Obama's toughest patient: Partial reform isn't easy

Posted: Tuesday, September 01, 2009

The Obama administration and other advocates of comprehensive health reform knew that August was going to be a perilous month. It's turned out to be disastrous. As lawmakers return to work and President Obama ends his vacation, the health reform enterprise is in rough shape. So what is the proper course of treatment?

One approach would be to scale back the scope and cost of reform - spending perhaps $600 billion to $700 billion over the next decade instead of the $1 trillion now under discussion. This would do less harm fiscally. But the interconnectedness of the health-care system makes a piecemeal fix more difficult than a comprehensive one. It would fall short of a cure for two major ailments of the current system: Too many people lack health insurance, and for too many others it is unreliable and, increasingly, unaffordable.

For example, consider cutting the cost of reform by reducing subsidies for purchasing insurance. Many people, unable to comply with a requirement to obtain coverage, could find themselves both without insurance and fined for that failure, while the new insurance exchange purchasing pools would be smaller and therefore less effective in reducing overall costs.

You could extend coverage only to segments of the population, hoping to add more over time. But whom to choose? Extending Medicaid to all those at or near the poverty level - childless adults and many parents currently aren't eligible - is expensive (about $400 billion over 10 years) and politically unpopular. Yet if you don't cover that part of the uninsured population, you don't solve hospitals' problems providing uncompensated care, the costs of which are passed on to insured patients. Those approaching Medicare age need help most, because insurance is least affordable for them - but they are the most expensive to cover. You could start with younger adults, but it is odd public policy to extend benefits first to those who need it least.

The point isn't that piecemeal reform is impossible or ineffective. Retrenchment may yet be necessary, and it could extend coverage to perhaps 20 million currently uninsured while bringing important reforms to the dysfunctional individual insurance market. But you give up a lot if you lose comprehensiveness. So it's worth another stab at a comprehensive approach - but one that really controls costs over time.

The financial challenge is twofold: coming up with the money to pay for the program and making certain that it is affordable going forward. The grim deficit news counsels even more strongly that funding come from within the health-care system; other revenue is going to be needed to deal with the spiraling debt. The most sensible such source is the tax-free treatment of employer-sponsored health insurance. Capping the exclusion of health benefits from taxable income would both generate revenue and help slow cost growth. As vital is dealing with Medicare costs. The best approach is giving the Medicare advisory council power to implement, not merely advocate, cost-saving measures, subject to presidential or congressional override. The Congressional Budget Office adds that the council should have "clear authority to recommend broad changes in coverage, benefit design, and payment and delivery systems" along with a fall-back mechanism, such as an automatic across-the-board reduction in payments, if cost savings are not achieved.

Finally, it is time for Dr. Obama to take charge of this difficult case. He must come up with a plan or embrace one - perhaps the long-awaited Senate Finance Committee proposal. And he must sell it as perhaps not perfect but the best that can be achieved and far preferable to the status quo. Because right now, his patient needs some intensive care.

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