Health Reform in the US II: What Obama proposes, and why passing reform is so tough

Hello again, Latif fans! Rob Ford here with the second part of my primer on the US health care debate. This time I’ll be covering what Obama and the Democrats propose, and why passing the reforms is so tough. More of an essay than a post by now, but hopefully you’ll find it interesting...

As I detailed in the first part of the guide, the three major problems with US health care at present are that it is expensive, inefficient and unjust. How does Obama’s plan to correct these problems? It’s worth noting for starters that there isn’t one “plan” – in fact there are several quite different plans working their way through parts of the American legislature, an issue I’ll come back to later in this post. For simplicity I’ll focus on the core elements of the plan, and refer to these as the “Obama plan”.

Let’s start with justice. The fact that America is the only developed country in the world that does not provide a minimum standard of health care to all its citizens has long been a thorn in the side of the Democrats, America’s left(ish) party. Every Democratic President from Roosevelt on has tried to expand health care coverage, though with varying success. All of the reforms currently on the table look to address this, but not in the way the NHS solved this problem in Britain. Obama does not intend to create a government funded, government run free to all health service. The private basis of American medicine will be left essentially unaltered. Instead, the Obama plan would make it a legal requirement that all Americans take out basic health care and provide large subsidies to poorer Americans to enable them to do so. Those who decline to take out coverage will be fined. The plan also addresses another major injustice of the current system: it would ban insurers from refusing to provide coverage to those who have previously been ill. Such “pre-existing condition” clauses are very common in insurance policies, though many Americans are not aware of them until they find out their medical bills are not covered. The insurance market more generally would be more tightly regulated, reducing private insurers’ discretion over what they will cover and what share of medical costs they can force their customers to pay themselves.

On the minus side, the plan will force a lot of lower middle class parents into a difficult choice: pay up to 12% of their incomes to purchase health care, at a time when money is tight, or face fines and other penalties from the government. The government provides money to help out the poor, but its not a lot and many struggling families could get stuck with big bills. So – good, but not great. 7/10

Next up: cost. The Obama plan makes some efforts to bring costs down – Obama has struck deals with drug companies to reduce the costs of medications and has pledged to reduce the fees the government pays doctors for their services through programmes like Medicare. So far, so good. Except this is really chipping away at the edges of the problem. The first big cost generator in the US is the decentralized nature of the insurance market – individual private insurance companies negotiating with doctors and pharmaceutical companies on their own don’t have much bargaining power, so the docs and drug companies can squeeze big increases from them. By contrast, the NHS negotiates all its drug contract centrally, and has enormous bargaining power – indeed, the National Institute for Clinical Excellence (NICE) is so powerful that other European governments follow its guidelines in their own price negotiations. The result: us lucky Brits pay a lot less for our meds. The Obama plan as it stands does nothing about this. Some of the bills have a proposal the Americans call “the public option” – a proposal to create government insurance plans to create in the private market. This has been fiercely resisted on the grounds that it is the first step down the road to “socialized medicine”. It probably would be – an insurance plan with the government’s tax raising powers behind it would be able to outcompete private plans. But that’s the point. It is “socialized medicine” – government directed or coordinated provision of health services – that delivers high quality health care at reasonable costs. Its what American pensioners have –and they like it. Its what American war veterans have – and they like it too. But Obama won’t even be offering a weak version of it to the rest of the American public.

Obamacare scores badly on the second major cost driver as well. As mentioned in the previous post, most Americans under 65 get their health care through their employees, who in turn get a huge tax break for offering it. As a result, when health care provides jack up costs, most Americans don’t notice – it doesn’t show up in their salary or their bills. The employers notice, but the pain is blunted by the big tax rebates they pick up on the cost increase. As a result, there’s no one to push back against the upward pressure on private costs. And if private costs go up, government provided medical costs go up too – the government has to pay the same rate or the doctors won’t work for them and the drug companies won’t sell them drugs. Obamacare does precisely nothing to deal with this problem, largely because the tax relief on health care is that rare example of a policy both company directors and trade unions fiercely want to keep. It would be political suicide for a Democratic president to withdraw it. Score: 3/10

How about inefficiency? Bad news here also...several thoughtful writers, including doctors, have written that a major cause of inefficiency in the US system is the way doctors are paid. In the UK, doctors receive a set wage from the government, which rises with seniority or with high performance. In the US, doctors don’t get most of their income this way. Instead they charge fees for every consultation they do, every procedure they recommend, every drug they prescribe. Would you trust a mechanic who gets paid based on how much he finds wrong with your car? Thought not. Yet hundreds of millions of Americans trust their lives and welfare to doctors who have a massive, MASSIVE economic incentive to find things wrong with them. The result is predictable: there is evidence of enormous over-diagnosis, over-prescription and over-treatment in the US system. In many cases, the results are actually harmful for Americans’ health. And what does Obamacare do about it? Not a lot – there’s some arm waving in the direction of better incentive structure, but the government can’t correct this unless it take a much larger role in the overall system – i.e. “socialised medicine” again. And Obama won’t go there. Score: 2/10

The Politics, or, where it all gets complicated

So all in all, OK on the justice front but not great on the cost and efficiency front. And that’s largely because what’s being proposed is so timid. Why not be more radical? Where is America’s Nye Bevan? Here’s where the politics comes in. In Britain, when Labour wanted to create a National Health Service all it needed to do was introduce a bill in the House of Commons and get its MPs to vote for it. In America, its much more complicated, due to their wonderful idea “the separation of powers”. Obama does not sit in America’s legislature, and can’t tell it what to do. He can say what he would LIKE to happen, but then its up to the members of the two legislative branches House of Representative and the Senate to write the legislation and vote on it. The actual business of writing laws is handled by Congressional Committees, and a big complex bill like heath care has to pass several committees – three in the House of Representatives and two in the Senate. Then in each chamber the different versions of the bills have to be “reconciled” – that is, turned into a single bill. Then they have to be voted for in the committees again. THEN the whole membership of each chamber has to vote on the combined bill. THEN the bill the House of Representatives has passed has to be reconciled with the bill the Senate has passed in what is called a “Conference Committee” between the two legislatures. Then the hybrid bill passed by this conference has to pass a vote again in each of the two chambers.

Got that? Thought not. Here’s a summary version:

To pass health care, all Obama has to do is...
1. Get three House committees to write legislation and pass it
2. Meld these three bills into a single bill, and get the committees to pass them again
3. Get the whole House to pass the melded bill
4. Get two Senate committees to write legislation and pass it
5. Meld these two bills into a single bill, and get the committees to pass them again
6. Get the whole Senate to pass the melded bill.
7. Take the bill the House passed and the bill the Senate passed, and get the two chambers to meld these into a single bill
8. Get each chamber to pass the melded bill again
9. Sign the bill!

Simples! When the Founding Fathers said their system was designed to prevent government tyranny, they weren’t kidding. Obama’s party has large majorities in both branches of the legislature, and the President has already made impressive progress in negotiating this obstacle course: all of steps 1-4 are in the bag. The trouble is steps 5-7 are much tougher, because they involve the full Senate.

Why is the Senate a problem. Two words: disproportionality and filibuster. When America was founded, the constitution provided two senators for every state, regardless of its population. This was a concession to the small states who worried about being dominated by the bigger ones. What has resulted is precisely the opposite. California, with 37 million people, gets two Senators. So does Wyoming, with 500,000. As a result, the Senate is hugely disproportional, with the views of people from low population states over-represented. You can get a majority in the Senate using senators who represent only one sixth of Americans. Unfortunately for Obama, the small states tend to have right wing electorates who don’t like health care much.

The second problem is the filibuster, which is a complicated issue but essentially gives any single Senator the ability to indefinitely block, and thus doom, any piece of legislation by talking about it for as long as they like. Senators have often exercised this right in all-night talkathons that can last 20 hours or more. Senate opponents of the health care reform will certainly use this power if they can. The only way to prevent it is called a “cloture motion”, which forces Senators to vote rather than waffle. And cloture requires the votes of 60 out of the 100 Senators. So Obama doesn’t just need 50 votes, he needs 60. How many Democratic Senators are there? 60.

So the great big choke point is this: assuming the Republican opposition remains united (which currently looks reasonable), for health care to pass EVERY SINGLE Democratic senator has to vote for it. Every single Senator is potentially pivotal, and they all know it. Obama and the Democratic Senate leaders have to craft a bill that 60 hugely powerful individuals from a wide range of different states and with a wide range of different ideological outlooks and views of health care will all vote for. And not just once : they have to vote for the original Senate bill and then also for the version that is melded with the one from the more ideologically left wing House of Representatives.

This is a monumentally difficult task. And this, in turn, is why health care is so hard to reform and why the Obama reforms are so timid: what he’s offering is probably as much as he can get the Senate to agree to. And there’s the rub: if health care fails, or doesn’t deliver what Americans expect it to, disappointed Americans shouldn’t blame Obama, or the Republicans, or the health care lobby, or Fox News. They should blame Washington, Jefferson, Adams and the rest of the Founding Fathers who decided to privilege small states at the expense of large ones, and enabled the rural right wing electorates of 20 empty states to hold the other 5/6ths of their compatriots to ransom.