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Obama Recasts Health Care Debate

President Obama addresses Congress on Tuesday. (whitehouse.gov)
President Obama addresses Congress on Tuesday. (whitehouse.gov)

President Obama addresses Congress on Tuesday. (White House photo)

It wasn’t the most eloquent line of the speech, nor is it likely to make many headlines this week, but President Barack Obama’s Tuesday-night pronouncement that Medicare reform can’t happen without an overhaul of the nation’s entire health-care system marked a stark departure from the popular Washington notion that the country’s long-term budget crisis could be solved by slashing entitlement spending alone.

“Comprehensive health care reform,” Obama said is his address to a joint session of Congress, “is the best way to strengthen Medicare for years to come.”

Illustration by: Matt Mahurin
Illustration by: Matt Mahurin

Illustration by: Matt Mahurin

That thinking will likely have sweeping policy implications as lawmakers debate steps to keep the country solvent in the face of projections that federal spending is on an unsustainable path, largely due to the skyrocketing costs of Medicare and Medicaid. Many observers have used those projections to identify an “entitlement crisis,” encompassing not only the federal health care programs, but Social Security as well.

To address this “crisis,” Congress has dabbled perennially at the edges of Medicare in hopes of trimming costs; conservatives have pushed plans to privatize Social Security; and lawmakers from both sides of the aisle have proposed the formation of commissions charged with reforming the entitlement programs to put them on a path to solvency. Critics view these proposals as backdoor efforts to slash Medicare and Social Security benefits.

Obama’s statement Tuesday is some indication that the White House has rejected the bundled “entitlement crisis” argument, and will instead approach the nation’s budget challenges by tackling the surging, across-the-board costs in health care, which, at current rates, would bankrupt Medicare and Medicaid. The broader approach, many experts say, is vital to fixing the problem.

“[T]he nation faces a daunting health care financing problem that bedevils private insurers and public programs alike,” Henry Aaron, a health policy expert at the Brookings Institution, wrote this week on Brookings’ Website. “The distinction is critical. How the problem is defined will determine whether the debate on how to solve it has any real chance of succeeding.”

There is little dispute that Washington faces severe long-term budget troubles and that rising health care costs are at the root of the problem. A federal report released this week indicates that health care spending will rise by 6.2 percent per year over the next decade — 2.1 percentage points higher than the economy is projected to grow over the same span.

The resulting pressure on the federal budget will be enormous. In 2009, Washington is projected to spend $720 billion on Medicare, Medicaid and the State Children’s Health Insurance Program alone, according to the latest estimates from the Congressional Budget Office, and the figure is expected to double by 2019.

And that’s just the federally-funded slice of the health-care pie. Nationwide, health-care spending is projected to hit $2.6 trillion in 2009, or 18 percent of the gross domestic product, according to the CBO. By 2017, it will constitute 20 percent of GDP.

Much has been made of the retiring Baby Boomers and their effects on entitlement spending. But the much more significant factor contributing to the entitlement squeeze is not the rising number of Medicare beneficiaries but the skyrocketing cost to treat each patient — the result of better treatments and technologies that patients (very understandably) want in order to stay healthy.

Obama on Tuesday vowed in no uncertain terms to pass comprehensive health care reforms before the end of the year. “The cost of our health care has weighed down our economy and the conscience of our nation long enough,” he said. “So let there be no doubt: health care reform cannot wait, it must not wait, and it will not wait another year.”

The president has also scheduled a special health care summit at the White House next week.

The shift from targeting an entitlement crisis to tackling the larger issue of health care reform marks a major victory for many patient advocates and liberal health policy experts, who began the week deeply wary that Monday’s Fiscal Responsibility Summit, called by Obama, might open the door to Social Security cuts. “It’s a bait-and-switch argument,” said Lawrence Mishel, president of the Economic Policy Institute, a liberal think-tank. “There’s an ‘entitlement crisis,’ therefore Social Security must be a part of it.”

Many advocates and policy experts are particularly concerned about such cuts in the middle of a recession that’s already stolen much of the home equity and stock market wealth from the nation’s elderly population.

Jacob S. Hacker, political science professor and co-director of the Center for Health, Economic, and Family Security at the University of California, Berkeley, said there was “concern that the term ‘fiscal responsibility’ would be hijacked by groups with their eyes on cutting elderly programs.”

Peter Orszag, director of the Office of Management and Budget, mitigated these fears during the summit, pronouncing that, “Health care reform is entitlement reform. The path of fiscal responsibility must run directly through health care.”

For Orszag, the statement is perfectly in character. As director of the Congressional Budget Office in 2007 and 2008, Orszag trudged countless times to Capitol Hill bearing warnings that federal spending is unsustainable and that skyrocketing health care costs — across the board, not just in Medicare — are the cause.

“Sustainable changes to Medicare and Medicaid will only work if they are accompanied by other changes that restrain overall health care cost growth,” Orszag told a Senate panel in the summer of 2007.

Two powerful Democrats — Sens. Ted Kennedy (Mass.) and Max Baucus (Mont.) — are currently drafting comprehensive health reform bills. But the process won’t be easy. Health reform has been one the thorniest of all issues for lawmakers to tackle in recent decades — as the Clintons can well attest with their 1993 debacle. The result has been that, while lawmakers have been able to tweak this-Medicare-procedure or that-SCHIP-provision, comprehensive reform has gone precisely nowhere.

A major barrier: The medical industrial complex has grown enormous — and enormously powerful — over the years, leaving literally millions of professional livelihoods hinging on the skyrocketing costs of health coverage and treatment, as well as the status-quo payment formulas of the U.S. Department of Health and Human Services.

Try to overhaul this system (or this lack of a system, as many critics are quick to distinguish), and you’ll first need at least partial approval from the doctors, the dentists, the nurses, the hospitals, the not-for-profit clinics, the insurance companies, the pharmaceutical companies, the medical device manufacturers, the physical therapists, the nursing homes, the laboratories, the pharmacies — and the list goes on.

Combined, the health sector gave more than $162 million to Washington lawmakers in the 2008 election cycle alone, according to the Center or Responsive Politics. And this does nothing to mention the patient advocates who recently united to apply pressure at the very mention of a gathering to discuss fiscal responsibility.

The economic stimulus package, signed into law last week, contains several health reform provisions, including $19 billion to encourage the nation’s various health care providers to adopt interoperable health information technologies. Another $1.1 billion will go to study the relative effectiveness of different services and treatments in hopes of weeding out those that don’t work.

No one thinks the up-front costs to revamp the health care system will be cheap, and the pricetag may scare away lawmakers already wary of trillions of dollars in deficit spending this year already. Still, some policy experts say the current economic turmoil — combined with Obama’s current popularity — present Democrats with the perfect opportunity to pass sweeping health care reforms this year.

“The task is monumental, but it is not insurmountable,” Hacker, of Berkeley, wrote this month in the Christian Science Monitor. “In fact, our current economic crisis makes it not just more pressing, but also more possible.”

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