Health care reform proponents could find encouragement in recent Obama administration comments on the issue of taxing health care benefits. The President, having adamantly rejected the concept during last year’s campaign (thereby violating a cardinal rule of politics: “never say anything you can’t later on claim was misinterpreted by your enemies”) indicated through White House budget director Peter Orzsag that he considered the issue very much on the table.
Since passage of health care reform is likely to require almost unanimous support by the fifty-eight Senate Dems—or maybe fifty-nine, depending on the eventual emergence of a winner from the long Minnesota winter—the President’s willingness to back down is a positive step (although sophisticated financial thinkers will note that shuffling funding sources will do nothing to reduce total costs).
What the administration’s openness to compromise also does, however, is move the spotlight onto another issue with the potential of sinking health care reform: the inclusion or otherwise of a public program option in a reform structure.
If the discussion at the March 5 White House Health Care Forum is a reliable guide, there is a real possibility that meaningful reform could fall victim to a battle between Democratic liberals’ insistence on a public program option and the insurance industry’s determination to stop a proposal that would allow the entity setting the health care system rules also to be a competitor.
Setting aside my own reservations about public programs, I believe it’s possible to craft a compromise, even assuming that liberal Dems who believe it’s not reform without a public program won’t be willing to back off (even in exchange for actually getting reform passed).
With current front-runner reform models all including some form of “insurance exchange,” a public program option could be written into reform legislation but implemented only when insurer premium increases for the standard coverage exceed a predetermined target, for example CPI change plus one percent. To minimize the effects of local and year-to-year aberrations and insurer premium variations, the trigger test could perhaps be applied on a biennial basis for each regional exchange, with the premium number in the comparison being a weighted average across insurers, and with the CPI percentage that for the region. This approach doesn’t cover the first year, since it’s dependent on year-to-year changes, but the Massachusetts Connector and Netherlands health care reform experiences suggest that insurers will offer aggressively low rates initially in order to build market share.
This kind of trigger approach should appease liberal concerns, and provide insurers with a very considerable incentive to control premiums, while insulating them—so long as they are successful—from any new cost-shifting effects. This doesn’t mean the trigger would be popular—after all, one definition of a compromise is something that both parties detest—but with Liberal Democrats convinced that public programs are far less costly, and Insurers and their Republican allies espousing the free market as the answer to our problems, who could reasonably object?
Now if only the Obama administration could forget about play-or-pay…
Roger Collier was formerly CEO of a national health care consulting firm. His experience includes the design and implementation of innovative health care programs for HMOs, health insurers, and state and federal agencies.