Senator Barack Obama’s Health Care Reform Plan

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Senator Obama has previously pledged to sign a bill assuring universal health insurance coverage for all Americans. His preferred approach is an interesting mix of public and private offerings.  Senator Obama’s plan would enable all Americans to buy into a government run purchasing pool offering coverage similar to that provided to federal employees. Senator Obama calls for subsidies to help low and middle income families afford this coverage, although his speech didn’t provide details as to the amount of the subsidy or who would qualify.

Coverage through the pool would be provided on an individual basis, meaning it would remain in force even if the insured changed jobs. To pay for the subsidies, Senator Obama would let President George W. Bush’s tax cuts for the wealthiest Americans expire. He’d also levy a tax on “all but the smallest employers” who fail to provide eligible coverage to their workers.

Interestingly, unlike former North Carolina Senator John Edwards, Senator Obama does not seem to require individuals to purchase coverage. If his voluntary approach doesn’t succeed, he’s prepared to revisit the plan until 100 percent of the population is insured.

Unlike many Democratic proposals, Senator Obama explicitly called for assuring choice in the marketplace, “If you want more choices, you will also have the option of purchasing a number of affordable private plans that have similar benefits and standards for quality and efficiency.”

Central to Senator Obama’s health care reform plan are five initiatives aimed at constraining health care costs:

1.  Shifting some expenses for catastrophic health care expenses to the federal government.

2. Requiring all plans to cover “evidence-based, preventive care services” and the promotion of healthier lifestyles.

3. Reduce the $100 billion a year he estimates is wasted on poor quality care by requiring hospitals and providers to “collect, track, and publicly report measures of health care quality.”

4. Reducing waste and inefficiency through adoption of electronic medical records and other technologies.

5. Reforming the pharmaceutical and health insurance industries.  These reforms include stopping drug company practices which drive generic drugs out of the market and, interestingly, taking on insurance industry consolidation.  Noting there were over 400 health plan mergers in the past 10 years, Senator Obama pledged to investigate and prosecute the monopolization of the insurance industry. And where we do find places where insurance companies aren’t competitive, we will make them pay a reasonable share of their profits on the patients they should be caring for in the first place.”

Taken together, Senator Obama claims his cost cutting measures are expected to reduce average health insurance premiums by $2,500.

There’s a lot of details still needed to fully flesh out the Senator Obama health care reform plan. But today’s speech goes a long way to adding substance to the broad rhetoric of the past. Significantly, Senator Obama rejects the single payer system solution promoted by the liberal wing of the Democratic party and many unions. While he doesn’t explicitly criticize this approach, he does throw an implicit elbow there way when he promises that his approach means, “If you need to see a doctor, you will not have to wait in long lines for one. If you want more choices, you will also have the option of purchasing a number of affordable private plans that have similar benefits and standards for quality and efficiency.”

While rejecting a single payer approach will cost him some votes in the Democratic primaries, it positions him well for the general election if he gains his party’s nomination.  And by focusing the bulk of his speech on the need for cost containment, Obama demonstrates a sophistication on the health care reform issue often lacking in the political debate. Further evidence of his nuanced approach is a recognition that even insurance and drug companies deserve a seat at the table, even if “they don’t get to buy every chair.” All of this is evidence of a realism too often missing from the debate.

There’s much to be concerned about in his approach. One example: government run purchasing pools rarely perform as promised and usually create an unlevel playing field in the market. Another: Requiring carriers to sell coverage to all applicants, regardless of pre-existing medical conditions, without a mandate for individuals to buy coverage is a recipe for disaster. Just ask folks in New York and New Jersey.

But I doubt if Senator Obama expects his plan to be enacted as is. While promising to sign a universal coverage bill by the end of his first term, Obama has long taken a reasonable approach to reform: stay focused on the goal, but to be “agnostic in terms of how to achieve those values.” And that’s the way politics should work.