What Daschle Means for Health Reform

Lost in the drama that always defines the Clintons, arguably the most important domestic appointment was leaked today and got relatively no attention outside of health care circles.  What was the news? Former Majority Leader Tom Daschle has apparently been offered and accepted the position of Secretary of Health and Human Services. In addition, Daschle will be President-elect Obama’s point man on all issues related to health care policy.

Make no mistake about it, this is a very important appointment. In fact, it is very hard to overstate its importance for anyone who cares about health care.  Daschle will be no Tommy Thompson or Mike Leavitt, picked to head a HHS that wasn’t a top priority for their President.  Daschle will also not be a Donna Shalala, who had no real power during the Hillarycare debacle. In his role as HHS Secretary, Dascle will be an all out Health Care Reform Czar for the Obama administration. In this role, Daschle will be charged to use his thirty-plus years of Washington experience and contacts to push comprehensive health care reform, including universal insurance, through the congress. And if successful, Daschle will be in charge of getting the new national health program (not to be mistaken with nationalized health care) off the ground running and through its first few years of existence. This may seem easier than the tasks awaiting the new Secretary of State or Treasury Secretary, but bear in mind that similar tasks to reform health care have failed many times over the past 60 years. I wrote more about this history last week.

With lessens from history as our guide, why does Daschle have a good chance to succeed where others, including Hillary Clinton and Harry Truman, failed?

• Daschle has the ability to get things done on the Hill. He served eight years in House and three terms in the Senate, including as Majority and Minority leader. In this capacity, he has the same core competencies that Lyndon Johnson, “the master of the Senate,” had when he ushered through such legislation as the Civil Rights Act and the expansion of the Social Security Act to include universal coverage for the elderly, disabled, and indigent (Medicare and Medicaid).

• Daschle, unlike Hillary Clinton, won’t be a divisive partisan crusader installed because of his or her last name. Daschle showed an ability to work well with Republicans during his time in Congress.

• Daschle by all indications has the full support of President Obama. Daschle was behind Obama early on in his Presidential race, and Senator Obama has returned the favor. Dashle was briefly rumored to be a potential vice president or chief of staff. However, I imagine Daschle would much prefer this new role. He is a smart man and realizes the potential impact and legacy of such a role, if successful.

• Key number: 58 or 59. With 58 or 59 seats in the Senate, his job will be much easier than Hillary’s was in 1993.

A Mandate for Health Reform?

Democrats have officially taken a trifecta or control of the White House, House of Representatives, and Senate for the first time in fourteen years. House Democrats have picked up over 20 seats and Senate Dems will likely have between 57 and 59 seats in 2009. These majorities with a Democratic President are the largest since the days of Lyndon Johnson. Like that time period, there is a real chance for a progressive window. In this type of window, which normally only happens once every 30-40 years, the Democrats will have the potential to pass landmark legislation.

What will be the policy priorities?

My guess is that there will be three top priorities: health care reform, tax reform in order to pay for the health care reform and the deficits left by the Bush administration, and further regulation of the financial industry.

For now, I will focus on one of these priorities

Health Care Reform

The United States has come tantalizingly close to universal coverage several times in the last 60 years. First, in the 1930s, health care was left out of the original Social Security bill after much debate. Next, in the late 1940s, under President Truman, health care reform came within a few votes of passage. Next, in the last progressive window in 1965, Medicare and Medicaid were passed as a first step to what was thought to be universal coverage. However, other political realities, such as the Vietnam War, got in the way. Then in 1993, the last time the Democrats controlled the trifecta, came Hillary Clinton’s failed attempt at universal health care. The first two efforts were stymied in part by the strong opposition of organized medicine, in particular the American Medical Association. The insurance lobby helped put a stop to the latter effort. Ironically, the same Harry and Louise characters, who were famous for their 1993 commercial about government staying out of their medicine cabinet, have returned in a health reform commercial put forth by various leading health care associations and lobbying groups. Unlike the previous ads, these characters are now in favor of some sort of universal coverage as part of a comprehensive reform solution. In addition, one of the leading organizations calling for reform in 2008 has been the American Medical Association.

There is general agreement that universal coverage must not only be for all, but must also be paid for by all. Thus, there is a sense of shared sacrifice that must take place in order to achieve universal coverage. With that said, it is important to note that universal coverage alone is only half of the solution. There must be cost controls and a continued increase in tying provider and hospital payments to performance and high quality outcomes. In addition, there must be incentives to correct the maldistribution of providers. Having insurance matters little if you cannot get high quality care and/or there are no health care providers in your area. Good luck finding a specialist in an under-served area. To solve this, there must be legislation to correct for the financial and cultural dominance of certain specialties of medicine at the expense of others.

Many health care experts believe that the states are the best laboratories. In this sense, the relative success of the Massachusetts health care plan should serve as a model for moving forward. According to this model, there will still be a private health insurance market, and no one will be forced to sign up for a government plan. Regional health markets would most likely be set up to help keep costs down and provide efficient coverage to every citizen.

What about mandates?

Unfortunately, Barack Obama was generally against mandates during his campaign for president. This is naïve from an economic standpoint. In order to control costs and avoid adverse selection, mandates must be in place so that all healthy individuals diversify the risk pool. Without a truly diverse risk pool, there is no way that universal coverage can be sustainable from an economic sense.

Overall, I think it is important to highlight the need for mutual sacrifice for the good of the country that will be needed in order to achieve the type of real health care reform that will be needed in order to lead to a fulfillment of the Institute of Medicine’s six health care aims–health care that is more safe, effective, patient-centered, timely, efficient, and equitable.

We must have a real call to all Americans do something for their country. Such a call hasn’t been made since JFK, and it’s been a long time coming. I hope that President-elect Obama will be able to issue such a call, because such a call is needed if we are to find a sustainable solution to our health care crisis.

McCain’s Health Plan: DOA

John McCain is fond of repeating the patently false assertion that Barack Obama would “raise taxes on the middle class.” FactCheck.org has had to re-iterate that Obama’s tax plan would absolutely not “raise taxes on the middle class,” unless people in the “middle class” make over $250,000 a year. Even though the ads have been thoroughly debunked, McCain continues to repeat this claim, which is not just an opinion, and not just “spin,” but an outright lie. In no way will an Obama tax plan raise taxes on the “middle class.” McCain knows this, and yet he continues to say that Obama’s tax plan will raise taxes on the middle class.

Ironically, McCain is himself preparing a tax on the middle class — in the form of his health care proposal. McCain, of course, wants to work within the broken confines of the broken health care system. This is his plan for “reform,” but to borrow a phrase from Barack Obama, McCain’s health care plan is still a pig wearing lipstick. There is no real reform: no attempt to bring costs — which have doubled (doubled!) since 2000 — down; no attempt to utilize the government’s bargaining power to get deals for patients; no attempt to get health insurance for people who are denied due to “pre-existing conditions.” McCain’s plan is this: throw a $2500 tax exemption ($5000 for families) at consumers and tell them to go get their own health care.

That’s it. Here’s some money, let The Market work things out.

The problem — as I’ve often said in the past — is that health care does not operate according to the Invisible Hand, since the respective interests of the health care provider and the health care customer are mutually exclusive. The insurer (provider) wants to provide the least amount of health care for the most amount of money. The customer wants to obtain the most amount of health care for the least amount of money. People who get health insurance through their companies get a break, since they get group rates. Because there are so many people in the insurance pool, the average cost of health care per person can stay low, and the pool can absorb the hit if any member of the group needs to cash in on that health care.

McCain isn’t even proposing that. Literally, he wants you to get your cash, go down to the UnitedHealthCare office, and sign up for a plan all on your own. No group discounts. No nothing. Regular retail price. Health care premiums in Ohio start at $300 per month. Even The Wall Street Journal agreed that John McCain’s health care plan was outrageous.

At the same time, McCain wants to tax the money that employers contribute to their employees’ health insurance:

The value of the typical plan provided by an employer to a family is $12,106, of which the employer pays $8,824, and the worker pays the remaining $3,282. The median household income is $44,389, which places most American families in the 15 percent income tax bracket.

McCain wants to add the employer’s cost — an additional $8,824 — to that middle class family’s income, then tax it. The hit to the average family is 15 percent of the McCain-added income — $1,323 more in income taxes.

This new tax would affect the 158 million Americans who are insured through their employer.

Now there’s a tax on the middle class! The Hill Blog goes into a little bit of conspiracy theory, though:

So if you choose to remain with your employer-based insurance, there’s no guarantee that you’ll ever see any benefit from that $5,000 payment. In addition, giving young healthy workers $2,500 to buy insurance on their own, where it won’t be taxed, will encourage them to leave employer-based plans, quickly raising the costs for everyone remaining and thus eliminating benefits of the tax credits. 

Republicans love to complain about how ineffective a particular agency or program is, intentionally staff that agency with idiots, and then, when the idiot-staffed agency messes up, point to that agency and exclaim (loudly enough for the cameras to hear), “See?! I told you that the government doesn’t work! Now, the private sector, that would have done things better!” Then, they outsource the previously government-provided benefit or service to a private company, most likely run by the personal friend of someone high up in the government.

The end result of the situation described in the blockquote above is that private health insurance companies would find their coffers pregnant with the cash generated by individuals buying insurance at the retail price rather than the discounted group rate. Why settle for getting income from group discounts when you could goad your consumers into paying full price?! That’s what I call reform.