Health Reform 2.0

     If reform is to succeed, progressives will have to
     fight for a stronger government role, including a
     public option.

Jacob S. Hacker |
August 17, 2010
http://prospect.org/cs/articles?article=health_reform_20

Sen. Tom Harkin put the point well when he described
the health bill as a "starter home." What Harkin
neglected to mention is that the home isn't built yet,
and the construction zone is in the path of a hurricane
-- the fast-approaching storm of runaway health costs
and hard-core conservative opposition.

In the face of these challenges, reformers have three
great priorities: implementing the law, protecting and
defending it from the already-mounting attacks, and
renovating and improving Harkin's "starter home" to
make it a sustainable structure. The next health-care
battle will require organization, narrative, and
strategy at least as much as the last did. And this
time, reformers will need to call plainly for a greater
government role -- armed, if they take their three big
tests seriously, with concrete examples of government
getting things right.

Wilbur Cohen, the architect of the last landmark reform
law, liked to say that policy is "1 percent inspiration
and 99 percent implementation." But Cohen's Medicare
was a model of simplicity compared with the current
law. To overcome deep-pocketed interests and reassure a
skeptical public, Cohen's heirs largely eschewed the
simple approach to expanding coverage embodied in
Medicare: that is, expanding public insurance. (The big
exception, of course, was the public-insurance option,
which didn't make it into the law but remains vital.)

Instead, the law is a series of big patches to our
patchwork system, and primary responsibility for most
of them resides with the states. While the state
lawsuits under way are almost certain to crumble, that
will not stop states from fumbling the establishment of
the exchanges, the regulation of insurers, or the
expansion of Medicaid. In many states, the wisest
course would be to have the feds take on the difficult
task of creating an exchange. But wise advice is not
always heeded. Reformers should be pressing state
leaders to enlist the assistance of the federal
government and to craft cross-state solutions in less
populated regions.

Rest assured: Insurers and providers will be doing
everything they can to shape what states do. Just
because they received major concessions doesn't mean
they won't push for even more. Reformers, backed up by
the federal government, will need to push back.

Reformers also need to recognize that the polarized
partisan battle did not end on the night of March 21.
It simply entered a new phase -- from ground warfare to
guerilla battle.

The first rule of guerrilla warfare is to strike where
least expected. The big fights over the individual
mandate are mostly a diversion from the fateful
struggles to come. These skirmishes will concern the
greatest fault line of contemporary American politics
-- financing.

Financing is the soft underbelly of health reform. The
health-care bill relies on a grab bag of revenue
sources. Over the long term, if costs grow more quickly
than these sources, federal deficits and the pressure
to cut subsidies for coverage will grow. Both outcomes
would undermine the ability of reform to achieve its
promise and public confidence in the law.

Reformers should not underestimate the power of the GOP
anti-tax crusade -- or, for that matter, the party's
anti-regulatory zeal. The tax provisions in the bill
will be an inevitable target, and if Democrats lose the
White House, a vulnerable one. Also in the crosshairs
will be the interlocking requirements on employers and
insurers designed to ensure that public financing is
backed up with employer contributions and insurance-
company restraint. We can also count on Republicans to
continue to oppose changes in Medicare designed to
build on its past success in restraining costs (though,
fortunately, most of these changes are out of Congress'
hands).

The sad truth is that conservatives need to win only
one critical guerilla battle to undermine the law.
Reformers need to win every one.

                       ***

If reformers play just defense, however, they will be
stuck protecting a law that has two serious problems:
It is not designed to ensure that everyone is covered,
and it is not capable of seriously reining in medical
inflation.

Moving toward seamless coverage is the easiest fix, at
least in policy terms. In our predominantly employment-
based system, there are only two routes to broad
guaranteed coverage -- requiring that employers provide
coverage or contribute toward its costs, on the one
hand, or severing the financial link between employment
and health insurance by raising the funds for
subsidized coverage through alternative means, on the
other.

The current law is an uneasy hybrid of these two
approaches: (weak) requirements on the largest
employers but none on those with fewer than 50 workers
and no guarantee that those not covered through
employment will receive insurance through Medicaid or
the exchanges. From a policy standpoint, the creation
of a new funding stream outside of employment -- say, a
value-added tax -- has a lot going for it. Politically,
however, the most promising route may be to build on
the existing law to fill in its gaps. And the key to
doing so is to make it easier and more attractive for
employers, particularly small employers, to buy
coverage through the exchanges. After all, the
exchanges will provide a much broader choice of plans,
at better rates, than small employers can gain on their
own.

None of this will matter much, however, if costs aren't
contained. And here we reach the weakest foundation of
Harkin's starter home. All the reform ideas that would
have provided big direct savings -- from serious
administrative streamlining to explicit review of
private premiums to the public insurance option that I
have long championed -- were either sidelined or
neutered as they ran the gauntlet of affected
interests. Indeed, the public-option debate was a case
study in why cost control is so hard: Conservative
Democrats first effectively stripped out the tools of
cost control that would have allowed the public option
to compete aggressively with private insurers. Then,
they complained that the public option wouldn't control
costs!

No one who has studied the medical market in recent
years can fail to recognize the unhealthy consolidation
that has taken place. An ironic coda to the public
option's demise was the release this February of the
American Medical Association's latest report on
insurance competition. Its verdict? A "near total
collapse of competitive and dynamic health insurance
markets," with more than half of metropolitan areas
dominated by a single insurer enjoying at least half
the market (up from 40 percent of areas in 2008). Of
course, what the AMA neglected to mention is that
massive consolidation has also taken place on the
provider side, with most metropolitan areas dominated
by a single hospital or flagship system.

Comparative-effectiveness research, changes in Medicare
payments, encouraging greater competition through
exchanges, even taxing high-cost health plans -- none
of this will seriously restrain costs without the
creation of countervailing power to pressure
consolidated insurers and provider systems to change
their prices and practices. And the only place where
this power can ultimately come from is the public
sector. For better or worse, the ultimate fate of
reform hinges on progressives' efforts to rehabilitate
American government.

                            ***

Reformers won the war in 2010, but they lost the battle
for public opinion: Americans were convinced that
reform was needed but not that government could do it.
Reformers cannot afford to lose the second battle for
public opinion.

Winning will require organization and narrative. It
will also require that reformers coalesce around a
broad strategy, as they did in the pivotal years
leading up to March 2010. That strategy should have two
prongs: the case against insurers, and the case for
government.

Private insurers are partners in the new law, but their
cooperation will not be automatic, and a tough approach
to insurers is the single most important precondition
for long-term success. The largest private insurance
companies are a gift to populist critics that just
keeps on giving. To put the law in place, federal and
state officials need to keep putting insurers in their
place -- prominently and without apology.

But making a case against insurers is not enough to
justify positive government action. And continuing
government action is essential if reform is to succeed.
Reformers surely need to make the case that the law
passed was in Americans' interest. But they should not
be afraid to also point out where the law needs to be
strengthened, especially when that also means pointing
out where private insurers continue to fall short. Just
as Medicare's early inability to control costs colored
perceptions of the program for decades, public and
elite views of the current law's effects are likely to
gel before the coverage provisions of the law take full
effect in 2014.

In the process, reformers should revive the public
option. A simple Medicare-like public plan could build
on the provisions of the law that create at least one
national nonprofit plan. Regardless of the near-term
political prospects, the public option is a clear and
simple goal that links concerns about health security,
the affordability of coverage, and the nation's larger
fiscal challenge. It is popular. It will save serious
money. And it can function as a sword of Damocles: If
insurers fail to live up to the obligations of the law
and tackle rising costs, they will face the only form
of accountability that really matters in the private
market -- losing customers.

The passion that pushed health-care reform to the top
of the political agenda should not be sidelined by
technocratic concerns or triumphant complacency. In
politics, sometimes the best defense is a good offense.



Jacob S. Hacker is Stanley Resor Professor of Political
Science at Yale University, is the author, with Paul
Pierson, of Winner-Take-All Politics: How Washington
Made the Rich Richer -- and Turned Its Back on the
Middle Class (2010).

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