it were a tangible present good, is Obama setting himself up to deviate from the clear path to that future? Obama has, within his grasp, that once-in-a-lifetime rarity: a plan that is both nearly perfect, AND achievable. Will he give in when the for-profit healthcare industry, inevitably, asks that the public option be watered down or taken off the table altogether -- or will the president keep his word to the American people -- people who have put their trust in his commitment to collaborate, but not to compromise?

Comments

[robbep]

i see that more and more of us are starting to get concerned by Obama's willingness to work with the other side. I wld love to hear one reporter ask him what issues does he fully commit to and wld not compromise away.

[ntmessage]

How can we defend growing the health care system during a depression? Especially when the system is already 17% of GDP for mediocre health care. Other countries pay more like 9% of GDP. If we do not stop the growth and address the one Trillion of waste per year every year today (growing to 1.7 Trillion in 10 years) we will have health care as 25 % of GDP.

This is the most non-progressive, costly and most regressive thing we can do to the country. Ever. This is how the UAW bankrupted GM. Except now, the government can bail out the UAW and GM.

Once the country goes, no one can bail us out. It is all Health Care because it is all spending and so much waste. In the current Obama plan, there is still 15 Trillion of waste in the next 10 years as opposed to 17 Trillion of waste. That is wholly unacceptable.

Numbers do not lie. Sharpen your pencil and see what Orzag sees. Bankruptcy not because of the banks (who will pay the government back with interest) but from Health Care. So many people go bankrupt because of health care. That is a microcosm of our nation’s future disguised as a canary in the coalmine.

[rrlieberma]

Including a serious nonprofit public option will be largely a political decision. We need to support those public officials, such as New York Senator Kirsten Gillibrand, who strongly advocate this approach. If Obama does not have the political will to move firmly toward a single payer system, we have to make sure that he gets the political push that he needs to do the right thing, and not be shy about it.

[John Graham]

There's an obvious error of fact in the article: Kaiser and (85%) of the hospitals are non-profit, but he calls them for-profit.

[RightsGuy]

WHY ISN’T SINGLE-PAYER ON THE TABLE?

A NEW STUDY SHOWS THAT SINGLE-PAYER HEALTHCARE REFORM WOULD BE A MAJOR STIMULUS FOR THE US ECONOMY and would provide:

** 2.6 Million New Jobs,
** $317 Billion in Business Revenue,
** $100 Billion in Wages, and
** $44 Billion New Tax Revenues

You can find out more about this study here: http://www.CalNurses.org/

The press release is here: http://www.calnurses.org/media-center/press-releases/2009/january/nurses-to-congress-expanding-medicare-could-reverse-job-losses-and-repair-our-broken-healthcare-system-and-safety-net.html

And check out this Bloomberg.com article, “No Reason to Demonize U.S. Single-Payer Health:
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_wasik&sid=ao58otXrmrPM

[BenedictAtLarge]

Some 30 years back, I had the good fortune to work for the then largest group health insurer in the world. Being involved in major product development, I grew to know the animal inside and out. I say "good fortune" now because back then, we were still trying to do the right thing: help folks handle their toughest bills when they couldn't by themselves.

I left in the mid-80's because I saw that long term, we could no longer do that. I knew even then that the "inflation over inflation" that had beset us would end us as a viable product and even as a desirable product. (Many of my contemporaries at the time knew this also.) Today, I'm frankly amazed that the industry has lasted this long because it simply has never effectively addressed that inflation over inflation problem.

Which brings us to this latest promise. In a word, it is bullshit. You can find it somewhere in EVERY single mission statement of EVERY single group health insurer from the time I worked for them until today. It is the sort of bullshit that allows everyone to rest, thinking at least "they" are trying. I'm sorry, but after over 35 years of hearing "I'm trying", we must only conclude that either they are not, they are not trying very hard, or THEY ARE NOT CAPABLE of solving the problem. Whichever you choose, it's time for these companies to die. Before they kill anymore of us.

[DRaymond]

What is naive would be thinking that any sort of health care reform in this country would occur without the buy-in of all these major players, any of which could lobby a reform program to death and any of which would if it was going to destroy them.

The big thing is that none of them are still trying to hide behind the old baloney that 'America has the best health care in the world!' They all now admit that things need to be changed.

[Bronxdude]

Health insurance providers and pharmaceutical companies (in collusion with crooked politicians corrupted by “K” Street lobbyists) have butchered the American middleclass. Since republicans don’t support real healthcare reform and do support the continued plundering of the middleclass by corporations like UnitedHealthcare and Pfizer, this is exactly why we need the federal government between the public and corrupt politicians who advocate for corrupt health insurance providers. Real healthcare reform provides the consumer with real options, such as single payor, private insurance, or public insurance. In Georgia, under its current healthcare insurance contract with UnitedHealthcare, state employee’s due process patient protection rights have been abolished, which means that UnitedHealthCare can deny benefits or medical coverage, influence medical care, and charge exorbitant deductibles and copays with impunity. Real reform will end the collusive/­monopolist­ic advantage currently enjoyed by drug companies and health insurance providers. Don’t be fooled Mr. Obama; they will no give up the ghost quietly!

[NoMoFearNoMoHate]

I think you're missing the point that the will of the American people to reform healthcare has forced them to the table and THAT is what was such big news and that we can, we MUST continue along this process to improve our country.

[ntmessage]

We also neglect to point out that we have DEFLATION in the economy today and that all assets are roughly worth half of what they were in the past. The long-term target inflation by the Fed is 2%. And we are seriously talking that 5.5% is good? I cannot believe how ridiculous this sounds. People are talking about this continued gouging of the consumers with a straight face? Is the media too concerned about losing those two-minute commercials for drugs we do not need? This is the definition of corruption.

Am I the only one out there thinking this is catastrophically wrong and unfair when you look at the lives of ordinary people?

Today we spend SEVEN THOUSAND dollars on every person for Health Care. At 5.5% inflation, we will be paying OVER TEN THOUSAND per person within 7 years! All this while everything is actually costing less. If my house is halved and my stocks are halved, why can’t we ask the Health Care Industry to LOWER their prices?

Come On!

[TrueSense]

Either the American people are fools or the admin is acting foolishly. This is a straight out bambuzzle. The tax code is his only heavy lift so far and he disappeared on allowing short sales to stabilize the country. I hope he is not an agent to keep the American people from getting what they really want. and deserve. Another Bush/McCain, and the people would look for a true tough, progressive populist ! Who wants that ?

This is change we can believe in ? He is acting to slick and makes you want to believe but it does not match up with reality and what is needed for th people, the economy, and the country and competitveness and money saving. Big, deal, slow the rate of growth !

Obama is either naive, sold out on this one, or thinks the people are stupid. I am glad to see the press asking hard questions. Now I just wish I could see the reporting.

[PJay1]

Maybe not so naive as 'beholden' and obsequious.

I don't get it.
He was elected by a majority - a mandate.
He has REAL political capital.
Democrats are the majority in both the House and Senate.

And yet he makes unnecessary, even harmful, concessions one after another, and to a party that has become basically irrelevant.

Why?

[Rog49Thomas]

The industry's commitment to health reform is as real

As "self-regulation".

As John Galt.

As those WMDs in Iraq.

Oops, let me correct my post. Actually John Galt is more real than the industry's commitment to reform.

[vanmungo]

This "plan" is nothing more than emergency life-support for the private-insurance industry. It's an unconscionable sham, nothing more than a Rube Goldberg contraption to dodge the only real solution to runaway costs--single payer. It's the health-care equivalent of Geithner's bank bailout--another sop to the corporate sector embroidered with a lot of demagogic, diversionary populist pap.

The most nauseating sentence in the article above is the following: "Radical health care reform - reform that doesn't shave health care costs for regular people, but slashes them; reform that doesn't force single-payer healthcare on the American people too soon, but sets the stage for their eventual, uncomplaining acceptance of it - is within Obama's grasp."

DOESN'T FORCE SINGLE-PAYER ON THE AMERICAN PEOPLE????!!!! Every poll on this subject for the last several years has shown that 60-65 percent of Americans favor single-payer medicare for all, along with 59 percent of physicians. The only forcing is being done by the HMOs and Big Pharma, shoving another gulleftul of inflated costs, coverage gaps, rising copays and deductibles down the mouths of the American people.

Tepid corporate liberals like this author make me sick--which is very dangerous, given my lousy for-profit insurance plan.

[barackobama4prez]

i think the black guy has been burned enough not to be naiive about such things. watch him work.

[M.S. Bellows, Jr. - Huffpost Blogger]

Wish I could. What I keep seeing is an overwillingness to compromise. For example, he omitted important things (mortgage "cramdown" power in bankruptcies) and included unnecessary and wasteful ones (too many tax cuts) in the stimulus package -- only to net zero Republican House votes. As a senator, he compromised too quickly on the Alito filibuster. He promised to campaign for Arlen Specter -- who immediately said Franken should concede to Coleman in MN, of all things.

Please understand: I'm an experienced litigation attorney who now works solely as a mediator. I support both collaboration (best method) and compromise (often better than outright conflict). But some people confuse the two, and brilliant as he is, I believe Obama sometimes is one of those. I fear he'll abandon the public option in order to curry favor with both Rs and with conservative Ds (a whole other topic!), instead of taking the war to them and pushing them to accept his agenda. As a peacemaker, that may be against his nature. As a "change President," it shouldn't be.

[vanmungo]

The public plan option is the HMOs Plan B--a Trojan horse designed to torpedo single payer. In this Rube Goldberg hybrid contraption, the public plan would be saddled with all the sickest, oldest, and poorest of the population, saddling the public plan with impossible costs disadvantages and depriving it of the cost-efficiencies of risk pooling that are the main advantage of single payer--i.e., the healthy 80 percent pay for the sick 20 percent. In a hybrid plan, the HMOs, with slick unscrupulous marketing, would bury the public plan. Even Jacob Hacker of Berkeley, who helped to design the hybrid plan, predicts that it will result in an EXPANSION of private-sector insurance.

Beware the public-option plan--it's not a step toward single payer--it's a step into the abyss. The hybrid plan is the HMO wolf in sheep's clothing, nothing more.

[barackobama4prez]

I hear you. But the fact is, many progressives want to have it their way, or no way at all. Liberals have a limit to what terms they will accept and sometimes that results in no terms at all. Then they are pi$$ed because they got nothing. As uncomfortable or "unworkable" as the things you've been mentioning, the President's plate is pretty full and I think we are making progress. He never said he wouldn't dissapoint Democrats.

[PJay1]

Good points all of them, as well as this whole article.
It can get exasperating to watch him being so obsequious.
It' s not becoming of a president who won with a majority and a real mandate.