What Obama's Health Care Letter Really Says

Barack Obama sent a letter to Senator Kennedy and Senator Baucus providing some details about how he wants health care reform to be structured. I will go through the letter line by line to tell you want he is really saying.

Cost:

“At this historic juncture, we share the goal of quality, affordable health care for all Americans. But I want to stress that reform cannot mean focusing on expanded coverage alone. Indeed, without a serious, sustained effort to reduce the growth rate of health care costs, affordable health care coverage will remain out of reach”

This line is pretty straight forward. Health care reform must primarily reduce cost for most Americans to get a majority of the country on board. He says “reduce the growth rate” -- not bring down the cost. Some argue that America dramatically overpays for health care, and we should be able to actually reduce cost and not just slow its increase. He is saying health care reform must be real but not a truly dramatic overhaul. Also implied is that the metric to judge reform will be cost and not coverage. Like in Massachusetts, coverage will not be truly universal; a small percentage of people will be left out for now (mainly a few hard-to-reach individuals and illegal immigrants).

Health Insurance Exchange:

“The plans you are discussing embody my core belief that Americans should have a choices for health insurance, building on the principles that if they like the coverage they have now, they can keep it. But for those who don't have such options, I agree that we should create a health insurance exchange – a market where Americans can one-stop shop for a health care plan, compare benefits and prices, and choose the plan that's best for them, in the same way the Members of Congress and their families can.”

Health insurance exchanges have wide bipartisan support from basically everyone, including Obama. There are two other subtle points here. First he uses the phrase “don't have such options,” which implies he is willing to not make it easy for people who currently have employer health insurance to opt out of it. The exchange might be only for those currently without insurance from an employer. If you want to opt out of your employer's health plan, you may not get any help from your employer or the government in buying your own insurance plan.

There might also be a “don't reinvent the wheel” message here. There is no need to write news rules governing a health insurance exchange. Just use the same rules for the current federal employee health exchange or one of the state employee exchanges.

Public Option:

“I strongly believe that Americans should have a choice of a public health insurance option operating alongside private plans. This gives them a better range of choices, make the health care market more competitive, and keep insurance companies honest.”

This is good but not great news for progressives who support a public plan. “Strongly believe” and “should” is relatively week language. He could have said, “...(must and/or need) to have a choice of a public health insurance option” He could have also said “I will not accept reform without a public plan”.

He wants a public option available now (not a trigger that might put a plan in place depending on future events), but there is still some wiggle room. “Should” still leaves him room to break his campaign promise about a public health insurance option. It is a statement which sets the public option in quickly drying concrete but not in stone. He does not give any indication about how he wants the public option to be structured. I believe that the fix is in for Senators Schumer's compromise public plan.

Mandates:

“I am open to your ideas on shared responsibility. But I believe if we are going to make people responsible for owning health insurance, we must make health care affordable. If we do end up with a system where people are responsible for their own insurance, we need to provided a hardship waiver to exempt Americans who cannot afford it. In addition, while I believe that employers have a responsibility to support health insurance for their employees, small businesses face a number of special challenges in affording health benefits and should be exempted.”

On employer mandates, it is clear that big companies will be required to provide health insurance, small businesses will not.

On an individual mandate, despite campaigning against it, Obama is prepared to accept it now. A “hardship waiver” for Americans “who cannot afford it” is a nice piece of legal-ese to give Obama an out. The message is that he wants any subsidy to help people buy health insurance to be based on their ability to afford it. This will allow him to have a “hardship waiver” that is meaningless. For example, the waiver could allow people to not buy insurance if it cost more than 15% of their income, but the bill could fully subsidize the cost of insurance when it is goes over 10% of their income.

Savings:

“I am also open to your ideas about giving special consideration to the recommendations of the Medicare Payment Advisory Commission (MedPAC), a commission created by a Republica Congress. Under this approach, MedPAC's recommendations on cost reductions would be adopted unless opposed by a joint resolution of the Congress.”

Ezra Klein explains how important this is for reducing the cost of health care and as entitlement reform. The message is that the structure of Medicare health care payments are too important, too wonky, and too open to special interest lobbying; Congress can't be trusted to be involved in the nitty-gritty of it any longer.

Bipartisanship:

“I know that you have reached out to Republican colleagues, as I have, and that you have worked hard to reach a bipartisan consensus about many of these issues. I remain hopeful that many Republicans will join us in enacting this historic legislation that will lower health care costs for families, businesses, and governments, and improve the lives of millions of Americans.”

These lines should be the most encouraging to progressives. Bipartisanship is nice but not at the cost of completely watering down reform. He does not need Republicans to join the Democrats; he is only “hopeful” that they will. There is also an implied threat. Republicans may claim that they will vote against the Democrats' health care bill, but when it comes time to publicly denying millions of Americans health insurance, they will think twice. Those who vote against health care reform will be hammered on their vote in the next election.