First published in ITIJ 95, December 2008
As the 44th president of the United States is elected, healthcare has its usual place at the top of the agenda. Milan Korcok asks whether travel insurers can hope for relief under ObamaCare
With Barack Obama now America’s president-elect and the Democrats having a stranglehold on both houses of Congress, it would seem that all those promises about reforming healthcare, covering millions of uninsured, and making the system more effective and transparent will become a reality. That’s what Obama promised. And who’s to fight him?
To foreign observers, that might make simple sense. And to international travel insurers struggling with America’s stupendous healthcare costs and labyrinthine operation, any change would be an improvement. But don’t hold your breath. What you see is not always what you get when attempting to parse American politics and the serpentine relationships that link the executive, legislative and judicial branches of government. What is said on the long and tortured campaign trail evaporates quickly in the heat of congressional conflict. International travel insurers who anticipate any immediate change in the way they do business with American hospitals, doctors, or their cost containment intermediaries better relax: it’s going to be business as usual for some time yet.
A new spirit of service?
If America was a parliamentary rather than a republican democracy and the president was the majority party leader in either or both chambers of Congress, he might have more leverage in portraying his promises as government policy. But once the election is over and the president moves into the White House and the senators and representatives go back to their bunkers on Capitol Hill, life changes and promises made on the stump take on a different hue. Reality sets in.
In his campaign speeches, Obama promised a modified form of universal health insurance coverage through a combination of public and private insurance programmes. Unlike the plan offered by Obama’s nemesis Hillary Clinton, signing up for insurance would not be mandatory, and signing up 47 million uninsured would be unrealistic. A key element in this strategy would be the creation of a National Health Insurance Exchange for those who can’t get employer-sponsored insurance or don’t qualify for public programmes such as Medicare or Medicaid. The Exchange would consist of private insurers offering low-cost plans with benefits similar to those offered to the federal programme that covers government workers and members of Congress (mostly by Blue Cross or other private plans). Private insurers wanting to participate in the Exchange would agree to guaranteed issue, lowered premiums, and standard benefit packages in return for a listing on the exchange.
it's going to be business as usual for some time yet
Obama would also expand Medicare, Medicaid, the State Children’s Health Insurance Program (SCHIP), impose more federal regulation on private insurers, seek to improve medical information technology and quality outcome measurement resources, require hospitals to report their costs, prices and quality outcomes and on and on. There are a lot of promises. If implemented to any large measure, and that is a huge ‘if’, the Obama health plan would seriously erode America’s existing employer-sponsored health insurance system, which now provides coverage for roughly 60 per cent of the population under 65, and would impose layers of control over private health insurers, but it would not eliminate them. It needs them to administer the very plans it seeks to control.
Neither is Obama’s plan designed to morph into a Canada-style single-payer programme, though Obama has in earlier times said that if he had to do it all from scratch, he would favor a single-payer model as it would be easier to control. He is not, however, doing it from scratch, and with 55 per cent of the funding of America’s $2.5-trillion healthcare system coming from private sources, that prospect is not on the horizon. One does not quickly, or without an eye-gouging fight, nationalise a $2.5-trillion industry when it does not intend to be nationalised.
What he has outlined is, by the accounts of all independent experts who have analysed it, a very costly programme at a time when costs are things to be cut, not inflated. America’s healthcare system is by far the most expensive in the world at more than 16 per cent of GDP and rising. How adding millions of uninsured with the promise of first dollar coverage, third party subsidies, generous benefits (all at public expense) will do anything but explode health costs, is hard for most analysts to see.
The road will be long
Hospitals that up to now have been providing care to the uninsured at the cost of their own debt will be getting paid for the newly insured. For them that’s a plus. But if those reimbursements are at current Medicare or other federally-mandated levels, hospitals will not likely stop the practice of cost shifting – making better endowed private plans and ‘self-payers’ such as patients covered by foreign insurers, pick up the slack. In addition, none of Obama’s promises have even suggested covering all 47 million uninsured. There will be plenty of uncompensated care left for hospitals to deal with.
In fact, the Kaiser Family Foundation, a national reporting system on health insurance, has reported that one in three Americans, including those with health insurance are now having trouble paying their rising deductibles and co-payments, a factor that may well offset any gains hospitals make in collecting added revenues from the newly insured.
The CFO of one Vermont hospital system was recently quoted in a trade publication as projecting that the unpaid deductibles and co-payments left behind the insured may raise his own hospital system’s charity care burden by 10 per cent next year. And as travel insurers know very well, when American hospitals look for ways to offset their other shortfalls, foreign patients are tempting targets.
Obama’s strategists have claimed that most of the billions required to implement the first stages of his plan will be found by cutting out waste, implementing new information and records technologies, eliminating redundant government programmes, growing preventive programmes, and so on. But to independent health financial experts, this is thin illusion.
If implemented to any large measure, the Obama health plan would seriously erode America's existing employer-sponsored health insurance system
According to an independent assessment by the Lewin Group, a national healthcare consulting firm, the Obama plan would reduce the number of uninsured by 26.6 million in 2010 if ‘fully implemented’. That’s a big ‘if’. Concurrently, millions of people already in private insurance plans would gravitate to the cheaper publicly-funded plans and those in the National Health Insurance Exchange network. Overall, Lewin projects the Obama plan would increase federal spending on healthcare by about $1.17 trillion. Meanwhile, the Tax Policy Center, an arm of the independent Urban Institute and the Brookings Institution, estimates that the Obama plan would reduce the number of uninsured by 18.4 million in 2009 (if implemented immediately) and would cost $1.6 trillion over 10 years.
Michael Tanner, senior fellow at the Cato Institute research tank says that whatever estimate one looks at for the Obama plans – ranging from $110 billion to $160 billion a year, it ‘will cost a lot’. Tanner writes: “Senator Obama has not spelled out specifically how he would pay for these costs, but more generally has suggested that the extra money would come from allowing the Bush tax cuts to expire and ending the Iraq War. But, given his other spending promises, estimated to run between $300 billion and $1 trillion per year, some additional revenue will almost certainly be necessary. Moreover, Obama would require that nearly all businesses, including many small businesses, provide health insurance to their employees. The mandates will increase the cost of employing a worker by nearly $12,000 per employee. This is effectively a tax increase on businesses, and will ultimately be passed on to their workers.”
Is this plan tantamount to government-run healthcare? “Not in the sense of a single-payer programme like in Canada,” says Tanner. “But the government would certainly have much more control over the healthcare marketplace. Private insurance companies would still exist, but they would operate much like public utilities with the government involved in deciding what benefits they offer, what they can charge, and how they operate.”
With all of the billion and trillion-dollar projections flying around, one is at a loss to guess – and that’s the best that one can try for – whether this will lead to a reduction in healthcare cost overall as Obama says it will, or will it simply shift it from the private to the public sector?
The climb will be steep
Perhaps it’s better to be more pragmatic, as is Democratic Senator Jay Rockefeller, who recently summed up both Obama’s and John McCain’s healthcare reforms from a legislative insider’s point of view: “We all know there is not enough money to do all of this stuff.”
From the intense focus on individual presidential candidates that primary and campaigning season produces, foreign audiences get a tilted view of the president’s power to enact, or even introduce legislation, especially if it involves spending. The national media stories that bounce over into international outlets cover only the top stories of the day – they don’t deal with the nitty-gritty. Thus, foreign audiences don’t often see the president groveling before the House of Representatives, which is where the money is counted and dispensed like so many pennies to a demanding child.
The finest plans of some very formidable presidents have run aground in the House
The House has 435 voting members (the Senate 100), all of them with political ambitions, constituencies and obligations of their own. They have allegiances to local hospitals, community groups, developers, corporations, businesses, unions, lobbyists, various other sources of influence and money. It may be OK to close down and streamline hospitals across the country, but not theirs. And if Medicare (which accounts for about 40 per cent of an average hospital’s revenues) decides to cut back rates for hospital services and that leads to a curtailment of local services, no amount of party coloration is going to keep that representative onboard the president’s master plan.
One of the smartest politicians ever to lead the House of Representatives as speaker, Thomas ‘Tip’ O’Neill of Massachusetts, best laid out the politician’s golden rule: “All politics is local.”
It’s been said the president of the United States is the most powerful man in the world:
but not when he’s begging for a tax increase from a Congress that has other priorities for public dollars. And any programme that involves money has to go through the House and its bewildering maze of committees, authorizations, trade-offs and pork barrel politics. The finest plans of some very formidable presidents have run aground in the House.
In 1944 Franklin Roosevelt asked Congress to declare adequate medical care a right of citizenship. He never got it. His successor Harry Truman proposed a national health programme covering all Americans. Congress considered it a communist plot and buried it deep. Only President Lyndon Johnson, in 1965, met any success moving big health legislation when through sheer political will and cunning he maneuvered the Medicare and Medicaid bills into law, providing the elderly, the disabled and the poor with a government-funded healthcare safety net. And he was working with supportive congressional majorities even larger than Obama’s. Since then the steps to expanding health coverage have been small – two forward one back, and most of them taken not by government, but by employers self-insuring their employees.
Can change really come to America?
In a parliamentary system, the leader of the party has much greater suasion over members of his party. He is there with them on the benches, at question period, he is first among equals. He also owes his job to them in that if they are not elected to their ridings in sufficient numbers, he is out of a job.
In parliamentary systems, the masses don’t vote for the P.M. In the republican system, they do. The president achieves his own power, or not, directly from the people, independently of the other congressmen and senators, sheriffs, county clerks, judges, property assessors and lesser functionaries on the ballot. Like all other presidents, Obama created his own lifeline and he has to take care of Number One first. So, if that means parting on some critical issues with members of his own party on Capital Hill, he will do it. It happens often.
Out of this election, Obama brings with him a unified front – a Democratic House, Democratic Senate and his Democratic self. One would think this is a blank check. But it has not always been. American politicians are a fractious bunch, and conservative southern Democrats do not always agree with liberal northeastern ones, or the ultra liberal Californian variety. They sometimes line up with Republicans. While Republicans from liberal areas such as California will line up with conservative Democrats from the South. There are many possible computations.
During the recent Wall Street Bailout Bill fracas, though the bailout bill was initiated by President Bush, it was written in the House, mostly by Democrats. Yet the first version died not because of pressure from the Republicans, which was expected, but because 96 Democrats refused to go along.
Throughout this marathon campaign season, though healthcare has attracted a lot of debate, most of it has focused on the problem of the nation’s 46 million uninsured and how to bring them in from the cold. The debate can best be characterized as a gigantic shell game, moving money around but not really changing the size of the pot. Experts agree that aside from some references to improved information technology and incentives for good outcomes, the Obama plan does not strike at any of the core causes of America’s high health costs, the hospital per diems, the stratospheric doctors’ fees, prices for high-tech procedures.
American politicians are a fractious bunch
Writing in the US publication Health Affairs, Gail Wilensky, senior fellow at Project Hope, an international health education foundation, notes: “It (the Obama plan) greatly increases the federal regulation of private insurance but does not address the core economic incentives that drive healthcare spending.” Until those drivers of healthcare spending are addressed, there is little cost relief international insurers and their cost containment representatives can expect in the American healthcare marketplace.
Whatever change comes, if any, it will come not by the imposition of some master plan, but it will be glacially slow, in bits and pieces, haggled over by congressional committees with varying interests, subjected to the courts, and forged by whatever political crisis may be brewing at the time. In short, it will be the very reflection of the American form of government and the conflicting dynamics of a very diverse country.