Friday, January 15, 2010

In the Back Rooms of Washington

When it comes down to hard negotiating over major policy, official Washington retreats behind close doors, open government rhetoric be damned.  So it is with the "change" administration and its efforts to reach one-party consensus on the health bill.  US Person will not dignify the pending proposals with the term "reform" because there is precious little reform in the Senate bill and only a modicum more in the House proposal.  The real reform so desperately needed is a method to control escalating medical care costs in this country.  The House bill attempts some cost control by providing competition from a non-profit government insurance plan.  But as we have seen this idea is too effective for the revanchists that represent the insurance industry in the Senate.  The Senate is only willing to allow some pilot cost control programs as a sop to progressives who saw their public option axed by Joe Lieberman and his ilk.  As Republican leader Mitch McConnell rightly observed, "this bill doesn't even meet the basic goal that the American people had in mind and what they thought this debate was all about: to lower costs."  The complaint may be disingenuous coming from an obstructionist like McConnell, but it is accurate.  The Congressional Budget Office agrees the Senate bill makes no significant long-term cost reductions.

Health care cost are strangling our economy: eighteen cents of every dollar an American earns goes to health care.  Between 1999 and 2009 the average annual premium for an employer provided plan rose from $5,800 to $13,400.  The average cost for a Medicare recipient went from $5,500 to $11,900.  Our system costs so much not because of superior quality--Europe does it better for less--but because our so-called system is fragmented, disorganized, inconsistent and profit oriented.  At the current rate of increase, the cost of family insurance will reach $27,000 or more in a decade.  Business will see the share of their labor costs devoted to providing insurance rise to 17%.  Medicare will be bankrupt in eight years.[1]  Not only will Americans be unable to afford health insurance, the current broken system will bring the national economy to its knees.

Senate bill supporters point to the excise tax on high cost health plans favored by Forty-four as a cost control measure.  The reasoning is that if expensive plans  are taxed, businesses will not offer them and consumers will not take advantage of generous benefits.  The reasoning is specious.  The 40% excise tax will affect insurers and large self-insured employers who will then past on the costs to employees.  By 2019 the tax would affect one-fifth of households making between $50,000 and $75,000 a year--the working middle class--according to the Congressional Joint Committee on Taxation.  Studies show that expensive plans do not always have generous benefits, either.  High premiums are associated with older workers, smaller employers, and women. Where a worker lives also makes a difference in premiums.  A twenty thousand dollar policy in Miami costs only fifteen thousand in Phoenix. The difference has nothing to do with overly generous benefits, but is a function of prices and medical practices in each market[2]. So the bottom line is that the only practical solution offered by Congress in either bill--non-profit competition for the private profit insurance business--has been defeated by the insurance lobby, and once again Americans will be left to pay the mounting bills.

[1] "Testing, Testing", New Yorker Magazine 12.14.09
[2]Bill Salganik,Counterpunch 01.14.10  Unions managed to cut a deal with Forty-four in private meetings at the White House to exempt their contracts from the excise tax for five years.  Of course the political concession to unionized labor only makes the tax even more unfair.