The current financial crisis is a tragedy for those losing their jobs, their homes and their financial security. Secondarily, it represents a failure of public policy that will impact the country for years to come. One of the issues most likely to be dealt a set-back from the bank meltdown is national health care reform.
Whoever is elected president, health care reform high was to be high on their domestic policy agenda. The Democratic nominee, Senator Barack Obama has long made addressing access and affordability a centerpiece of his campaign. While Senator John McCain, the Republican candidate, has been less focused on health care reform, he has repeatedly made clear that he intends to change the status quo. However, recent events have cast a doubt on the underlying principals of their reform packages. Further, those events may have eliminated the resources substantial changes will require.
Senator McCain’s health care reform approach has taken the biggest beating from the financial market turmoil. A self-described “deregulator,” Senator McCain would loosen government oversight of the health care coverage marketplace. For example, he would allow carriers to offer plans in every state so long as they are approved by anystate. This means health insurance companies could shop for the jurisdiction with the weakest regulatory system. The current financial crisis demonstrates the danger of such an approach. Few would argue that it was caused by too much regulation of banks and mortgage companies. Neither party in Congress is likely to support this approach in light of the devastation deregulation of the banking industry helped to create.
Senator Obama’s health care reform plan has also been battered by the mess in the financial markets. He would expand existing government efforts like the State Children’s Health Insurance Program. He would offer health insurance coverage through new government-run health plan. This National Health Insurance Exchanges would be both a participant in the market and a regulator. Yet Fannie Mae and Freddie Mac have underscored the danger of mixing the two roles. The government has a tough enough time regulating markets. To ask it to both umpire the game while also stepping up to the plate would tax the competence of any organization. To ask the government to try this feat is foolhardy,
Then there’s the cost of the candidate’s health care reform plans. Senator McCain claims his reform plan will cost $10 billion; Senator Obama says his will cost $50 billion. Both, no doubt, underestimate the final bill. However, the proposed $700 billion Wall Street rescue plan represents about 5% of the nation’s Gross Domestic Product (GDP) of approximately 13.8 trillion in 2007. It dwarfs the astronomical federal deficit of $482 billion. It is, in other words, a vacumn cleaner that will suck up much of the resources needed to implement any kind of meaningful reform.
Senator Obama recognizes this. According to the Associated Press, Senator Obama said he “remains committed to addressing needs in health care, education and energy.” However, he indicated tax cuts for the middle class will be his top priority, noting they are “particularly important to strengthen an economy sliding into ”
Health care reform was never going to be an easy issue for the next president to tackle. Finding the right role for government and the right level of regulation was always going to be a challenge. Given the new economic landscape and the fall-out from the current financial crisis, fashioning meaningful, comprehensive health care reform will be even more difficult.
What this means is that national health care reform will be delayed. It will also be more contentious and a greater challenge than previously feared.