Despite Democratic control, major health reform still unlikely

With 258 House and 57 Senate Democrats, it’s almost certain that major health
reform will be passed, right?

Actually, that was the number of Democrats Bill Clinton started off with in 1993 and we know what happened to health care reform in that Congress.

With similar Democratic majorities, I do not expect a major health care reform bill like the one President-Elect Barack Obama called for during the campaign–in 2009 or 2010.


I do expect a number of important health bills including the renewal
of the State Children’s Health Insurance Plan (SCHIP) and a major
Medicare bill.

Here are the reasons why we could have a big health care reform bill in 2009:

1. Obama and the Democrats called for health reform during the campaign and many voters expect them to follow through.2.
Senator Kennedy has already begun a significant bipartisan effort and
many in the Congress want to see the Senator succeed in what could well
be his last effort toward a career-long goal.3. The health care
system continues at unsustainable cost levels–the average family cost
of employer-provided health insurance reached $12,800 this year.4. There are 45 million uninsured.

Here are the reasons why, in spite of all of our health care
problems, I don’t believe we will have a big comprehensive health care
reform bill in 2009 or 2010:

1. There is no consensus in the Congress or the country on what a comprehensive health care bill would look like.2.
Our people don’t want health reform badly enough to force the Congress
to stand up to the powerful stakeholders and make them do it.3. We don’t have the money.

No Consensus

Barack Obama did win a big victory. He did promise health care reform. But he won with slightly more than 50% of the vote and John McCain’s voters gave him close to 50% of the vote. The country remains split over the degree to which government should be involved in our health care system and that is reflected in the Congress–even after the Democratic victory yesterday.

In the House, the Democrats will enjoy a big majority. However, last session we had 49 "Blue Dog" Democrats and will have at least that many this time. Without "Blue Dog" support, the Democrats will not have a majority on any health care bill. No big health care reform can pass without the support of these fiscally conservative Democrats who are pledged to a pay-as-you-go policy–you can’t spend the money unless you either raise taxes or cut spending someplace else.

In the Senate, it appears the Democrats should have 57 or 58 seats in January. But Republicans can stop a big Democratic health care bill with only 41 votes and they will likely have 42 or 43. Forty-three is exactly the number of seats Bob Dole had when he stopped the Clinton Health Plan in 1994.

Any big health care bill will have lots of reasons for any number of powerful special interests to try to stop it. Or, a big bill’s authors could do what they did in Massachusetts–pay everyone off. The problem is if you give insurers, doctors, hospitals, drug companies, and all the others what they want to get them onside, you will create an enormously expensive bill and create opposition on that front alone. That’s why the California effort crashed earlier this year when that bill’s total costs became clear.

We are simply not at a place where any of us can outline a health care bill that clearly has consensus support and you don’t do something this big unless you have a clear consensus.

People don’t want it badly enough.

We really do have a democracy. For all the things you hear about the "special interests controlling Washington," the fact is that if there is a huge outcry from voters the Congress will respond. But there is no huge outcry from voters over health care.

The big issue in this election leading to Obama’s big victory was the financial meltdown and the economy–not health care.

Support for health care reform among voters is soft. Health care had consistently been the number three issue (behind Iraq and the economy) in the Kaiser Family Foundation tracking poll until gas prices spiked this summer. It then fell to fourth behind the price at the pump. In August, 22% of those polled thought paying for health care was a serious problem for them–but 36% said paying for gas was a serious problem. After the financial meltdown, in October only 12% thought paying for health care was a serious problem.

Health care costs $12,800 a year for a good family plan and when gas went to $4, the cost of gas was more important!

Health care is a chronic issue for the voter but support for big change is not deep-seated. It is not deep-seated because most people have very good health insurance that is largely paid for by someone else. Lake Research reports that 92% of those who voted last year had health insurance–82% had everyone covered in their household. For the vast majority, health insurance comes from the workplace where someone else pays for it.

For all the issues of the uninsured and health insurance costs, the vast majority of voters have really good health insurance and their employer still pays for the largest share of it. So, it’s no surprise when $4 gas is a bigger issue than $12,800 health insurance. It should also be no surprise when next year voter pressure for the Congress to do anything big and controversial will be tepid.

As long as the employer community is willing to subsidize our incredibly high health care costs for those who vote don’t look for anyone to be marching on Washington to fix our health care system.

No money

Passing an Obama-like health care reform plan will easily cost $100 billion a year to implement.

Two years ago the budget deficit was $162 billion. Last year it was $455 billion. In this fiscal year, it will be at least $1 trillion! The deficit was going to be $550 billion before it became necessary to book $250 billion of the bailout this year. It is expected the economic deterioration will create an additional $100 billion in deficit, and the Congress is getting ready to pass another stimulus bill costing at least $100 billion. That totals $1 trillion. Add to that the cost of the Iraq war, a bigger stimulus bill, any more deterioration, and $1 trillion is going to look good.

Add to that Obama’s preeminent campaign promise–he will cut taxes for all families making less than $200,000 a year. He can’t avoid this one. He intends to raise taxes for those making over $250,000 but just keeping the Bush tax cuts (which expire in 2010) for those making less than $250,000 a year and then cutting taxes further for those under $200,000 will have a big cost. Keeping that promise at a time there are already huge deficits will trump other spending–like health care.

With 43 Senate Republicans and at least 49 "Blue Dog" fiscally conservative House Democrats and pay-as-you-go health care reform looks pretty unrealistic.

And watch Massachusetts. That health reform plan was passed by giving all the players what they wanted–hospitals, docs, insurers. It was passed with virtually no cost containment. Coming up on its third year this summer, just as any federal health care legislation would be on the table, those chickens are going to come home to roost.

What will happen in 2009?

I expect the new President and Congress to keep their health care promise by starting incrementally to insure more Americans. They can’t afford, or would be able, to do it all so they will make a down payment.

There are a number of unavoidable health care issues for the next Congress:

  • The reauthorization of SCHIP, which must be done by April. Last year the Congress approved a $35 billion expansion that would have increased the number of kids covered from 6 million to 10 million. President Bush vetoed the bipartisan expansion twice. Obama will sign it and it could well involve a big cigarette tax to meet pay-as-you-go demands.
  • Physicians are scheduled to get an automatic 21% Medicare fee cut on January 1, 2010. The Congress has fixed this Sustainable Growth Rate problem seven times before. The last time was in July when they fixed it for just 18 months. While we desperately need physician payment reform, we won’t likely have the votes to do more than another temporary fix because the doctors don’t agree among themselves how to reform the payment system.

With pay-as-you-go so important an issue there is one place, other than a cigarette tax, where the Congress can find the money for health care–private Medicare. Pit the kids health program and the big Medicare fee cut against the cigarette companies and Medicare HMOs and, in the new Congress and White House, there is no competition–tobacco gets taxed more and the HMOs get cut.

But even the extra HMO payments and a cigarette tax aren’t large enough to both expand SCHIP to 10 million kids, fix the doctor payment problem, and pay for Medicare as it is. There will have to be more Medicare cuts–hospitals, nursing homes, durable medical equipment…Look for a big provider food fight over who gets what.

There are also a number of things the Congress can do that won’t cost the government much or any money–health information technology standards and requirements, transparency in provider pricing, health outcomes research, and others.

If there is any money left, there have been bipartisan efforts to help small business owners provide health insurance. This is the one area where we are seeing significant coverage erosion.

Expanding SCHIP, dealing with Medicare payments, adding on things like health information technology, and maybe doing something for small business would give the new President and the Democratic Congress bragging rights on health care if not comprehensive reform.

In the end, Obama and the Democrats can accomplish a fairly substantial health package without doing a big comprehensive Obama health plan and that is what I expect.

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Michael SlyderLaura LRichard FerreiraNick PolimeniAli Al-Rajhi Recent comment authors
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Michael Slyder

Robert – In this era of inflated expectation, I was relieved to read your analysis of the health care crisis and the liklihood of comprehensive reform. I have been working for many years on an economic theory that provides, among other things, a unique solution to our health care crisis. In this system, billions of dollars are saved, government and private industry are no longer involved in its management, and government subsequently downsizes upon implementation. Please visit my educational website (www.containedcapitalism.com) to review my work. I would appreciate your support. Thanks.

Richard Ferreira
Richard Ferreira

The issue is not the hospital system (private, public, academic, community, for-profit,not-for-profit, etc), nor the pharmaceutical inductry, nor the physicians abiding the Hippocratic oath. The problem is the economics and the system(s) that have developed to address the issues. Claims review would not be needed if hospital billing practices did not contain fraudulent claims, professional services for which no compensation is due to the hospital, unnecessary hospital days and a whole list of infractions to numerous to delineate in this commentary. Provide all residents of the US with universal health care coverage provided through multiple private insurers and not a… Read more »

Laura L
Laura L

From a hospital perspective, here are the things that are driving expenses up and need to be addressed quickly to help with the looming medical crisis: Drug costs – even though our docs and providers are on a strict pharmacological review program to contain costs, the drug costs our hospital absorbs is still going up faster than our revenues. We’re talking 12% a year and as a state hospital, we get discounts so you can imagine how the private sector is taking this. An extremely lagging ejudication system between hospital and payor. Real-time is on its way so I hear,… Read more »

Richard Ferreira
Richard Ferreira

Bob presents an excellent argument as to why under the current circumstances there will not be any major healthcare reform. Economics are the overwhelming concern of the majority and similarly, their apathy respecting what healthcare actually costs them are the facts. Finally, these do nothing legislative good-old-boys might be moved out of sympathy for Ted Kennedy but is that rational? I would take a position that inventing other programs SCHIP or modifying existing programs such as Medicare and Medicaid are wasteful and will not address the issues but will further worsen and increase the costs of healthcare. The existing programs… Read more »

Nick Polimeni
Nick Polimeni

We don’t have the money to implement a universal system: This is utterly FALSE; the idea comes from long misunderstood economic concept on methods of creating the necessary liquidity to support any social project required by the nation. The “we have no money” idea has been promoted by the politicians as a one-size-fits-all excuse to hide their vested interest. Projections on ALL of Obama’s plans attainability are easily feasible within various economic studies by various institutes, including PEI, and so forth. Do we have the personnel? We have enough people unemployed who within a year can be trained as nurses… Read more »

Ali Al-Rajhi

As Brian Klepper & David Kibbe stated in a previous article (which I have tagged on my blog), there needs to be more funding toward Primary Care so to reduce the amount of ‘unnecessary’ to the hospital for preventative conditions.
For those interested, here is the article Brian Klepper & David Kibbe wrote: http://publichealthbugle.com/?p=97


Community based underwriting has its pluses and minuses. NJ did it several years ago with mixed results.


Paul Krugman points out the fact that NY and other states, albeit few, have community based underwriting. Wouldn’t a healthcare bill that started with community based underwriting be a good start?


Reforming entitlement programs (Medicaid/Medicare) is probably the single booming issue for the federal gov’t in the medium-to-long term but there is no way healthcare dominates the 1st year of his presidency unless the one wildcard gets played in Ted Kennedy. The prognosis on his survival has been kept very hushed and quiet. Not sure if he will even survive through 2009 or being able to function in a capacity as a standing Senator. If it becomes known that Ted Kennedy only has months to live and he chooses to make expanded health care coverage his last hoorah, I can see… Read more »


Nice summary by Bob. In the short-time, 2009 is likely a year where SCHIP bill that got vetoed by Bush will be reintroduced and approved. It was a bill that did not require any additional borrowing and complied with the “pay-as-you go rules” (e.g., that really mean nothing and conveniently got suspended for the massive Agricultural pork bill that passed last year). I imagine almost of the “Blue Dog” Democrats and even some moderates in the Republican party may support it. Only a question is if the tobacco lobby raises a big enough stink about the increased federal tax hikes… Read more »

Matthew Holt

I;ve been a naysayer for more than 2 years about anything happening quickly and on balance agree with Bob, but, it does depend how bad things get how quickly. Remember that most of the bad numbers we are now seeing on income/production/employment/ etc PRE-Date the late september-October meltdown in the financial sector. If things continue to get worse, we could be at 10% unemployment in 12 months (much more in reality because of how we fake that number) and perhaps up to 120 million churning through uninsurance (that number was at 80m in the boom time). And then who knows,… Read more »

Greg Pawelski
Greg Pawelski

Obama’s resounding defeat of McCain delivered a mandate for a progressive policy agenda, which includes a promise of universal health care coverage, mandatory nursing staff levels, raising the minimum wage, a dramatic transformation to a low-carbon economy, opposing Social Security privatizaton, promoting “fair” trade, and a historic investment in education. The progressive directon of the country, symbolized in Tuesday’s victory, is perfectly clear, it rejected conservative ideology.

Deron S.

Maggie – I agree that the consistently underperforming hospitals should be closed down, but only if that capacity can be replaced with better performers. The number of beds per capita has already been on a steady decline over the last decade or so, at a time when we are getting sicker. As to Obama’s spending priorities, I’m not so sure healthcare should ever be a spending priority. The system is already expensive. If reform solutions are done in the right order, I don’t think a whole lot of government spending is necessary. Developing insurance company policy standards to reduce complexity… Read more »

Maggie Mahar

jd– Here’s the problem, as I see it a) universal coverage will increase the nation’s health care bill by 13–15% according to a recent report by the Centers for Health System Change/Robert Wood Johnson Foundation. Many people (yours truly uncluded) have argued in the past that if everyone were insured, our bill would be lower because today, uninsured people who don’t receive timely care wind up becoming much sicker than they would have had they been insured–and we all share in paying their hospital bills. It turns out that, over the last decade or so, the growing number of uninsured… Read more »


I think Maggie and Bob may be too quick to conclude that the current financial-cum-economic crisis makes universal health care less likely. Obama has never set himself up to be the primary driver of a universal health care bill. His platform as a candidate didn’t even include a UHC proposal. On the other hand, three major players in the Senate (Baucus, Kennedy and Clinton) all do have UHC as their topmost goal, or close to it. Obama will not veto a UHC bill passed by Democrats as long as it isn’t totally irresponsible (i.e., it has some cost control measures,… Read more »