Can Obama Deliver Real Healthcare Reform?

The outlines of President Obama’s healthcare reform plan are coming into view. Instead of proposing a grand scheme, like the Clinton reform plan, the President first threw out some ideas about where where to make cuts in government funding of healthcare to help finance an expansion of coverage. Then today, he called the major stakeholders to the White House to try to reach a consensus. The President has also made it clear that he expects Congress to work out the details, but that he will do whatever it takes to get reform legislation passed.

So far, most industry players seem pleased by Obama’s approach. Not only is he not proposing draconian cuts in spending, but his effort to reach universal coverage promises to provide a lot of new business to insurance companies, pharmaceutical firms, hospitals, physicians, and others. Moreover, he has specifically spared hospitals from a $20 million drop in disproportionate share payments. His plan would also cancel a 21 percent rollback in Medicare fees for doctors next year and 5 percent annual cuts in the future.

The aim of the White House is to “dole out the pain in small, easier-to-swallow bites to minimize opposition,” write Dan Eggen and Ceci Connolly of The Washington Post. Of course, not all sectors will find that pain easy to take. For example, home health agencies are facing a $37 billion hit in Obama’s plan. And replacing the current method of paying Medicare Advantage plans with competitive bidding is projected to save $175 billion. America’s Health Insurance Plans, the trade association, claims that this reduction would fall on the shoulders of seniors, who would have to pay more out of pocket. But insurers’ robust profits from these Medicare plans would also decrease.

The fact that the insurance companies, providers, and other industry sectors are rooting for Obama’s plan means a couple of things. First, they see the possibility of growing their business as a result of reform. Second, the more farsighted healthcare leaders realize that the status quo is not an option: Unless some big changes are made in the health care system, it faces eventual collapse. National health spending is now expected to rise from $2.4 trillion in 2008 to $4.4 trillion in 2018. Even if the economy bounces back, that’s simply not do-able.

The President and his advisers realize that there’s no way to achieve significant reforms this year without industry support. On the other hand, the delivery system changes that the Administration has proposed will do little to curb the growth in spending, as Robert Laszewski points out in a very well-reasoned blog. In fact, the very support that the industry has displayed so far—even though it may be short-lived—indicates that the plan is unlikely to hurt anybody very much. And that suggests that the final reform plan will lack the teeth it needs to save our system.

What we’re now seeing is Part I of health care reform. Part II will arrive when all else fails.