Crunch Time for Health-Care Reform

By Ruth Marcus
Sunday, March 22, 2009

You wouldn't know it from the headlines, but it's crunch time on health-care reform. In a series of high-level meetings at the White House and on Capitol Hill, critical decisions are being made that will help decide whether the comprehensive health reform that has eluded policymakers for decades finally comes to fruition -- and what the system will look like for decades.

What's being fitted together right now -- in ambitious hopes of a public unveiling this spring and floor action this summer -- are interlocking parts of an intricate jigsaw of clashing ideologies, interest groups, political personalities and congressional fiefdoms.

The stakes are enormous. "If it isn't done this year, it won't be done for the next four years," Iowa's Charles Grassley, a key player as the senior Republican on the Senate Finance Committee, said last week at a breakfast sponsored by the Kaiser Family Foundation. "If we do something incremental this year, we're never going to have comprehensive health-care reform."

Here are Five Hard Pieces on the way to that goal:

Piece One: Should there be a public insurance option? This is a question that evokes near-religious fervor and that could crash the whole enterprise. Republicans hate the notion of a government program because they fear, with ample reason, that it is a slippery-slope step to a single-payer program. Liberals demand a public insurance alternative for precisely that reason.

Potential solution: Have the public program abide by the same rules as private plans, so it has no inherent advantage.

Drawbacks: In that case, what's the point? Plus, anything that smacks of a public program will be unacceptable to Republicans.

Piece Two: How to pay for the program? Specifically, should employer-provided health insurance, no matter how generous, continue to be treated as tax-free income? This is a huge pot of money -- more than $200 billion annually. The current arrangement is not only unfair, it's also counterproductive, encouraging overconsumption of health care. But unions, which have negotiated generous health packages, oppose changes, and during the presidential campaign, Barack Obama denounced John McCain's proposal to eliminate the exclusion as a $3.6 trillion tax hike.

Potential solution: Go partway, taxing benefits above a certain dollar amount and/or for those at a higher income level. A cap on benefits has the added cost-dampening advantage of encouraging insurers to offer policies in this range.

Drawbacks: This approach produces a lot less money, somewhere between $30 billion and $90 billion, depending on how it's structured. At some point, all the burden of reform can't be put on the wealthiest.

Piece Three: Should individuals be required to purchase insurance? The argument is that this individual mandate would keep spending and premiums down by spreading costs over a healthier population, ensuring preventive care. Health insurers have embraced such a mandate (more customers!) in exchange for having to insure applicants regardless of their health status. But Obama condemned Hillary Clinton's proposed mandate as a scheme to "go after people's wages."

Potential solution: Go for the mandate because it makes sense and the politics are reasonably uncomplicated: insurers are for it; unions aren't opposed; small business won't go ballistic, as with an employer mandate. Use automatic enrollment to get people covered and a relatively "soft" mandate, without draconian penalties.

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