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LieberCare Is a Dead End for Real Reform

photo: Rayne for Firedoglake

photo: Rayne for Firedoglake

This should have been a great time to deal with health care reform. We have a Democratic Congress and a smart new President who campaigned on the issue. We know that the current health care system is unreasonably expensive. The health insurance companies are weak, offering a good target for a major cost-cutting effort. But look at what happened. We don’t know the exact parameters of LieberCare, but from published reports, we can see that the bill not only makes it impossible to reach the goals of progressives, it solves major problems for insurance companies.

The current system is far too expensive. Medical care will comprise 20% of the GDP by 2018, according to a study published in Health Affairs (abstract only). This is outrageous. It crowds out a host of better alternative uses. Between the bloated health care system and the bloated military budget, we have no chance of becoming a fully productive country. We can only solve this problem by completely restructuring the financing system for health care. The obvious target is health insurance companies. If we change that, we can move to other major cost centers, like hospital companies, drug companies and medical device companies.

Health insurance companies have three huge problems that make them a great target for reformers. Their balance sheets are larded with goodwill and intangible assets, which don’t have a cash value. Their value depends on the ability of the company to stay in business and make profits. The recession has cost the health insurance companies millions of customers, and threatens their ability to make the kind of profits these companies need to keep that goodwill on the books. Companies responded by raising rates to appease Wall Street. This has caused great pain to the remaining customers, including small businesses and people in the individual market for health insurance. The result is that an already hated industry created even more ill-will among the general populace. These weaknesses created a real opening for substantive change

Progressives had two goals for health care reform: universal coverage and lower costs. These were the pillars of President Obama’s campaign promises, so it certainly was reasonable to push for policies that would make those promises a reality. The obvious solution was a single-payer system. When the President took that idea off the table, we looked for alternatives that would at least leave the door open to single-payer in the future, such as a public option, or Medicare buy-in.

The House bill wasn’t very strong, but it contained the seeds of a public option and established a pathway to single-payer in the future. Then the Senate took up the issue. Senator Reid and others say there will be universal coverage, but that comes only from the mandate. The Senate imposes on citizens of a supposedly free country a statutory duty to pay a portion of their income to a private company to buy insurance that will prove inadequate to a substantial number of them, and which can only be purchased with taxpayer support. The goal may be met but the method is shocking.

This mandate solves the financial problems facing health insurance companies. It creates millions of forced customers to replace those who can’t pay premiums because of the recession. It means that the business model of health insurance companies is safe, so they can keep their goodwill on their balance sheets, and look reasonably solvent.

The Senate bill does nothing substantive to lower costs of health care. First, it entrenches the private companies in the payment system. Once they accumulate the kinds of money millions of new customers are paying (with government help), their treasuries will increase dramatically. I estimated an increase in assets at $455 billion by 2016, and an increase in revenues of $1.39 trillion. Those numbers need to be updated to the current versions of the proposed legislation and some newer projections of premium increases, but the orders of magnitude are correct. Does anyone really believe this Congress is capable of regulating companies with that kind of money to spread around on lobbyists and campaign contributions?

Second, the Senate stripped out most of the real cost control measures. It refused to permit any effort to drive costs down in the pharmaceutical industry, and it did nothing to rein in money paid to providers. It is inconceivable that this bill will have any real impact on the amount of money spent on health care.

In summary, instead of a pathway to a substantive change in the way health care is financed and provided, the Senate reinforces the current dysfunctional system.

I recognize that it does contain some provisions that will make a difference to a lot of people. The question we have to answer is whether the costs of making that difference are too high. I don’t understand how a country that spends 20% of its GDP on health care can compete in the world economy, and that’s too high a price. Maybe President Obama can go on television and explain this to us.

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