12/09/2009 07:19 pm ET Updated May 25, 2011

Assessing Reid's Healthcare Compromise

News broke last night that Senate Majority Leader Harry Reid has what he thinks is a viable compromise piece of healthcare reform legislation, which he thinks could garner the 60 votes he needs to pass the Senate. Unfortunately, details of this compromise have not been officially announced, and Harry is waiting to get numbers from the Congressional Budget Office (C.B.O.) before releasing the text. So, while an accurate assessment of the bill is impossible at this point (since it's like trying to nail smoke to a wall), we can at least begin to look at what is taking shape, based solely on the rumors and leaks in the press so far.

The big headline is, of course, "public option scrapped." But, strangely enough, this hasn't caused the outcry one would have expected among progressive Democrats. In fact, Dr. Howard Dean has openly supported the compromise, calling it "real reform." Which is no real surprise, since it has been reported that Dean was the one to propose the new tradeoff -- which, if true, would tend to automatically make Dean a supporter of his own idea.

So let's attempt to take as good a look as possible at the smoky, smoky details which are emerging from the perpetual metaphysical fog on Capitol Hill.

First, the public option doesn't seem to be gone entirely, it has rather morphed into two separate schemes. The first is what is being described as a "non-profit" marketplace of private health insurance, administered by the federal Office of Personnel and Management (O.P.M.). These are the guys who already administer federal employees' health insurance (the feds' "human resources" department, as it were). The key term in all of that -- which has not yet been adequately defined -- is, of course, "non-profit."

But there's a second scheme rumored to exist in the new compromise -- the rebirth of Olympia Snowe's "trigger." If, after a certain amount of time, the insurance market was still as brutal as ever in some places, then a public option would spring into existence to rectify the situation. Maybe -- again, details are scarce on this issue.

The big tradeoff, and the one that has Progressives seriously weighing the plan, instead of immediately denouncing it (for the lack of a public option), is allowing some people to "buy in" to Medicare early. Currently, as the Medicare system exists, no one under the age of 65 is allowed to participate. The new plan would allow those 55 and over to buy in to the system if they couldn't get insurance elsewhere (again, this crucial detail remains rather smoky). Rumors are that this would go into effect almost immediately, either in 2010 or in 2011.

One aspect of the compromise doesn't seem to be getting anywhere near the attention it deserves -- if the rumors are true, of course. This is a new regulation for the entire health insurance industry which would force companies to spend at least 90 cents of every dollar they take in (from premiums) on actual health services for their customers. This would effectively limit overhead (paperwork and profit) to 10 percent, if I did that math correctly. This could be a powerful new regulatory brake on the industry's excesses.

There are other contentious issues being brought up as amendments in the Senate, which are unrelated to this compromise proposal, I should add. The biggest of these (and one of the most popular) is being debated now -- allowing "reimportation" of drugs from Canada (and elsewhere) to save money. This is a direct challenge to the White House's deal with the drug industry, so it will be interesting to see whether it passes or not. Other countries, with national health systems, negotiate much lower prices by buying drugs in bulk. Here in the United States, people pay up to ten times as much for exactly the same pill as our neighbors to the north, for instance. And (especially in border states where seniors ride buses across the border to buy cheaper drugs) this idea has a lot of support from the public.

One final point is worth making before we explore whether any of this is truly a good idea or not. All of the plans under discussion -- all the House plans, and all the Senate plans -- have two enormously beneficial things going for them (which those of us who have been closely watching the debate tend to gloss over at times). The first is the ban on insurance companies refusing to insure people for "pre-existing conditions." And the second is the removal of "lifetime caps" on benefits. Millions upon millions of Americans will be affected by these changes, for the better. These two reforms alone are worth passing, because it will be a tangible benefit to everyone who has insurance. Reforming these two things will mean a whole lot of people will not have to go bankrupt if they get sick. It tends to get lost in the debate, but these two may wind up being the most popular reforms out of the entire package.

How popular Harry Reid's compromise will be is still an open question, though, and one that can't truly be answered until we get a look at the actual details. Not knowing what "non-profit" means, for instance. If the O.P.M. can handle the administration of a basic healthcare plan which insurance companies must offer without reaping profits as a result, this could bring about a bigger change, in the final analysis, than a public option which has been so limited and watered-down that -- even if it passed in its current state -- it would only benefit a small percentage of Americans. If the goal is to change the entire health insurance industry, so that basic care is seen as something which companies cannot profit from, it could be a much more profound change in the marketing of health insurance than a public option (as it currently stands). Insurers would concentrate on making profit from "gold-plated" health insurance as a result (selling things like a guaranteed private hospital room, for instance, although the care itself would be the same as the basic plan), which could lead to a system similar to what Switzerland has. But again, the devil is in the details -- which we haven't seen yet.

The absence of a true public option may cause some consternation among those who have been fighting hard for it for months, but some form of it may survive as a threat to the insurers, which could be triggered if they don't get their act together on the non-profit scheme. It likely won't be explicitly called a "public option," to allow face-saving votes by moderate Democrats, but it may remain a similar idea. And the public option, even before Reid's new compromise was announced, wasn't going to go into effect for four years anyway, so if the trigger dates stay the same, then not much will have really changed with the basic idea. Maybe -- again, nailing down the details on this one is going to be tough, since it may come down to semantics -- what "is" a public option, and what "is not."

The big tradeoff -- the big carrot dangled in front of Progressives, in other words -- is the early Medicare buy-in for the those 55 and older. This is a giant "doughnut hole" already, as there are millions of Americans desperately trying to hang on until they hit the magic age of 65 and can get healthcare. Some of these are people who have been fired from their jobs and are now "too old to hire," some of these are people with "pre-existing conditions," and some have fallen through the gaping cracks in our current system in other ways. All of them, I should point out, are baby boomers. And the older you get, the more likely you are to vote (something politicians are always aware of). Meaning that, if this scheme makes it into the final legislation, it is going to change a whole lot of lives for the better. If the rumor is true that they'll start signing people up for this starting next year, this could have an enormous political benefit for Democrats -- since 2010 is an election year.

There's another aspect of expanding Medicare in such a fashion that is interesting as well. Howard Dean, in coming out for the idea, pointed out: "It makes sense. Why have two bureaucracies, including one who hasn't run this before [the Department of Health and Human Services]... when you can use Medicare?" Dean is referring to the public option (as it stands) which would indeed create a new bureaucracy in H.H.S. to administer the plan. It makes more sense, as Dr. Dean points out, to hand this over to the Medicare people who already know how to do it, rather than create a second parallel system.

But all this really just may be "spin." It may, in fact, be a political "dog whistle" -- defined as language that your supporters understand to mean one thing, which your opponents don't even hear. Because if it makes sense to lower the eligibility age for Medicare to 55... what is to stop some future Congress from lowering it to 45? Or 35? Or just throwing it open to all? This is one flavor of the "strong public option" which didn't even survive in the House. Could Democrats be looking even further down the road, and introducing a framework to be expanded later on, until a true single-payer plan is available to any American who wants it?

Well, that's overly optimistic, even I have to admit. But if the new buy-in program proves to work and proves to be wildly popular, it certainly remains an option to be considered at a later date. Which is better than a lot of previous bills contained, I should add, especially since the framework already exists. And, politically, Republicans may have recently painted themselves into a corner by attempting to portray themselves as "champions of Medicare" -- making it hard (if not impossible) for them to pivot to the position of "we cannot expand Medicare." And very difficult for them to explain such flip-floppitude out on the campaign trail next year.

What surprises me is that the "90 cents out of each premium dollar" aspect is gaining so little attention. Perhaps, after the mainstream media kicks around the "death of the public option" for a few days, someone will notice it. Stranger things have happened. But this seems to me to be a very strong and very bedrock reform of our entire for-profit healthcare system. The government has always had the power to regulate the heck out of the health insurance industry, since they enjoy federal monopoly protection (which comes with as many strings as Congress is willing to tie to it). This seems to me to be a giant leap in that direction. It also seems like the biggest rein on the greed of the industry as it currently stands today. If health insurers were limited to a certain profit, then Wall Street would lose interest in healthcare stocks as targets of high-flying speculation, and the whole industry could settle down a bit and not spend so much time obsessing over quarterly results. This would be a calming influence which might cause short-term pain for some investors, but would result in long-term stability which simply does not exist today in the industry. But, again, it all depends on the fine print. That may be way too optimistic to hope for, in other words.

The only assessment which can accurately be made at this point is that the details of Harry Reid's compromise, when the bill emerges from the C.B.O., are going to be very interesting to a lot of people. If the whole mix looks, on the whole, like it can be validly called "reform" of our healthcare system, then it may indeed corral enough votes to actually pass before Christmas. Again, that's a wee bit optimistic, but if Reid can get all the factions to agree on anything at this point, it will be counted as a legislative victory for both him and President Obama.

So we'll all be waiting to see those final details, when they appear. In the meantime, hand me that hammer, will you? I think I've got this smoke steady under this nail... whoops, it got away from me again, sorry.


Chris Weigant blogs at: