Is Obama Naive About the For-Profit Health Industry's Commitment to Real Reform?

In these times, with this mandate and the American people's rare but undeniable hunger for radical change, Obama's motto ought to be: "Don't let the good be the enemy of the perfect."
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[Updated on May 11.]

Optimism is a virtue; it leads us to see the best in people despite their flaws, and to envision a better future even when we can clearly see the obstacles that lie in the path to that future.

But blind optimism is no virtue. Naive or overeager optimism can lead us to ignore the fact that most people have mixed motives, and to cling so tightly to our vision of an idealized future that we become blind to the practical challenges we need to overcome to reach it. Wiser optimists trust - but verify; they have faith in the better, without ignoring the worse, angels of human nature.

On Sunday afternoon, two senior Obama Administration officials unexpectedly called a telephonic press conference to announce what they cast as a tremendous, positive new development in the healthcare reform effort. And they seemed genuinely, sincerely excited about this mysterious new development -- excited enough to buzz every national journalist's BlackBerry with an invitation to the conference call in the middle of Mother's Day. Because the President himself will be announcing this development officially on Monday, they embargoed the information (forbade reporters from releasing it) until 9 pm ET Sunday, and made the call -- arranged by the White House press office -- "on background," asking not to be identified by name or position.

Quite a buildup. So what was the big news? Simply this: a coalition of health insurance, hospital, pharmaceutical, and physician trade groups, plus a major union, will promise the President Monday that they will reduce the rate of future growth in the cost of healthcare by 1.5% per year for the next decade.

That's it. And the President will be announcing it himself Monday morning [update: according to CNN, 12:30 ET, 9:30 PT], presumably with equal excitement. [More HuffPost reporting on this call here.]

The big news, in other words, is that healthcare will continue to be increasingly expensive for consumers, employers, and governments, but not quite as quickly as it was going to be. 7% per year inflation will become 5.5% per year inflation -- that is, if the participants keep their promise. Which, according to the officials, they'll do, not because there's any kind of enforcement mechanism - there isn't one - but simply because they're "Americans."

(That's a quote from one of the administration officials, by the way: these for-profit healthcare industry groups are going to reduce costs, and potentially profits, simply because they're good "Americans.")

The senior administration officials were hyperbolic about this news. One, focusing on the political battle to enact healthcare reform, called the trade groups' pledge "a game changer."

The other official, focusing on economic issues, saw this as nothing less than the salvation of the entire federal budget:

"I don't think there could be a more significant step to help struggling families and to help the federal budget than reducing the growth rate of healthcare spending by 1.5 percentage points per year. With regard to the federal budget... the only way that we are going to restore the nation to a sound fiscal path over the long term is to reduce the growth rate in health care costs... Reducing the growth rate of health care costs overall by 1.5% per year would virtually eliminate the nation's long term fiscal gap. ... This, by an order of magnitude, is far more important [than Social Security or related reforms] to the fiscal trajectory that we're on, especially over the long term, than anything else that could be done."

Remember, we're talking about slightly reducing the rate of growth in health care costs, not a reduction in health care costs themselves. That's what's supposedly going to save both American families and the nation's fiscal problems "over the long term."

The journalists on the call, understandably, were more skeptical. The biggies queued up to ask questions: reporters from the New York Times, Wall Street Journal, Associated Press, Washington Post, NBC News, CNN, Los Angeles Times, Reuters. Some asked for wonkish, green-eyeshade details (answers were rarely forthcoming).

Other reporters questioned what mechanisms were in place for making sure those promises are kept (answer: there are none). In response to a question from Reuters, one of the officials put his trust in the bully pulpit and the Fourth Estate, saying, "I don't know how many of you have made, in-person, a commitment to the President of the United States... There will be accountability not only through regular check-ins with the President of the United States but also through the media, because I have no doubt that you all will be checking up on them."

The other official simply believes that pharmaceutical, insurance and hospital trade groups are acting in patriotic good faith, saying, "These are very sophisticated trade associations which in the past have, one could argue, dragged their feet when it came to the subject of health care reform and certainly cost containment. [Now they're] coming forward voluntarily, approaching this President and saying, we want to be part of the solution, we want to be part of getting health care reform done... That fundamentally aligns these major provider groups with the President's goal of getting health care reform done this year. That is a game changer in our opinion."

Eliza Marcus of Bloomberg and Michael Fletcher of the Washington Post asked outright whether the healthcare industry was buying something with this concession. One of the officials dismissed the possibility, denying that there have been any discussions at all about the public plan or any other quid pro quo and instead casting the industry coalition's promise in purely patriotic terms: "They put it to me that everybody must share responsibility.... [T]hey want to get everybody covered... and they said to me, we know we have to do our part.... [T]his is them coming forward as Americans to get this done."

At face value, the health industry groups' announcement is good news. Even Paul Krugman, a consistent Cassandra of late, seems pleased. What's puzzling is the Administration's eagerness to accept it at face value. The group making this pledge includes private health insurers, medical device manufacturers, a pharmaceutical manufacturer, and the pharmaceutical manufacturers' trade group (PhRMA).

If you want a sense of how loyal and reliable this group is, you may be interested to note that PhRMA is represented in these negotiations by former Congressman Billy Tauzin, who (as a Democrat) co-founded the anti-progressive Blue Dog Coalition, then left the party to become a Republican, fought for pharmacy industry interests while in office, and finally began working on PhRMA's payroll literally the same day he left Congress. PhRMA (pronounced "Pharma") has never in its existence made a concession without something being in it for them. Most (though not all) of the groups participating in this initiative historically have opposed health care reform, and most are large donors to the Republican and Vichy Dem politicians who are preparing to mount a political and rhetorical battle against health care reform, as evidenced most recently by the leak of Republican pollster Frank Luntz's crassly cynical talking points memo (teaching opponents of healthcare reform how to "spin" Obama's plan so it sounds like Mandatory Gay Nazi Communism).

The biggest concern most members of this "patriotic" coalition have about Obama's reform plans is his intention to include a "public plan" -- i.e., a Medicare-style, government-run health plan that anyone could subscribe to, just like they can subscribe to Blue Cross, Kaiser or any other private insurance. That government-backed option terrifies the for-profit healthcare industry, because they know they can't compete with it. Medicare, for all its faults, still has the lowest administrative costs than any other health provider in the country; it has no need to deliver profits to shareholders, its executives are paid far less than their counterparts in the private sector, and it delivers competent care to millions of Americans who otherwise would go uninsured. Not only is a Medicare-style public health plan a competitive threat to the for-profits, but it's a political threat as well: for-profit providers know that if millions of Americans sign up for federally-run, nonprofit healthcare and see that it actually works -- that their fears of rationed care and needless deaths aren't borne out -- then the inertia towards single-payer healthcare for everyone may become an unstoppable juggernaut.

For that reason, it's hard to believe that a coalition including PhRMA, Kaiser, the nation's largest hospital coalitions, and other for-profit providers aren't angling, at a minimum, to curry enough favor with the Administration that Obama feels obligated to drop the public plan option -- just as he "compromised" on aspects of FISA, healthcare components in the stimulus package, and other controversially progressive aspects of his original platform. But the senior Administration officials speaking to reporters on Sunday seemed genuinely nonplussed that anyone would think such a quid pro quo might be under, if not on top of, the negotiating table.

The last question of the conference call, happily, went to me. I wanted, first, to confirm that the grand announcement was merely about a reduction in cost increases, not a reduction in cost, and second, to know whether Obama, himself, still considered a public health care option to be beyond negotiation. I figured, if Obama is unstinting in his support of the public option, it doesn't matter what the trade groups think they're buying with this concession, right?

I didn't like the answers I got, though. The first told me that the Administration is getting too excited about too little; a reduction in the rate of growth is less relief than American families and employers need, and the second fell short of the adamant reassurance I wanted to hear. But decide for yourself:

Bellows: "I have two questions. The first is following up on Michael Fletcher's and Eliza Marcus' questions: is the President still insistent that a public health plan will be among the options offered to people, or is that a bargaining chip in any way? And the second question, following up on Andrew Beatty's: is it correct that the cost per capita will still increase, just not as much as it previously was projected to?"

Senior Administration Official #1: "On the second question, the answer to that is yes. Again, what we're talking about here is reducing the growth rate, so yes, health care costs, you should anticipate health care costs will continue to rise, but achieving a slowdown in the rate at which they increase is a, would be a huge accomplishment in terms of freeing up resources for other priorities and in terms of relieving pressure on the federal budget."

The official continued with a justification for accepting continued healthcare cost increases:

"One of the reasons that you should expect health care costs to continue to increase is not only that the population is aging, which puts some upward pressure on health spending, but also that as incomes rise over time, it is natural that people want to spend part of their additional income on health care...."

On whether the public plan is non-negotiable:

Bellows: "The second question?"

Senior Administration Official #2: "On the public plan, this event with the President tomorrow [Monday] is not about the public plan, we've had no discussion with this group about he public plan, in fact, if I look at the list of trade associations that are part of this, there are different views about it, but the President likes the public plan, it's part of his campaign plan [sic: platform?]."

My beef? Simply that liking a plan is weaker than labelling it non-negotiable. The lack of adamancy troubles me.

One of the Obama administration's mantras is "don't let the perfect become the enemy of the good." But in these times, with Obama's still-strong mandate for change and the American people's rare but undeniable hunger for reform, their motto ought to be: "Don't let the good be the enemy of the perfect."

Radical health care reform -- reform that doesn't shave health care costs for regular people and their employers, but slashes them; reform that doesn't force single-payer healthcare on the American people, but demonstrates that it can work well and therefore sets the stage for their eventual acceptance of it -- is within Obama's grasp. He'd be wrong to settle for merely "good" health care -- for health care that merely slows the rate at which costs increase, or health care that doesn't include a government-payer option to demonstrate that a government-sponsored plan can provide better care at lower cost than profit-driven private plans. He would, to paraphrase Chief of Staff Rahm Emanuel, be wasting a crisis.

Anyone paying attention to the economic policies of industrially successful nations knows that single-payer, low-cost healthcare is key to America's future. By taking for-profit corporate lobbyists like Billy Tauzin at their word, by considering their unenforceable promise of future good behavior as if it were a tangible present good, is Obama setting himself up to deviate from the clear path to that future? Obama has, within his grasp, that once-in-a-lifetime rarity: a plan that is both nearly perfect, AND achievable. Will he give in when the for-profit healthcare industry, inevitably, asks that the public option be watered down or taken off the table altogether -- or will the president keep his word to the American people -- people who have put their trust in his commitment to collaborate, but not to compromise?

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