by Ken

Robert Reich



Robert Reich's Blog



SUNDAY, JULY 19, 2009

Obamacare Is at War With Itself Over Future Costs



Right now, Obamacare is at war with itself. Political efforts to buy off Big Pharma, private insurers, and the AMA are all pushing up long-term costs -- one reason why Douglas Elmendorf, head of the Congressional Budget Office, told Congress late last week that "the cost curve is being raised." But this is setting off alarms among Blue Dog Democrats worried about future deficits -- and their votes are critical.



Big Pharma, for example, is in line to get just what it wants. The Senate health panel’s bill protects biotech companies from generic competition for 12 years after their drugs go to market, which is guaranteed to keep prices sky high. Meanwhile, legislation expected from the Senate Finance committee won't allow cheaper drugs to be imported from Canada and won't give the federal government the right to negotiate Medicare drug prices directly with pharmaceutical companies. Last month Big Pharma agreed to what the White House touted as $80 billion in givebacks to help pay for expanded health insurance, but so far there's been no mechanism to force the industry to keep its promise. No wonder Big Pharma is now running "Harry and Louise" ads -- the same couple who fifteen years ago scared Americans into thinking the Clinton plan would take away their choice of doctor -- now supportive of Obamacare.



Private insurers, for their part, have become convinced they'll make more money with a universal mandate accompanied by generous subsidies for families with earnings up to 400 percent of poverty (in excess of $80,000 of income) than they might stand to lose. Although still strongly opposed to a public option, the insurance industry is lining up behind much of the legislation. The biggest surprise is the AMA, which has also now come out in favor -- but only after being assurred that Medicare reimbursements won't be cut nearly as much as doctors first feared.



But all these industry giveaways are obviously causing the healthcare tab to grow. And as these long-term costs rise, the locus of opposition to universal health care is shifting away from industry and toward Blue Dog and moderate Democrats who are increasingly worried about future deficits. My sources on the Hill tell me there aren't enough votes in the House to get either major bill through, even with a provision that would pay for it with a surcharge on the richest 1 percent of taxpayers. House members don't want to vote for a tax increase before their Senate counterparts commit to one. Yet the Senate continues to be in suspended animation because Max Baucus and his Senate Finance Committee still haven't come up with a credible way of paying for health care. In his testimony last week, Elmendorf favored limiting tax-free employer-provided health benefits, but organized labor remains strongly opposed.



Obama has less than three weeks before August recess. Chances are dimming that he can get some form of universal health care passed in both Houses before the clock runs out. The Democratic National Committee is running ads favoring passage in Blue Dog states and districts, but that won't be enough. Now is the time for the President to begin twisting arms and knocking heads. To control long-term costs, he'll also have to take away some of the goodies that have been promised to the health-industrial complex, and maybe even cross Big Labor. He also needs to come out clearly and forcefully in favor of a way to pay for the whole thing -- ideally, in my view, a surtax on the top.

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I imagine many of you are still digesting Noah's jeremiad yesterday on the mess over health care reform now unfolding in Congress -- and I want to encourage everyone to make it through -- and so I'm going to keep what I have to say brief.I was nervous about getting involved in the debate on health care reform debate because this seems to me above all a matter of infinite and infinitesimal details, and I have no confidence in my ability to process the minutiae even of what needs to be done by way of reform, let alone what the bills that take shape actually mandate. My feeling is that very little of what's being screeched about now is going to tell us much about what if anything makes it through Congress and onto the president's desk.Sure, the famous public option is important. But I still think in the end what's really going to matter is all that accumulation of detail, the stuff that hardly anybody knows about and even fewer people understand. In a subject this complex, with (count 'em)congressional committees at working on bills, not to mention the conference committees that will eventually have to reconcile House and Senate versions, my prediction is that the only people who will really know what's in there are the wonkiest of health care policy wonks. And, of course, the lobbyists who have attached themselves to all those dozens and dozens of committee members fighting for the interests of their employers.More and more it seems to me that if we get anything, it's almost certainly going to be health care, not reform, with the revisions determined by which special interests have the most clout and the the deepest and shrewdest access to the lawmakers who can advance their agendas. My existing gloom was only deepened by this Sunday blogpost from former Labor Secretary. I had no idea that major concessions of this kind had already been made, at least within the respective committees. I mean, if the drug companies already have it in the bag that they won't face any price competition, not only are we not going to have any "reform" of the American prescription-drug distribution system, not only is there no hope of getting control of obscenely skyrocketing drug prices, but with all those drug-company subsidies built into the package, we're going to have one whopping chunk of cash added onto the total tab, just to pay off the drug companies. (I've highlighted just a couple of chunks of the text below, to signal the kind of information that deepens my gloom.)

Labels: Big Pharma, health care, Obama, Robert Reich