Wayne O’Leary

Blowback in Health Care

As the parameters of health-care reform become clearer, especially with regard to the establishment-endorsed Baucus plan, it increasingly resembles a political suicide pact among Democrats. Far from enacting a new program the public will rally behind, something as popular as, say, Medicare, the congressional blind mice of the majority party appear committed to something liable to jeopardize their electoral chances in 2010 and well beyond.

At this writing, the public option, the only saving grace in the various bills being advanced, seems to be hanging by a thread. Without it, what remains of reform is really nothing more than former Republican Gov. Mitt Romney’s 2006 Massachusetts law writ large. To refresh memories, the Romney plan’s main features consist of an individual insurance mandate supplemented by state subsidies for those unable to fully afford coverage and, like the federal proposals, an exchange (the Commonwealth Health Insurance Connector) to facilitate purchase of the mandatory plans by the uninsured. The available plans are private only; there is no Massachusetts public option.

So, how are things going with the much-ballyhooed experiment fathered by the GOP’s presumptive 2012 presidential candidate? By most measures, not all that well. Massachusetts, which had the nation’s lowest percentage of uninsured to begin with, has managed only to reduce it by half; thousands remain without coverage. The initial bids from insurance companies for affordable individual policies under the connector came in at double the anticipated monthly premium cost — $400 rather than the expected $200.

As a result, state subsidies needed each year to assist purchasers have shot upwards, far exceeding the $1 billion originally projected and requiring the commonwealth to scavenge for additional monies. In 2007-08, $250 million was cost-shifted to meet the shortfall, and severe cuts were imposed on hospitals and clinics that serve the poor.

Massachusetts officials badly miscalculated the number of state residents who would require subsidies under Romney’s free-market “culture of insurance.” Commonwealth Care, the program charged with providing the financial aid, saw enrollments swell from 176,000 to 439,000 within a year, half of that number qualifying for full subsidies by virtue of limited incomes. Inevitably, the failure to address cost containment by regulating the for-profit health-insurance market’s pricing policies has led to overall reductions in state health-care spending, to say nothing of threatening bankruptcy, as available funds are siphoned off to enrich insurers.

Meanwhile, Massachusetts has created its own insurance version of the Medicare prescription-drug donut hole. Those who are offered health coverage through their employers, but can’t afford it, do not qualify for state subsidies. With incomes too high for Commonwealth Care, yet too low for privately purchased plans, they have no insurance and are exempted from the individual mandate.

Most of the uninsured, though, are subject to substantial tax penalties should they fail, for whatever reason, to buy policies. The fines, which were set at $219 in 2007, have since risen to $900 for each individual. There are also employer fines, called “Fair Share” fees, levied on companies declining to offer insurance to their workers, yet these slaps on the wrist amount to far less than what the state spends to subsidize the Commonwealth Care premiums of those very same workers, another instance of indirect corporate welfare.

This, then, is the conservative, market-oriented reform Mitt Romney celebrated for its role in “making the individual responsible for his own health coverage.” It’s also more or less the reform President Obama and congressional Democrats have committed themselves to on a national level. All the Democratic plans under consideration include a Massachusetts-style individual mandate, a version of the Romney health connector (developed by the right-wing Heritage Foundation), a system of steep fines for noncompliance, and a prorated schedule of taxpayer subsidies for the low-income uninsured. The congressional proposals differ only in that most of them include a low- cost public-insurance option within the federal exchange, aimed at slowing the rise of private premiums through competitive pricing.

Remarkably, the Democrats’ Republican-designed health reform (opposed, ironically, by congressional Republicans) has been formulated with little apparent thought given to its political ramifications. A June poll by The Economist warned that Americans would strongly oppose any individual mandate by 53% to 21%, although by a similar margin (56% to 23%) an offsetting government option would receive a vote of confidence.

There is something un-American, the public seems to be saying, about the punitive coercion individual mandates represent, especially if undiluted by the chance to buy nonprofit insurance. Millions will react angrily if forced to purchase private health plans they can’t afford, health plans whose premiums, co-pays, and deductibles will rise relentlessly to satisfy insurer profit targets and stockholder expectations.

A public option is the key. And not just any public option. Whatever is enacted has to be broad enough in scope, competitive enough in price, and comprehensive enough in benefits to scare the insurance industry. It must be a genuine threat rather than a minor annoyance, a real alternative for the middle class and not a welfare program for the poor; otherwise, it will have no more effect on industry behavior than a few undersized regional health co-ops.

Most of all, it has to be widely available, not restricted to just the uninsured. The relatively minuscule 8 to 12 million participants predicted for the public-option plans now before Congress (compared to the 160 million or so in employer-based private plans) simply won’t be sufficient.

In this context, the proposal of Sen. Ron Wyden (D-Ore.) to open any public option to everyone, allowing insured individuals to drop unsatisfactory private policies and switch to a government-run plan, makes especially good sense. Absent this sort of strong public provision, the pending federal version of Romney-care promises to be nothing but an unmerited gift to the insurance industry: several million new captive customers, whose taxpayer subsidies will go directly into industry coffers and increase annually to keep pace with mushrooming premiums.

Add the fact that universality is realized in none of the Democratic proposals — anywhere from a third to two-thirds of the uninsured are left out — and the stage is set for a political backlash. If Democrats present next year’s voters with a deficient “reform” that is also coercive and unaffordable, they will lose, and they will deserve to lose.

Wayne O’Leary is a writer in Orono, Maine.

From The Progressive Populist, December 1, 2009