President Obama wanted health insurance reform in the worst way. And at the rate things are going, he is likely to get it.
Let's review the bidding -- first the substance, then the politics. America spends 15 percent of its GDP covering far less than the entire population, while other wealthy nations cover everyone, more effectively, for about nine percent. We under-insure tens of millions of others by leaving big loopholes in what's covered. More than half of Americans who file medical bankruptcy nominally have insurance.
Why is our system so massively inefficient? Because it is run by and for private insurers, aided and abetted by for-profit drug companies and hospitals. Even if we insure more people, as President Obama hopes to, a fragmented, profit-oriented system dominated by these interests simply cannot yield the most efficient use of health outlays.
By contrast, a comprehensive system with a national health budget naturally looks for the most efficient way to spend health dollars. That means much greater investment in prevention, and in the comprehensive use of proven treatment protocols for the easy stuff that makes a big difference in heading off more expensive treatments later on, such as childhood asthma, high blood pressure, and diabetes. It means a more sensible breakdown of primary care doctors and specialists. It means not saddling med school grads with hundreds of thousands of dollars of debt, which turns them into profit machines rather than healers.
Private health insurers cannot get us to this outcome because they maximize their profits by targeting the young and the healthy, and avoiding the sick, the old, and the risky. They invent preposterous concepts such as exclusion of people with "pre-existing conditions." Hendrik Hertzberg recently observed that we are all born with a pre-existing condition -- mortality. In theory, HMOs were supposed to increase prevention and collaboration. But they rapidly deteriorated into merely a system where large panels of doctors are approved providers if they accept the HMO's fee schedule, and physicians are under pressure to cut costs and see ever more patients in ever shorter appointments if they wish to maintain their incomes.
The "staff model" group practice -- where doctors are salaried and a medical team of generalists and specialists works in close collaboration -- is our closest equivalent of national health insurance, but it is being crowded out by the cherry-picking practices of the insurance industry. The exceptions invariably provide the best and most efficient care, such as the Cleveland Clinic and the Mayo Clinic.
The press commentary on the cause and cure of medical inflation has largely missed the point. The problem is not that "hospitals" and "doctors" in general make or charge too much money. The problem is feast coexisting with famine. The current system gives hospitals incentives to target the services that produce the most reimbursement at the least cost, such as complex cardiac interventions. So cardiology departments are gold-plated, while money-losing emergency rooms are threadbare. To make matters worse, specialty day-surgery hospitals, often owned by doctor-entrepreneurs, divert profitable patients from hard-pressed local general hospitals.
There is also a misallocation of resources according to medical specialty. As reimbursements are cut by insurers and by Medicare, primary care doctors are squeezed; likewise OB/GYNs, psychiatrists, and pediatricians. Meanwhile, some specialists such as oncologists (who are permitted to personally profit from the sale of cancer drugs), surgeons, dermatologists, and others, are still making out just fine. And standard practices and charges wildly vary by region.
The bottom line is that these structural problems cannot be fixed by what is likely to be approved by Congress as the Obama plan. Obama hopes that heavy reliance on new electronic record-keeping can somehow reduce medical inflation. But this is not where the problem (or the solution) lies -- because the plan builds on the existing insurance industry, with all of its inefficiencies. The candid Doug Elmendorf, director of the Congressional Budget Office, recently testified that the design of the Obama approach did nothing that would fundamentally change the pattern of medical cost inflation.
Putting the best possible gloss on Obama's approach, its inclusion of a public option will gradually move more and more people to a Medicare-style system; its much tougher regulation of private insurers will yield at least some of the efficiencies that we could get through true national health insurance, it will ban some of the worst practices such as exclusion for pre-existing conditions, and its "play-or-pay" feature for employers and subsidy of the near-poor will bring insurance to most Americans.
That is the best possible outcome. But it is not the likely one. That brings us to the politics.
President Obama set the terms of this legislative battle by proposing to work with, not against the insurance and drug industries. That added one lead weight to his feet. Then he added a second lead weight by trying to make the affair bipartisan, inviting Republicans to collude to produce an unacceptably weak plan. (Let's seek what kind of bastard child emerges from the collaboration between the unreliable Democrat Max Baucus of the Senate Finance Committee and his Republican counterpart, Chuck Grassley.) Obama also waited until very late in the game to take his case to the country.
The result? The insurance and drug industry lobbies say they support Obama. They just happen to oppose all of the details that would make the reform meaningful. The bill that (barely) cleared the House Energy and Commerce Committee on Friday keeps alive a somewhat stripped down public option. It bans exclusions for pre-existing conditions. And it requires employers to provide at least standard insurance or pay a tax. But the proposed tax is far less than the cost of the insurance, shifting some costs onto government. And it remains to be seen whether the remaining teeth in the House bill can survive what will surely be a weaker Senate bill. The Democratic Blue Dogs remain sunshine patriots on health reform if there is a risk of increasing costs to business; and the Republicans have defined defeat of health reform as a strategy of handing Obama a disabling symbolic defeat.
Given the partial progress by the House, it seems almost churlish to criticize Obama for not having set the bar higher in the first place. The liberal commentariat has bent over backwards to find things in the bill to like.
The estimable Hertzberg writes, "The American health-care system is bloated, wasteful, and cruel. Under the health-insurance-reform package now being bludgeoned into misshapen shape on Capitol Hill, it will still be bloated, wasteful, and cruel -- but markedly less so." Yes, but the consequence will be that medical inflation will likely drive us to further cuts in care, further speed-ups on primary care doctors, and further cost-shifting to patients and taxpayers.
The New York Times, in another classic of faint praise, editorialized, "It seems hard to believe that over the long haul the introduction of electronic medical records will not save substantial money." Actually, it is quite easy to believe. This editorialist must be extremely healthy. If he or she has been to the doctor lately, the medical records are already computerized and "charts" are electronic, not hand written. The problem is not the technology but the insurer-dominated system in which it reposes.
The behavior of Harry & Louise, the Republicans and Blue Dog Democrats is so odious that it's hard not to put in a kind word for Obama. Paul Krugman was never a fan of the Obama approach. His latest column is a general tutorial on why we should thank government for the fact that health insurance functions at all. He declines to say anything nice about the Obama bill, but concludes, very graciously, with more faint praise: "Now Mr. Obama basically proposes using additional regulation and subsidies to make decent insurance available to all of us. That's not radical; it's as American as, well, Medicare."
In my book, Obama's Challenge, I argued that our new president should devote all his effort in his first year to getting the economy back on track. Then, armed with the gratitude of the people and an increased majority in Congress, he should offer a much more robust health reform such as single payer after the first mid-term election. It would be a huge mistake, I contended, to tackle the Mount Everest of domestic reform as a novice.
Well, President Obama didn't take my advice (not the first time.) I can only join my fellow progressive journalists in hoping that something like the House version of the bill survives. But the likelihood is that whatever finally makes it through this session of Congress will reinforce and further bloat the current disaster of a health insurance system rather than fundamentally changing it. And if the decent elements of the plan are blocked, Obama should have the courage to pull the bill and take his case to the people.
As Shakespeare wrote, "Lilies that fester smell far worse than weeds." The satisfaction of a Rose Garden signing ceremony is not worth it, if the plan is more thorn than rose.
Robert Kuttner is co-editor of The American Prospect, a senior fellow at Demos, and author of Obama's Challenge.