Where the White House is Placing Its Bets on Health Care

The real political race for health care has just begun. The significance of the president's speech to Washington insiders was its signal about where the White House is placing its bets and its support. More on this in a moment. First, let's be clear about who's racing and why. Think of the speech as the starting gate of a two-month sprint between two competitors -- and it's not Democrats versus Republicans.

On one side are America's biggest private insurers and Big Pharma. They're drooling over the prospect of tens of millions more Americans buying insurance and drugs because the pending legislation will require them to, or require employers to cover them.

The pending expansion of Medicaid will also be a bonanza. Amerigroup Corp., UnitedHealth Group Inc. and other companies that administer Medicaid are looking at 10 million more customers. Healthcare Inc.’s Medicaid enrollment is expected to jump by 43 percent, according to its CEO. WellPoint Inc., the largest U.S. insurer, is also looking at big gains.

But the big insurers hate the idea of a public option because it will squeeze their profits. A true public option will force private insurers to compete in markets where there's now very little competition, and also have the bargaining power to force drug companies to offer lower prices. Big Pharma also wants to prevent Medicare and Medicaid from having the power to negotiate lower prices, for the same reason. Private insurers and Big Pharma would rather fudge the question of where the savings will come from or how all this will be paid for. They certainly don't want to pay for wider coverage with a surtax on the rich, because, hey, their executives and shareholders are mainly rich.

On the other side lies the Democratic base (organized labor, grassroots progressives, leading activists) whose main goal is to make health care more affordable for a hundred million American families who are now paying through the nose (higher and higher co-payments, deductibles, and premiums, not to mention wages that are depressed because of employer-provided health insurance), and affordable to the tens of millions who can't get it now.

To this end, the Dem base wants a public option and wants Medicare and Medicaid to have negotiating power. That's because every dollar that's squeezed out of the private insurers and Big Pharma is a dollar saved by average Americans on their health care -- or a dollar saved by taxpayers who otherwise end up footing the bills for Medicare and Medicaid. There's simply no more direct way to control costs. And the Dem base isn't at all reluctant to put the burden of paying for wider coverage on the wealthy.

Private insurers and Big Pharma are being represented in this race by Max Baucus and his Senate Finance Committee. Senate Finance is on the verge of reporting out a bill that requires that just about every American have health insurance and just about every business provide it (or else pay a fee). But the bill will not include a public option. Nor will it change current law to allow Medicare to negotiate low drug prices. Nor will it include a surtax on the wealthy.

The Committee's only real nod to cost containment is a small tax on expensive insurance policies, which doesn't worry the private insurers because its cost is so easily passed on to the beneficiaries. The Democratic base is being represented by Nancy Pelosi and House Dems, who have reported out a bill that includes a public option, want Medicare and Medicaid to have negotiating power, and will pay for universal coverage with a surcharge on the rich. The Senate's Health, Education, Labor, and Pension Committee, formerly chaired by Ted Kennedy, also represents the Democratic base, and reported a strong bill that parallels the House.