07/10/2009 05:12 am ET | Updated May 25, 2011

OBAMACARE: Will It Be Affordable Universal Health Care or a Government Bailout for the Insurance Companies?

According to recent reports, President Obama plans to play a bigger role in shaping health care reform legislation being formulated in the Senate and House.

The questions is will Obama's personal involvement lead to more robust health care reform which will make significant progress towards affordable universal care? Or, in the name of gaining support from the health insurance lobby and the "moderate" Republicans and "centrist" Democrats to whom it has contributed so much money, will Obama allow so many compromises that health care reform turns into a government bailout for the insurance industry?

Several administration quotes in the New York Times leave reason for concern. According to Rahm Emanuel, "The only nonnegotiable principle is success. Everything else is negotiable." According to the ranking Senate Finance Committee Republican Sen. Charles Grassley (a staunch opponent of a viable pubic option) in a meeting with Grassley and Democratic Senate Finance Committee chair Max Baucus (who has refused to commit to a public option) Obama said "Yeah, it's [the public option] a problem. If I get 85% of what I want with a bipartisan vote or 100 percent with 51 votes, all Democrat, I'd rather have it be bipartisan." Possible translation--we may be willing to give up a viable public option, mandate that every American buy private insurance, and tax workers for their employer-provided health care, if it will get a bill passed with some Republican votes.

There is a version of health care reform that would be very much to the liking of the for-profit health insurance industry and is very much in line with proposals being discussed by health insurance shills in Congress like Baucus and Grassley who have received huge campaign contributions from the for-profit health care industry.

• First, it would mandate that every uninsured American buy private health insurance or be fined by the IRS. This would provide the health insurance industry with 40-50 million new paying customers. (Obama argued against Hillary Clinton's proposals for such individual mandates in the Presidential debates, but now appears to be prepared to accept them as part of the price for insurance industry support for a health reform bill.)

• Second, it would provide partial subsidies to families who make less than two to three times the poverty level to buy private insurance, money that would go straight into the pockets of the for-profit insurance companies.

• Third, it would pay for this government subsidy by making workers pay income tax on their employer-provided health benefits. (John McCain supported this approach and Obama opposed it during the campaign, but Congressional opposition to other taxes to pay for health care reform may leave it as the last available option to Obama.) As Obama pointed out in his debates with McCain, this would lead many employers to drop health coverage for their employees and force them into the individual insurance market which is the most profitable sector for the insurance industry.

• Fourth, it would jettison the implementation of a public non-profit insurance option that might cut costs and provide serious competition to the private insurance industry, or more likely, include a neutered public insurance option that would be barred from seriously negotiating with providers for lower prices, and that might well benefit private insurers by offering a dumping ground for older and less healthy consumers whom private insurers don't want to insure, anyway.

If, as Rahm Emanuel says, "everything is negotiable", and if, as Obama says, he'd rather get part of what he wants with more than 60 votes--including some Republicans--than all of what he wants with 51 votes--all Democrats--then this is what health care "reform" may well end up looking like--a federal bailout of the private health insurance industry at the expense of the taxpayers.

Supporters of compromise are fond of chastising supporters of more robust health care reform, particularly single payer advocates, by repeating that "we can't let the perfect be the enemy of the good." The problem is that an overly compromised health reform bill that satisfies the health insurance lobby and its Democratic and Republican supporters in Congress may not be "good" at all, and may even make things worse. Health care costs would not be reduced, putting increasing strains on individual and government budgets. Uninsured individuals would be forced by the government to buy private insurance they can't afford, taking a big hit out of family income and reducing demand in other sectors of the economy. Workers would be forced to pay for it by being taxed on their employer-provided health benefits. And as a result, increasing numbers of employers would drop health benefits for their employees.

In a few years, this could lead to a huge political backlash against Obama and Congressional Democrats who voted for this "reform." Just as the Clinton's flawed health care proposals in 1994, which never came to a Congressional vote, lead to the revival of the Republican party in the 1996 mid-term elections, the enactment of a flawed health care reform plan by Obama, which results in greater financial burdens being placed on American families, could lead to the revival of the Republican Party and its calls to let the "free market" rule.

Part of the problem is that all of the leading Democratic Presidential candidates (Obama, Clinton and Edwards), as well as much of the grassroots progressive movement like MoveOn and unions like the SEIU, took single payer health care off the table from day one. If you scratch, them, most would agree that single payer health care (which would save approximately $400 billion dollars a year that now goes to private insurance company overhead, executive salaries, profits, and health provider employees responsible for billing) is, from a policy perspective, the best solution to providing affordable universal health care to all Americans. Single payer health care would align America with most of the developed capitalist world in which government-provided health care is a right and which provides better health outcomes for half the cost. Obama, himself, supported single payer health care as an Illinois legislator and during the Presidential campaign stated if he were designing a health care system from scratch, it would be a single payer system. But, liberal supporters of political compromise argue, single payer is not politically practical. This, despite the fact that polls by the likes of CBS News and USA Today show 55%-56% of voters support single payer. What they really mean is that, in their opinion, the insurance lobby is so powerful than even in the face of a mass political movement and Presidential leadership, single payer could not garner 51 (much less 60) votes in the Senate. Of course if 4 or 5 years ago you asked what would be more likely in our lifetime, single payer health care or an African American President, most of us would have said single payer health care.

But even if the liberal supporters of compromise are correct and single payer health care is unlikely to be achieved in the next few years, Obama and his progressive supporters have made a potentially fatal political error by surrendering in advance to the insurance lobby and taking single payer completely off the table as an option. It means that they start the political bargaining process having already given away their most important bargaining chips. A mass movement for single payer health care, supported by the grassroots progressive movement and the most powerful unions, with support from key Congressional Democrats and at least tacit support from President Obama, would scare the hell out of the health insurance industry and might lead, in the negotiations over a health reform bill, to their at least living with a robust public option. With single payer off the table, the insurance industry can turn all its guns on pressuring Obama and his Congressional supporters to bargain away the public option, or just as likely, come up with a "compromise" which neuters the public option and make it largely ineffective, while still being able to tell liberal interest groups that some form of public option was included in the final legislation.

Keep in mind that the argument of many progressives for a robust public option is that it's a stealth avenue to eventually reaching single payer. People like Paul Krugman and Jacob Hacker argued that it would save so much in administrative costs, compared to private insurance, and would be so much more effective in bargaining with providers for lower rates, that over time most people would chose the public option over private insurance until it became dominant and private health insurance begins to wither away. Did they think that the private insurance industry wouldn't notice this argument and wouldn't fight against a robust public option as hard as they would fight against single payer? (I've never completely bought this argument by public option advocates--It's true that there would be administrative savings, but the public option would still be relatively expensive if it offered comprehensive benefits, low deductibles and low co-pays. Private insurance could still offer cheaper options with high deductibles, high co-pays and lesser benefits that would draw away many of the young and healthy. This would lead to so-called "adverse selection" in which the older and less healthy gravitate to the public plan, making it increasingly expensive and thus less competitive with private insurance. Rather than leading eventually to single payer, it could instead lead people to conclude that "government financed health care" is expensive and inefficient.)

Already, there are calls from some "liberals" to accept a less robust public plan as part of the political compromise necessary to pass health care reform. Chuck Schumer (Dem.-Wall Street) has put forward one set of principles for such a compromise. Some of the policy wonks who originally developed the idea of a public option are also busy devising such a compromise. The essence of such a compromise is that the public plan would be restrained from using its bargaining leverage to negotiate with Doctors, hospitals and drug companies for lower prices, or to condition their participation in Medicare on their willingness to accept patients from the public plan. Such a compromise takes away the major advantage of having a public plan at all, which is its ability to control spiraling health care costs.

The question now is, having taken single payer off the table, how far is the Obama administration and its progressive supporters--both in Congress and in the grassroots movement--willing to further compromise in order to say that they passed some kind of health reform bill? Will they continue to say that "everything is negotiable?" Or will they say that unless there is a robust public option, a viable means to finance subsidies to the uninsured to buy insurance, waivers to any individual mandate for those who can't afford insurance, and continued tax-deductibility of employer-provided health care, Obama will veto the bill, key House and Senate liberals will vote against the bill, and the progressive movement will oppose it?

Unless Obama, Congressional liberals, and the progressive movement are prepared to draw a line in the sand behind these key, non-negotiable, reform principals, the health industry lobby will eat their lunch, health care reform will turn into a government bailout for the insurance companies, and over the next few years the public may turn against Democrats who allowed such a flawed form of health care reform to become law. It won't be a matter of the "perfect being the enemy of the good" but of the bad being the enemy of the even worse.