Obama Turns Up Volume on Health Care

Barack Obama listens to a question from a reporter during the president's news conference in the East Room at the White House, July 22, 2009. Photo by Jim Young/Reuters

With a press conference, a meeting with nurses and a visit to the Cleveland Clinic this week, President Obama turned up the volume for reforming health care. That flourish coincides with high-stakes bargaining on Capitol Hill and escalated rhetoric from a bevy of lobbyists knocking on lawmakers’ doors and bombarding television and Internet airwaves with round after round of expensive ad messages.

Obama on Wednesday stirred the political stew with his prime-time press conference, which was dominated by the health care battle. He had plenty to say. He did not still the critics. The issue is still far from resolved and will likely linger into fall. But for the nation, and especially for 50-plus America, the debate is taking shape with sharper talking points, with clearer battle lines and with partisan and ideological differences that are more obvious.

Here briefly is how the issues being debated would affect boomers, retirees, Medicare recipients and older workers who constitute the universe of 50-plus America.

The Big Picture

Expensive health care. The United States spends $2.3 trillion a year—17 percent of the national economy—on health care. That amounts to $6,714 per American compared with the per capita costs in Canada ($3,678), Germany ($3,371), Britain ($2,760) and Japan ($2,578).

Poor return. At the same time, longevity is lower in the United States, and infant mortality is higher here than in other Western countries. Rising costs are also driving the costs of Medicare (covering 42 million people over 65) and Medicaid (covering 39 million low-income and disabled people), which are projected to exceed all other private spending on health care by 2016.

Obama and top economists agree. “If we do not control these costs,” he said Wednesday, “we will not be able to control our deficit.  If we do not reform health care, your premiums and out-of-pocket costs will continue to skyrocket.  If we do not act, 14,000 Americans will continue to lose their health insurance every single day.  These are the consequences of inaction.  These are the stakes of the debate we’re having right now.”

Soaring costs. In 2007, health care costs rose faster (5.1 percent) than the national rate of inflation (2.5 percent). Rising costs put pressure on businesses that provide health insurance for their 158 million employees, for individuals—both the 15 million who can afford private insurance and the 46.7 million who can’t—and for governments who provide Medicare for 42 million people over 65 and for Medicaid, which provides insurance for 39 million.

The uninsured. Of the 46.7 million uninsured Americans, 11 million are over 55, eight of 10 are in families with at least one worker, 8.9 million were children, and two-thirds lived in households earning less than $50,000.

Common Ground

Congress is still negotiating details of legislative proposals. Three committees in the House have agreed on one bill. But details are being changed to attract attention of moderate Democrats worried about the cost of the measure. One Senate committee has agreed on a benefits package, but the Finance Committee is still seeking bipartisan support for a package of taxes and fees and program cuts that would meet the goal of keeping the cost of the overall package under $1 trillion.

Mandatory coverage. Every citizen would be required to have health insurance or pay a fee if they don’t (the House proposes 2.5 percent of a worker's salary, except for the poor). All but the smallest firms would have to provide insurance or pay a fee for each employee who isn’t covered. Details of employer fees are unresolved, although the House proposed requiring employers to pay 8 percent of their payroll if they didn’t provide employees insurance coverage. The House also exempts those small firms with a payroll under $250,000.

The House proposal would cover an estimated 94 percent of residents under 65 (those not covered by Medicare)—compared with 81 percent currently covered. Nearly half of the 17 million non-older residents who remain uninsured would be illegal immigrants.

Medicaid would grow. The program that now covers 39 million would be expanded to cover those earning four times the poverty level—$88,000 for a family of four. State governors are balking about the new costs this would impose on states. These people would receive a subsidy based on a sliding scale aimed at making the care affordable.

Insurance companies would be regulated, requiring coverage even for people with preexisting health conditions. Premiums for those in the 50 to 64 range would be higher than those for younger people. 

Keep What You Have

Issue: Whether those who like the coverage they have could keep it.

Obama’s take: “If you already have health insurance, the reform we’re proposing will provide you with more security and more stability.  It will keep government out of health care decisions, giving you the option to keep your insurance if you’re happy with it.  It will prevent insurance companies from dropping your coverage if you get too sick.  It will give you the security of knowing that if you lose your job, move or change your job, you will still be able to have coverage.  It will limit the amount your insurance company can force you to pay for your medical costs out of your own pocket.  And it will cover preventive care, like checkups and mammograms that save lives and money.”

Issue: How portable is the plan? Those who lose their jobs will have the option of purchasing insurance through an exchange or cooperative, a marketplace where different companies compete. Whether to include a government plan as one of the options remains a critical, unresolved issue. The public plan would be set up and run by the secretary of Health and Human Services. Under the House plan, it would pay, on average, Medicare rates plus 5 percent to doctors.

Obama’s take: “If you don’t have health insurance, or are a small business looking to cover your employees, you’ll be able to choose a quality, affordable health plan through a health insurance exchange—a marketplace that promotes choice and competition   Finally, no insurance company will be allowed to deny you coverage because of a preexisting medical condition.”

Unresolved Issues

The benefits package. Under the House plan, a committee would recommend an "essential benefits package" including preventive services, mental health services, oral health and vision for children; out-of-pocket costs would be capped. The new benefit package would be the basic benefit package offered in the exchange and over time would become the minimum quality standard for employer plans. Insurers wouldn't be able to deny coverage based on preexisting conditions.

Paying for the reform. Obama proposed capping individual tax deductions for those earning over $250,000, but both the House and Senate are seeking alternatives. The Senate is working on a range of new fees and taxes, including a possible high income tax on employer-provided health benefits. The House proposed raising $544 billion from a new income tax surcharge on single people making $280,000 a year and households making $350,000.

Obama’s take: “I have also pledged that health insurance reform will not add to our deficit over the next decade—and I mean it.” 

Cutting costs. Obama has secured commitments from health care leaders, including insurance companies and hospitals, to cut costs by $2 trillion over the next decade. Obama pledged to veto any reform bill that does not cut health care costs, and the Congressional Budget Office has criticized the current House bill because it doesn’t cut costs. The CBO endorsed proposals to tax employer-provided health insurance because that would prompt individuals to seek less coverage. But most of the cost-cutting measures, like cutting incentives for doctors to provide repetitive tests or utilize more effective treatment, are limited. Most of the cost-cutting proposals affect Medicare.

Cutting Medicare. Pharmaceutical companies have agreed to cut costs of brand-name drugs by half for Medicare recipients caught in the prescription drug program’s doughnut hole.

Obama proposed cutting over $500 billion from Medicare and Medicare Advantage plans. He is advocating a tougher Medicare Payment Advisory Commission, modeled after the Defense Base Closure and Realignment Commission. The commission’s cost-cutting recommendations would be adopted unless blocked by a vote of both houses of Congress.

“[This] could be a valuable tool to help achieve health care reform in a fiscally responsible way,” Obama said Wednesday.

Jim Toedtman is editor of the AARP Bulletin.