Obama’s Warp Speed Health Care Reform Rightly Focused

President Barack Obama’s address to the nation was both a rallying cry and a call to arms. And, if there remained any doubt, President Obama made clear he wants health care reform and he wants it now.

In his speech, President Obama promised the budget he will propose soon “includes an historic commitment to comprehensive health care reform — a down-payment on the principle that we must have quality, affordable health care for every American.” He then pledged to begin meetings among stakeholders to begin working through the contentious issues surrounding the topic next week. Pledging reform at warp speed he proclaimed, “So let there be no doubt: health care reform cannot wait; it must not wait and it will not wait another year.”

Can meaningful and comprehensive reform really be developed, debated and enacted in less than 12 months? Some would argue that it has to, that the political will to pass meaningful change must be seized and seized quickly. There will be great pain for some in the reform, and like pulling off a band aid it’s helpful to pull it quickly. Others will say making massive changes to a system as complex as America’s health care system needs to be done thoughtfully and carefully or else the damage from unintended consequences will swamp the benefits of change.

My take on it is that various aspects of a reform package can be developed in a year, but some elements will take longer. The question will be whether the Administration determines it’s better to pass what it can quickly and continue the legislative process into 2010 or wait for an omnibus package.

In any event, the President has little choice but to call for fast reform. His political capital is high right now. It has a lot more room to fall than to grow. Further, there’s broad consensus that health care reform could greatly aid the nation’s economic recovery — and that is his top priority. The sooner the details of reform are clear, the sooner business can rely on help in managing this cost. Further, there’s no shortage of proposals being discussed in and around Congress. If he doesn’t act on health care reform, someone else will. And he has no intention of ceding leadership on the issue to anyone else. Besides, if he misses his target and only brings about reform in 2010, is anyone going to complain? The only real deadline he has is to pass something before the mid-term election in November of next year. In the meantime, why not call for fast action?

More important than his timetable for reform is his focus for reform. And President Obama has made clear the kind of reform he’s looking for. Although former Senator Tom Daschle will no longer be leading the effort, his book, Critical: What We Can Do About the Health-Care Crisis (co-written with Scott S. Greenberger and Jeanne M. Lambrew, now the Deputy Director of the White House Office of Health Reform) clearly sets forth the Administration’s goals.

As I’ve written before, what’s significant, and encouraging, about this approach to health care reform is its focus on controlling the underlying cost of medical care. And that’s where the focus needs to be. A report by the Department of Health and Human Services projects health care costs in 2009 will exceed $8,000 per person. And this doesn’t include additional costs likely to result from the recent expansion by Congress of coverage for children and the economic stimulus money targeting medical technology. In a story on the report, the Associated Press quotes White House spokesman Reid Cherlin as saying “Health care costs are crushing middle class families and the small business that fuel job growth in this country.”

This doesn’t mean the administration will ignore market reforms or back off from seeking to establish a national purchasing pool (they’ll call it an Exchange) for coverage. But the fixation on costs is both appropriate and needed. Especially if we’re going to take health care reform where no American system has gone before — and at warp speed at that.

Obama’s First Health Care Reform Test: His Tax Increase Proposal

Health care reform rarely is accomplished in a process that is anything like a straight line. In 2009, for example, changing America’s health care system first requires addressing the nation’s tax system. That may not be intuitive, but it does seem to be the way things are working out.

President Barack Obama makes very clear that comprehensive health care reform is an integral part of his economic recovery program. Impressively, he has already accomplished a number of his goals, specifically inclusion of funding for health care technology as part of the recently passed stimulus package and the renewal and expansion of the State Children’s Health Insurance Plan (SCHIP). Those were just the start of his reform efforts, however. And now comes the difficult part.

President Obama wants to change the way Americans purchase and use their health care. He wants to achieve near universal coverage, reduce the cost of both health insurance and of medical care, and vastly reduce wasted spending on health care. This is not an easy task — just ask California Governor Arnold Schwarzenegger. Or Secretary of State Hillary Clinton, for that matter.

President Obama’s mission is complicated by the withdrawal of former Senator Tom Daschle to lead the Administration’s health care reform efforts. Senator Daschle had tremendous credibility in Congress and policy wonks alike. He was a superb choice to serve as President Obama’s Secretary of Health and Human Services and to be Director of the White House Office of Health Reform.  His nomination withdrawn due to Senator Daschle’s tax problems, the Administration is unlikely to find a replacement of equal political heft, access to the President and in-depth knowledge of the issue.

Finding a leader for is the Administration’s second most pressing health care reform challenge. The first is passing a tax increase. Here’s how it plays out.

The stimulus plan supported by President Obama greatly increases the nation’s spending. At the same time, the Obama Administration inherited a budget deficit of about $1.3 billion courtesy of the Bush Administration. This week, in a White House summit on fiscal policy and in an address to Congress, President Obama will make clear his commitment to slashing the deficit to $533 billion by 2013. To do that, according to the Associated Press, he will: 1) reduce spending on the Ira war; 2) end “temporary” tax breaks enacted during the administration of President George W. Bush on those making $250,000 or more a year; and 3) increase government efficiency. Among those programs slated for streamlining is reducing Medicare Advantage subsidies to insurance companies according to the New York Times.

The Administration is also likely to propose treating investment income earned by hedge-fund and private-equity partners as ordinary income according to the Bloomberg Press. This income is currently taxed at the capital-gains rate of 15 percent. Ordinary income is taxed at as much as 35 percent (but could go up to 39.5 percent if the Bush tax cut for those earning $250,000 or more is repealed.

Without these savings, President Obama will be hard pressed to finance expansio of health care reform and his energy  initiatives, increase education spending and enact his homeowners assistance program and send more troops to Afghanistan and reduce the deficit.

Of these, make no mistake: health care reform is near or at the top of the list.  As Office of Management and Budget Director Peter Orszag puts it, as quoted in the New York Times, “He wants to present an honest budget, he wants to focus on health care ….”  The Times quotes senior adviser David Axelrod as explaining, “The president believes there are essentially three areas that have to move forward even as we pare back elsewhere — health care, energy and education.”

It all comes down to the economy, however. And most objective observers would agree that America needs health care reform to have a sound economy. (The debate is not over whether reform is needed, it’s what kind of reform is required). So health care, taxes and the rest are all tied up in the Administration’s effort to right America’s fiscal ship.

We’ll have updated estimates as to how much revenue the tax increases are expected raise over the next four years when President Obama introduces a summary of his budget later this week. Clearly, however, it will be a critical component to the Administration’s fiscal goals. If the tax increases fail, it will be substantially harder for President Obama to finance a big ticket item such as his health care reform proposal. With the increases, he will have demonstrated his political acumen and bolstered his bargaining position with Congress while, at the same time, finding the revenues he needs to implement his plans.

So the first test of whether President Obama can pass his health care reform will not be a vote on creating a Federal Health Board or establishing a national purchasing exchange. It won’t mention guarantee issue or community rating nor even provider reimbursement levels. It will be a vote on whether a tax reduction scheduled to expire in 2011 will be allowed to so, then or sooner. Not a straight line, but a necessary course of action nonetheless.

Daschle Withdrawal Could Be Bad News for Reasonable Reform

There are some who will celebrate former Senator Tom Daschle’s decision to withdraw his nomination as Secretary of Health and Human Services and as Director of the White House Office on Health Reform. They should not. Even for those who disagree with his approach to reform — and I certainly disagreed with significant portions of it — the withdrawal is bad news.

First, because Senator Daschle is bright, very bright. And anyone tackling substantial changes to a system as complex, critical and impactful as America’s health care system better be very bright.

Second, unlike many bright people, Senator Daschle is a proven political pragmatist.  He understands the need for buy-in from competing interests and for compromise. This doesn’t mean he doesn’t have principles and a philosophy. He has both. But he also has a commitment to getting reform passed, which means he’d listen to and, where possible, incorporate the ideas of those who oppose his philosophy.

Third, Senator Daschle knows Congress and is trusted by the President. This would enable him to effectively influence the former and to ably represent the latter. Without his presence, reformers in Congress may have more sway and President Barack Obama will have a less forceful voice in negotiations.

Fourth, the individual(s) nominated in his stead may lack any of these strengths. One of the names floated, for example, is former Governor and Democratic National Committee Chair Howard Dean. Governor Dean, a doctor by profession, showed himself to be a smart organizer as head of the DNC. There were also plenty of times, both at the DNC and a presidential candidate in 2002, that he demonstrated a more ideological and erratic approach to issues like heatlh care reform than Senator Daschle.

There are others President Obama could turn to for leadership on health care reform. None are likely to possess the leadership traits possessed by Senator Daschle.

Senator Daschle’s tax return errors says more about the complexity of the country’s tax code than it does about his character. Those who oppose his approach to health care reform may find themselves nostalgic for his approach before long.