Crisis = Opportunity for Single-Payer

By Roger Bybee, Dollars and Sense. Posted April 8, 2009.

President Obama seems ready to proceed full-throttle toward a health care reform plan, but one that will keep private insurers at the center of the system. The plan, termed "guaranteed affordable choice," would allow workers to "keep the insurance they like," find a rival private insurer, or opt into a Medicare-style public plan.

To date, Obama has sensibly insisted that quick action on health care is imperative. "It's not something that we can put off because of the [financial] emergency," Obama declared in December. "This is part of the emergency." Questioned about the wisdom of launching a $100 billion health care program at a time of mounting government deficits, "I ask a different question," Obama countered. "How can we afford not to?"

He's right: economic meltdown is making health care reform more urgent by the day. Hospitals are hurting; while "the number of paying patients and profitable elective procedures is down . . . ," the LA Times reported recently, "the number of uninsured patients whom hospitals treat is rising." At the same time, escalating health care costs are squeezing private employers and governments alike. "The new Congressional Budget Office report shows that rising health care costs are the largest driver of the nation's long-term budget problems," budget watchdog Robert Greenstein of the Center on Budget and Policy Priorities told Congress last fall.

But Obama's hybrid, public-private plan is likely to hit a fiscal wall as federal spending balloons, and along with it the deficit. In the end, both popular sentiment and fiscal barriers may force him to follow a different course.

The administration's plan subsidizes lower-income Americans to enable them to buy private health insurance. Contrary to Obama's statements during the campaign, his plan will "need to require" all individuals to have health insurance, concludes the respected Commonwealth Fund. Such a mandate would be crucial to securing industry concessions necessary to move toward universal coverage, particularly a ban on excluding people with pre-existing conditions from coverage.

If so, the plan would eventually deliver tens of millions of new enrollees -- the number of uninsured is about 47 million -- to the insurance companies. Some 31% of their premiums, in many cases government-subsidized, will go into overhead and insurance company profits -- an estimated $400 billion annual burden weighing down the health care system.

But this plan is on a collision course with the fiscal realities. On top of the budget wreckage left by the Bush years, the federal government's fiscal demands are exploding. Health care reform faces daunting competition from a $787 billion stimulus package; the president's $72 billion decision to delay repealing the Bush tax cuts for high earners; a Wall Street, bank, and insurance company bailout at $700 billion to date and likely to grow; and the ongoing Iraq and Afghanistan wars, together costing $170 billion in "extra" defense spending in FY2009.

Still, a leading advocate of the Obama plan, political scientist Jacob Hacker, argues that it can be billed as an important economic stimulus and thus escape the fierce budgetary competition. In December, Hacker cheerfully declared in The New Republic that the Obama plan offers nothing less than a "magic bullet" that will yield "short-term spending and long-term saving" -- a perfect combination as the economy moves deeper into recession.

However, it is likely that Hacker seriously overstates the long-term savings while underestimating the clash of government priorities that lies just ahead. First, Obama-style individual mandate plans have run aground in at least six states that have tried them. With no mechanism to control the premiums charged by private insurers, the ever-higher cost of subsidizing low-income residents' premiums soon exhausts available funds. Nor will sufficient savings be derived from Obama's plan for electronic recordkeeping and more treatment of chronic illness, recent studies by the Congressional Budget Office and others suggest.

To many, a single-payer plan is the obvious way to ensure universal health coverage while containing costs. In addition to the dramatic reduction in administrative costs, single-payer plans offer other opportunities for controlling costs. For instance, they allow government -- the "single payer" -- to negotiate for lower costs with providers like doctors, hospitals, and pharmaceutical companies.

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