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Monday, July 20, 2009

"Obamacare Is At War With Itself"

Robert Reich believes that if health care reform is delayed beyond the August recess, it's unlikely to happen:

Universal health care is so complicated -- touching on so much of the economy, stepping on the toes of so many vested interests -- that to allow the bills to languish past recess risks the entire goal. Speed is essential. Recall that after Bill Clinton was elected, universal health insurance looked inevitable; a year later, it was doomed. As Lyndon Johnson warned his staff after the 1964 landslide, "every day while I'm in office, I'm gonna lose votes."

Republicans don't want any bill. Blue Dog Democrats are afraid of the costs of any bill. The AMA, private insurers, and pharmaceutical companies would be delighted if universal health care died. If bills aren't passed in the House and Senate before August 7th, the fights in both chambers over the public option and money will carry over into the Fall, where they'll become more intense and more prolonged. Obama won't have a bill on his desk before the end of the end of the year. That's a death sentence for health-care reform. The gravitational pull of the mid-term elections of 2010 will frighten off Blue Dogs and delight Republicans.

However, it appears that the tension between the costly giveaways being used to get the votes needed to pass the legislation and Blue Dogs worried about the costs of the giveaways is going to delay the process past the August recess:

Obamacare Is At War With Itself Over Future Costs, by Robert Reich: Right now, Obamacare is at war with itself. Political efforts to buy off Big Pharma, private insurers, and the AMA are all pushing up long-term costs... But this is setting off alarms among Blue Dog Democrats worried about future deficits -- and their votes are critical.

Big Pharma, for example, is in line to get just what it wants. The Senate health panel’s bill protects biotech companies from generic competition for 12 years after their drugs go to market, which is guaranteed to keep prices sky high. Meanwhile, legislation expected from the Senate Finance committee won't allow cheaper drugs to be imported from Canada and won't give the federal government the right to negotiate Medicare drug prices directly with pharmaceutical companies. ... No wonder Big Pharma is now running "Harry and Louise" ads -- the same couple who fifteen years ago scared Americans into thinking the Clinton plan would take away their choice of doctor -- now supportive of Obamacare.

Private insurers, for their part, have become convinced they'll make more money with a universal mandate accompanied by generous subsidies for families with earnings up to ... $80,000 ... than they might stand to lose. Although still strongly opposed to a public option, the insurance industry is lining up behind much of the legislation. The biggest surprise is the AMA, which has also now come out in favor -- but only after being assurred that Medicare reimbursements won't be cut nearly as much as doctors first feared.

But all these industry giveaways are obviously causing the healthcare tab to grow. And as these long-term costs rise, the locus of opposition to universal health care is shifting away from industry and toward Blue Dog and moderate Democrats who are increasingly worried about future deficits. My sources on the Hill tell me there aren't enough votes in the House to get either major bill through, even with a provision that would pay for it with a surcharge on the richest 1 percent of taxpayers. House members don't want to vote for a tax increase before their Senate counterparts commit to one. Yet the Senate continues to be in suspended animation because Max Baucus and his Senate Finance Committee still haven't come up with a credible way of paying for health care. In his testimony last week, Elmendorf favored limiting tax-free employer-provided health benefits, but organized labor remains strongly opposed.

Obama has less than three weeks before August recess. Chances are dimming that he can get some form of universal health care passed in both Houses before the clock runs out. The Democratic National Committee is running ads favoring passage in Blue Dog states and districts, but that won't be enough. Now is the time for the President to begin twisting arms and knocking heads. To control long-term costs, he'll also have to take away some of the goodies that have been promised to the health-industrial complex, and maybe even cross Big Labor. He also needs to come out clearly and forcefully in favor of a way to pay for the whole thing -- ideally, in my view, a surtax on the top.

Will legislation pass before the break? Will it happen at all? I expect that we will get some sort of legislation, if not before the break then after, but it will be weakened to the point where nobody is very happy with the outcome. The hope, and likely the main supporting argument for whatever legislation emerges, is that it will provide the foundation for further reform down the road, and set the stage in a way that makes that reform inevitable. But there's no guarantee that will happen.

Update: Tyler Cowen comments.

Update: Megan McArdle comments on the comments.

    Posted by on Monday, July 20, 2009 at 02:20 PM in Economics, Health Care, Politics | Permalink  Comments (51)


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