Health care, politics and the stimulus bill

Michael Lawlor

I just returned from the Academy Health “National Health Policy Summit.” It is a meeting held each year in Washington, D. C. to highlight the current trends in research, government and private industry concerning the broad issues of health care policy. It always involves speakers from the administration, so it was especially interesting in this year of presidential succession.

The most prominent “catchword” of this year’s conference was “reform.” Reflecting the plans and excitement of the new administration in power in the nation’s capital, there was constant talk of the hope of reform. The aims and preliminary details of financing and implementation of reform plans were reported. And the political prospects for various reform issues in the midst of confusing crosscurrents in the American electorate were debated.

First it is fair to say that the hope for enactment of fundamental reform, and the sense of impending change in this direction, was at an all-time high. Thus the first speaker of the conference was Jeanne Lambrew, Deputy Director of the White House Office of Health Reform. This office did not previously exist, and its deputy director assured us that its creation was a sign of the seriousness of President Obama’s commitment to health reform.

(Another sign of this commitment, Ms. Lambrew said, was that she had been working since November alongside the designated “Director” of this office, former leader of the U.S. Senate, Tom Daschle. Last week’s news of Senator Daschle’s surprising withdrawal from his nomination to be the new Secretary of Health and Human Services and Director of the White House Office of Health Reform leaves the leadership of the administration’s plan for health reform unsettled.)

Ms. Lambrew, formerly an economist at the University of Texas, was an impressive speaker, clearly in full possession of the facts and hopeful of big things to come. She strongly emphasized that the stimulus package now before Congress contains elements of a “down-payment” on President Obama’s campaign pledges to expand health care coverage for Americans, and to slow the growth of health care spending from its recent rapid growth rates.

Health care reform and the stimulus bill

The stimulus bill is designed to provide health insurance coverage to many of the millions of American citizens who are losing their jobs in this recession. It does this in a number of different ways, but the two main methods are by expanding the income requirement to qualify for Medicaid, and by offering a subsidy to workers who lose their jobs and elect to pay the full cost of continuing their old employer-provided coverage under existing COBRA legislation.

With regard to the issue of restraining the growth rate of health spending there are two elements in the stimulus package, both of which have suffered from the criticism that they are not aimed at the immediate creation of spending. The stimulus bill dedicates a large pot of money to ultimately (Ms. Lambrew mentioned a time frame of “the next few years”) be spent by the federal government in health care information technology (in the jargon of health policy wonks, H-IT). This is designed to cut out unnecessary administrative costs in public and private health care spending and to streamline access to medical records by disparate providers.

The other element of the stimulus bill aimed at slowing health spending is the appropriation of new funds for research into “cost effectiveness.” This, as was emphasized in another session devoted exclusively to that topic, will ensure that both public and private health spending will be spent for therapies, provided in appropriate clinical settings and by appropriate providers, which have been proven by research to work and to be the most efficient methods of spending health care dollars.

A notable feature of the tone of the speakers representing the administration at the meeting is worth comment. Various presentations emphasized the overall point, made in different ways by different speakers, that the details of various proposed health care reforms should be evaluated on the basis of what has been shown in the past, or on what might in the future be shown, to work. Here “work” means that a reform is likely to improve the chances of accomplishing the oft-stated goals of the administration’s health policy: expanding coverage, reducing health care cost escalation and improving the quality of care.

In other words, the various administration representatives who spoke at the conference shared the common quality that they each presented themselves and their approach to reform as that of pragmatic experimentalists. And each was refreshingly free of ideological biases. It will be interesting to see how this plays out over the next few years. The detached observer is immediately likely to suspect this is just posturing before tough decisions are actually made on the details of impending legislation.

But after sitting through presentations by speakers at this same conference from the past administration, and after having observed eight years of policy goal irrelevance, and extreme acts of ideological faith, and after seeing how often such stances collided with realities in the health care world, it was at least refreshing to see the official vantage point change toward pragmatism.

An example from the conference of this pragmatic approach, one that received a large degree of commentary at the meeting, was the issue of how both public and private insurance markets could co-exist in a hypothetical “reformed” health care setting. When one contemplates the number of low-income workers that have lost, or are likely to lose, health insurance coverage in the current economic downturn, one can see the pressing nature of this question.

What many speakers—ranging from Senator Max Baucus of Montana to Steve Burd, the President and CEO of Safeway—agreed upon, was that it would take a combination of public and private providers to decrease the numbers of the uninsured, especially if some potential private buyers of insurance coverage were constrained by low or no income.

That refreshingly frank observation was followed by another. That is, that in solving this problem it really does not matter to the administration how much of the health care industry ends up as strictly private and how much ends up publicly provided. Whatever combination best meets the needs of the uninsured “works” for them in the manner stated above. That will be their criteria for a good policy.

Financing health care reforms

This logically brings up the manner in which these, and future, health care reforms will be financed and the related question of the political prospects for early health care reform.

On the question of finance, there was expressed by the spokespeople for the Obama administration, by representatives of the Democratic leaders in both houses of Congress, and by the Republican congressional staff members who spoke, a somewhat sharper difference of opinion. The Obama administration expressed the frank and firmly held realization that the piecemeal health reforms that they are including in the current stimulus package are recognized by them to be items that will not translate into immediate government spending, and so are unlikely to be quickly stimulative.

Instead, and as stated above, they view these items as a preliminary down payment on their campaign promise of change in the health care system. But, simultaneously, they also view them as an investment in the future competiveness of the American economy. By this reasoning, and in the face of clear opposition on the other side of the aisle, the administration justifies paying for this reform by expanding the deficit now, and ultimately by increasing taxation. They are quite upfront about this, and use this reasoning to confront observers of different politics than the administration represents when these opponents take them to task for including such items in a “stimulus” bill.

Importantly, this is but one element of a general attitude that we are bound to see again in energy, foreign and tax policy. The flavor of this approach is captured by the frequently quoted aphorism that the administration is determined to “not let a crisis go to waste.” The legislative strategy that follows from this is the will to quite openly include longer term reforms within more immediate crisis spending. It is an approach that capitalizes on the President’s current political capital and momentum. But it is also an approach which is now apparent to his political opponents and as such may come back to haunt future attempts to fashion bipartisan support for other reforms.

Discussion of the paying for health reform inexorably leads to a discussion of the political prospects of that reform. This is as it should be. It would be hard to publicly disagree with the goals of President Obama’s health reform. What politician is safe enough in his or her seat to oppose expanding health coverage, reducing health care costs or improving the quality of health care? It is much safer to declare your support of these goals, but to decry the painful fiscal costs that pursuing them might imply.

Thus, much of the attack on these provisions of the stimulus package focuses on the inevitable long-term costs these reforms imply. Only if President Obama manages to convince enough senators and representatives, or a majority of the Americans that vote for them, that such long-term reforms are beneficial and/or needed can he hope to succeed in his future blueprint for reform—of health care or any other issue that he made promises about in his campaign.

The dangers ahead

Let us end by briefly turning our gaze to the future. What hints about that necessarily imperfect vision of health reform were offered at this gathering and seem probable at this point in time? The first thing to say is that the unexpected withdrawal of Tom Daschle’s nomination leaves confusion in the administration’s plans for health reform.

Whatever the political calculations were that went into that withdrawal (even President Obama admitted that the nomination sent the wrong message about the hope for a “changed” way of conducting governance), it is clear that Daschle was well suited by his knowledge of health care and politics and his close relationship with the President to shepherd health care reform to a successful legislative conclusion. The qualities of a replacement nominee will be very important.

Less commented upon in the media is the political danger alluded to above that the rhetoric and political operating procedures of the administration may endanger their efforts to accomplish future health reforms. This could happen if the administration alienates now bipartisan allies that they may need in the future. Perhaps they are counting on the groundswell of support they initially have enjoyed to translate into midterm congressional gains. But history casts questions on that hope, if it exists.

Lastly, a little reported fact from health policy research may impact the future of health care reform. Put simply, it is widely recognized by health economists and policy researchers, that health care cost inflation is not likely to be restrained much by even the most successful H-IT reform. That is because, in the long run, health care costs rise due to technological advancement in health care—due, in other words, to an extension of the way and the things that the health care system can do for ill people.

A corollary of this has been emphasized for some years by the economist Peter Orzag, formerly of the Congressional Budget Office, recently nominated and approved as President Obama’s budget director. The related point that he has emphasized is that, as we look into the forecasts of the amounts of money that the federal government has committed to pay for the health care of Medicaid and Medicare recipients, the unsustainability of future budgets results not so much from demographic changes like the retirement of the baby boom generation (we could fairly comfortably pay for their health care at current costs per head), as they do from the height to which health care costs per retiree will rise if the pace of health care inflation continues at current rates.

If President Obama is going to seriously reign in the growth of health care costs, it will require more than just an increase in information technology. It will also require as much agreement and support in Congress as can be mustered over whether, and if so how, to control technological growth in health care.