De-Sweetening Health Care Reform

The health care reform package being finalized by Congressional Democrats and the White House is chock full of benefits for specific states and interest groups. Some of that is inevitable in any legislation, regardless of the party in power. But the health care reform bill is widely viewed as an extreme example – we’re talking cotton candy level on the sweetness scale.

Now a Democratic Senator is trying to tone down the glucose level of the health care reform bill. Senator Russ Feingold has sent a letter to Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi requesting that “sweeteners” be removed from the final health care bill, January 14, 2010 “originally inserted to win over the support of certain members of Congress.” In the letter, Senator Feingold recognizes that there are “valid policy or fairness reasons why certain states or interests may receive seemingly different treatment.” However, he specifically cites “unmerited Medicaid assistance to certain states and carve-outs to avoid cuts to certain Medicare Advantage plans” he describes as “indefensible.” These provisions, he charges, “are intended to provide an undeserved windfall to specific states” and should be removed from the health reform bill.

Senator Feingold is right, both from a public policy perspective and from a political view. Both Democrats and Republicans engage in the practice of securing votes by inserting provisions into bills aimed at benefiting a specific Senator’s home state. That’s the American way. Really, it is.

But health care reform is complicated, controversial and sensitive. Hyper-sensitive. This is an issue that has generated charges of the American government threatening to kill old people, death threats against members of Congress, and outrageous hyperbole that only the CFO’s at Fox News and MSNBC could love. More significantly, this legislation is also going to impact every American in a highly personal way and significantly impact one-sixth of the nation’s economy. An issue like this should not be subjected to politics as usual. Removing the sweeteners makes sense.

Not that anyone asked, but I don’t think the deal struck yesterday with the unions yesterday falls into the sweetener category (at least not what we know so far. Apparently the deal postpones a tax on rich health plans until 2018, but only for coverage required by labor agreements and for state and local government workers. The compromise also removes vision and dental plans from the calculation of the value of a plan and raises the threshold for taxation from $23,000 for family coverage to $24,000. There are also adjustments for older workers and women.

The reason why I don’t view this deal as a pay-off for union support is because the nature of union agreements means a transition period make sense. Collective bargaining agreements have been made pursuant to the rules in effect today. These rules encourage unions to trade-off wage increases for enhanced (and more expensive) health benefits. To now change the rules without allowing time for new negotiations seems a bit unfair. Whether five years is needed for the transition or a shorter period of time would be sufficient is a level of detail I can’t address.

The same logic should apply to whatever mandated medical loss ratios wind up in the final bill. Health care reform is likely to require health plans to spend a minimum of 80 percent (for individual and small group coverage; 85 percent for large group plans) on claims payments. The legislation passed by the Senate would impose this requirement effective January 1, 2011. yet health plans have contracts in place with brokers, vendors and others that were made under the old rules. To now change those rules and impose spending requirements is both unfair and impractical. The disruption and pain resulting from failing to provide an adequate transition to mandated medical loss ratios will be felt not just by brokers and insurers, but by consumers and voters as well.

Should President Obama, Senator Reid and Speaker Pelosi eliminate the political sweeteners in the health care reform legislation they’re writing? Yes. Should they eliminate transition periods that ease the transition to the new world they’re creating? Yes. And those transition period should be offered to unions and health plans.

Chances for Meaningful Health Care Reform Dim as Positions Harden

Unions and others have decided it’s their way or the highway when it comes to health care reform. According to the Los Angeles Times, these interest groups are mounting a full-on campaign to defeat Governor Arnold Schwarzenegger’s health care reform package. Their campaign will include prayer vigils, television ads and demonstrations at the Governor’s public appearances. Joining the California Federation of Labor will be organizations like Health Access, Consumers Union and It’s Our Healthcare! Their main argument is that the Administration’s plan gouges the middle-class by requiring every resident to obtain health care coverage, but failing to provide sufficient subsidies to enough residents. For example, while the Governor would offer tax credits to households with annual income of 350 percent of the Federal Poverty Level (about $72,000); the coalition wants this eligibility level to at least 400 percent of the FPL (a bit more than $82,600) — which is a bit lower than the $103,000 target union officials mentioned last week. They also maintain California’s businesses pay too little of the funding toward the state’s health care system under the Governor’s plan.

So the gloves are now off and rationale debate is about to flee the scene (demonstrations and prayer vigils rarely lend themselves to civil, reasoned discussions). Passing health care reform during the current special legislative session was a tough assignment to begin with. Given Labor’s influence with the Democratic majority, this turn of events virtually eliminates any chance of responsible health care reform any time soon.

Reform is not impossible, however. Governor Schwarzenegger can be one of the most skillful politicians Sacramento has seen in decades (he can also be one of the most clumsy politicians Sacramento has seen in decades, but during the health care reform debate his most artful political persona has been on display). Speaker Fabian Nunez and Speaker Pro Tem Don Perata are no political slouches either. Plus, they would like to see health care reform enacted to help justify the changes to term limits they are seeking on the February 2008 ballot.

Even the Labor coalition has incentives to reach a compromise. They are looking at putting a health care reform initiative on the ballot in 2008 (presumably it would look a lot like Assembly Bill 8, which the Legislature passed and the Governor vetoed). The Governor is threatening to sponsor a competing initiative of his own. Meanwhile business groups and advocates of a government-run single payer system are also considering initiatives. When multiple ballot measures on one topic are put before the voters, historically it’s been easier to defeat all of them than to get any one of them passed (although there are exceptions). So if Labor and their allies aren’t careful they could wind up with no health care reform passing at all and starting over from square one in 2009. That would be squandering not only two years, but all the momentum behind the current reform efforts. And it would be bad news for all those who effective reform could help much sooner if a responsible compromise could be reached.

I was talking to someone today (who prefers to remain anonymous) who pointed out another dynamic in this situation that could make Labor’s position uncomfortable. The unions are supporting employer-centric reforms like AB 8. Governor Schwarzenegger supports an individual-centric approach. Senators Hillary Clinton and Barack Obama, Governor Bill Richardson are among the Democratic presidential candidates whose health care reform proposals mirror, to some degree, Governor Schwarzenegger’s approach. So all the rhetoric this coalition is aiming at Republican Governor Schwarzenegger may apply just as strongly to Democratic presidential candidate <fill in the blank> come 2008. And the unions will be strong supporters of that nominee. 

Politics is politics. Attacking an opponent while praising an ally who has the same position is not uncommon. For all but professional contortionists, however, it’s not a lot of fun either. But that will be then and this is now. For now, positions are hardening and the hope for meaningful health care reform any time soon is growing faint.