Health Care Reform Taking Shape

Photo: Cube by Davies & Starr, Icons from Getty Images, Retouching by Randy Mays

In Congress these days, it’s all about health care reform, all the time. At stake is nothing less than a massive overhaul of the nation’s health care system that could vastly expand coverage, affect how doctors, insurance companies and businesses operate and raise some taxes.

Both the Senate and House are working to craft—and pass—sweeping legislation this summer. Capitol Hill is swarming with representatives from major health industry groups that opposed reform in the past—business, medical providers, drug companies and insurers—as well as labor and consumer activists, including AARP, all working now to help shape new legislation.

Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, says the odds of major health care reform passing are “100 percent. Given. Inevitable. The country wants it. The president wants it.”

Health care costs now make up nearly one-fifth of the nation’s economy. These ever-increasing costs—and the lack of affordable coverage for millions of Americans—have created the dynamics for reform.

“This issue, health care reform, is not a luxury,” President Obama told key Democratic senators recently. “Soaring health care costs are unsustainable for families, they are unsustainable for businesses, and they are unsustainable for governments.”

Tough issues are on the table. Will a new government-sponsored insurance plan compete with private insurers to offer affordable coverage? Will employers be required to offer insurance or to help pay for employees’ health care? And how will the country foot the $1 trillion reform bill? But these questions camouflage wide areas of agreement that would reshape the nation’s health care system.

Compromise on public plan?

Many Democrats favor a government-sponsored insurance plan that can compete with the private sector. Not surprisingly, this idea is anathema to most Republicans. The insurance industry contends, and Republicans agree, that such a plan would use its market power and its ability to pay doctors less—as is done with Medicare—to keep prices low and drive the companies out of business, leaving the nation with nationalized health care.

Sen. Christopher Dodd, D-Conn., and others say that there is room for compromise. “Clearly, no one wants to see a highly subsidized public plan that’s not going to create a level playing field,” Dodd said. Some lawmakers are pushing for a public plan that would be activated only if private insurers failed to meet certain cost-saving benchmarks.

Another promising idea being discussed is to create nonprofit health care cooperatives that would be owned by groups of patients with no government involvement. The cooperatives would negotiate directly with insurers for low-cost group insurance rates. The idea was proposed by Sen. Kent Conrad, D-N.D., a member of the Senate Finance Committee. Baucus said the plan might be able to attract bipartisan support, while Sen. Chuck Grassley, R-Iowa, the top Republican on the committee, said the idea had potential—intriguing words from two key players.

Spending cuts and taxes

Paying for a new health system, which could easily cost more than $1 trillion, will involve a patchwork of spending cuts and new taxes.

Obama first pledged to save $300 billion from Medicare and Medicaid in 10 years, including cuts to Medicare Advantage programs. Later, he said he could save an added $300 billion through quality controls such as reducing unnecessary hospital readmissions.

These added savings will “absolutely not” affect Medicare coverage, benefits or quality of care for beneficiaries, Nancy-Ann DeParle, director of the White House Office on Health Reform, told the AARP Bulletin.

The president’s proposal to charge wealthy taxpayers higher premiums for Medicare drug coverage could gain support. And higher taxes have been suggested for alcohol, sugary beverages—which contribute to health costs by encouraging obesity—and perhaps cigarettes.

Probably the most controversial idea is to limit the tax break that individuals get on health benefits supplied by their employers. Now, those benefits are tax-free. Obama said during the presidential campaign he wanted to keep it that way. But Baucus, after a recent meeting with Obama, said the idea is on the table.

Congress must also decide what responsibility employers will have to provide coverage or to contribute financially to expanding access to coverage. James Gelfand, a senior manager at the U.S. Chamber of Commerce, says an employer mandate is too expensive.

Reaching agreement will not be easy. “Health reform is inherently controversial, but necessary,” says John Rother, AARP’s director of policy and strategy. What we do know, he says, is that “the status quo is no longer an option for anyone.”

Tamara Lytle was a correspondent and Washington bureau chief for the Orlando Sentinel from 1997 to 2008.