America's Reform of the Century Will Health Care Be Obama's Legacy or Waterloo?

Barack Obama wants to modernize the American health care system. But his ambitions come with a cost of around $1 trillion, a price tag that even some Democrats say is too high. Will he fail, as Clinton did before him?
Von Gabor Steingart

In times of trouble, US President Barack Obama always turns to his closest allies, the citizens of America. And Wednesday was no exception.

The president had invited about 200 journalists to the White House, but really they were just the window dressing. Obama was talking right over their heads -- to the Americans assembled in front of their TVs.

It's easy to fall prey to Washington's political games, he told his audience. "To turn every issue into a running tally of who's up and who's down," Obama said. He said it hadn't been lost on him that one Republican strategist had advised members of his party to "go for the kill" rather than compromise on health care and that another told activists that the health care issue "could break" the Democratic president.

The citizen president looked his fellow Americans firmly in the eye. It wasn't about him, he said. "This debate is not a game for these Americans (who can't afford health insurance). ... They're looking to us for leadership and we can't let them down."

In the cradle of capitalism, the president is arguing for more solidarity. Because up until now, being sick in America has been a private matter; and as a result, 47 million Americans have no health insurance today. So Obama wants America to become less American.

Every day during the economic crisis, another estimated 14,000 people lose their jobs, and therefore their health insurance. Additionally, the World Health Organization (WHO) reports that thousands of Americans die each year because they are denied the most basic health care. For America, a superpower that likes to set an example to the rest of the world, that is a damning indictment.

Washington's political circles have been buzzing since the president set a serious deadline for the passing of health care reform legislation. He wants it to happen this year. Support groups and activist organizations are buying billboard space, hoping to appeal to members of Congress on their way to work. The pastor of the city's oldest Baptist congregation, in the Georgetown neighborhood, even campaigned for health care reform in a recent sermon: "It is time, America, for you to care for your poor and sick." The congregation didn't respond with any old "amen." Instead it greeted her remarks with applause.

Even First Lady Michelle Obama has abandoned her political reserve. Once employed by the University of Chicago Hospitals, she now spends her time touring hospitals and orphanages to campaign for her husband's most ambitious reform program to date.

A Bold and Overdue Plan

Obama may have inherited a lot of problems from his predecessor, but the reorganization of the American health care system is a crusade he has chosen. If he succeeds, that alone will see him go down in history as a notable leader. If he fails, though, it will be his first serious defeat.

At the moment, the situation isn't looking very good for him. The president is leaving it up to the Democrats in Congress to do the work on his reform of the century, but he is also emphasizing the importance of bipartisan cooperation on the legislation. So when Harry Reid, the Democratic majority leader in the Senate, postponed debate over health care legislation until after the summer recess instead of the end of July as Obama had hoped, it represented a setback for the president.

Obama wants to extend the right to state-sponsored health insurance to all Americans. He wants to complete what former President Lyndon Johnson began in the 1960s with the introduction of national health insurance for retirees and the disabled (Medicare), as well as for low-income Americans and children (Medicaid).

The plan is as bold as it is overdue. The American health care system is expensive, ineffective and socially inequitable -- and it comes at an annual per capita cost of $7,500 -- twice as high as in Germany. Since 2000, doctors, hospitals and the pharmaceutical industry have managed to achieve a 70-percent increase in earnings, which Obama calls "health inflation."

The health care industry already comprises a large and growing share of the American gross domestic product. That share is currently 16 percent, compared to only 10 percent in Germany. If nothing changes, it will increase to a monstrous 25 percent within the next 15 years.

The high costs of the system are not matched by comparable benefits and services. The government has no real control over the health care system and pharmaceutical executives, chief physicians and hospital managers set their own salaries. The health care market is like a game of football without a referee. And the American superpower ranks a shameful 37th in international studies of health care systems. According to one such study, about 100,000 people a year die in American hospitals as a result of infections, while another 98,000 die because of incorrect treatment.

America, as a Third World Country. Although the rate of return may not be as high as it is for Wall Street banks, where the US health care system does rank highly is in the profit margins of the medical-industrial complex. When advisors from the McKinsey management consultancy were hired to examine the system, they discovered $480 billion in profits that were not matched by performance.

"Pure Waste"

The renowned Institute of Medicine even estimates that almost one-third of all medical care in the US -- or about $700 billion worth -- is "pure waste." This figure is one-and-a-half times the German federal budget and even exceeds the US military budget.

Bill and Hillary Clinton had hardly moved into the White House in 1993 before they took on the challenge of health care reform. And they failed spectacularly. Can Obama fare any better?

The magnitude of the problems has always been overshadowed by the size of the anti-reform coalition. Once again, the Republicans are intent on launching a battle of the cultures. Because while the debate revolves around party tactics, it also touches on some fundamental issues about American culture. How American should America be in the 21st century?

A unified opposition has agreed to disagree with "Obama-care" -- but they are divided as to how to proceed from there. There are the radicals who, led by former vice-presidential candidate Sarah Palin and fired up by conservative journalists like William Kristol, oppose any and all efforts for reform. In his blog, Kristol, the founder and editor of the Weekly Standard, an influential conservative political magazine, advises Republicans not to give in to the temptation "to try to appear constructive, or at least responsible."

"Subprime Socialized Health Care"

The Republicans are disparaging the Obama healthcare plan as "socialism." Conservative radio host Rush Limbaugh calls the plan "subprime socialized health care," in an allusion to the subprime mortgage loans that triggered the current economic crisis. And Republican Senator Jim DeMint, whose aggressive anti-Obama rhetoric has already sparked speculation of a possible presidential run, has described the health care reform as Obama's "Waterloo."

More moderate Republicans, including many senators, say they support health care reform but their search for a compromise is really a more refined, highly political version of the Republican conflict resolution strategy. They want to embroil the president in a long, energy-sapping discussion over details, hoping to portray Obama as a gambler and themselves as the advocates of the sick.

The strategy of delay seems to be working among conservative Democrats, too. "It's better to have a product based on quality and thoughtfulness rather than try to jam something through," Senate Majority Leader Reid said last week. Other members of Congress who are skeptical about health care reform say that a quick decision would be unjustifiable, given the complexity of the matter, and that Obama ought to be more patient.

Although the majority of Americans want a reform of the health care system, this majority shrinks the minute pollsters mention the costs of the proposed changes. Higher taxes and a bigger government deficit are extremely unpopular among voters, whether they be Republican or Democrat. The president's approval rating also declined last week -- another bad sign for health care reform.

The Obama project is without a doubt the most expensive program in America's relatively short history, even costlier than the $787 billion economic stimulus package. The nonpartisan Congressional Budget Committee estimates that the proposed healthcare reform legislation will cost around $1 trillion over the next 10 years.

Learning from the Clinton's Mistakes

Under the plan, about 45 million people, who were unable to pay all of their own health insurance, would become members of a national health care system. The Democrats envision raising taxes for the wealthy but the resulting revenues would be far from sufficient to cover the additional cost.

Almost daily, the president assures critics that his reform is "deficit neutral." He declines to explain where the money for the program will come from, but this lack of clarity could be calculated. Because the president and his team have already researched, and drawn their conclusions from, the failure of the Clintons' effort to reform health care.

Back then President Bill Clinton had put his wife, Hillary Clinton, in charge of developing a package of health reforms, including regulation and funding. The health industry meanwhile invested millions in TV ads that criticized the Clinton plan, claiming it would eliminate patients' ability to choose their doctors and make the health care system overly bureaucratic. Harry and Louise, a white, middle-class American couple, appeared in nightly ads on national television to try and turn public sentiment against the "other" couple, Bill and Hillary.

The televisual pair turned out to be more successful than the presidential couple. The public mood changed, the Clintons' health reform failed. And Clinton the bold reformer turned into Clinton the cautious pragmatist.

Leaving the Heavy Lifting for Congress

Obama is approaching the issue more carefully. Although he is pushing for reform, he is leaving the design of the legislature up to Congress. He's the owner of the house, but they will be its architects. And his role is simply to say "yes" or "no" to their suggestions. In effect, Obama is protecting his political capital by ordering Congress to come up with the nuts and bolts of health care reform. As the president cleverly keeps repeating, he won't sign anything that isn't "deficit neutral."

Congress is in no hurry to iron out the details of paying for the plan. The 1,018-page proposed health plan contains no suggestions on how to raise the estimated $1 trillion required to fund it. It also makes no mention of how to put a stop to, or at least reduce, the escalation of costs. And the current bill proposes a government health insurance program that would compete with private insurance plans.

Such a plan might just disturb the balance of power that exists within the current system, and which drives health care costs higher. In addition, the proposed plan requires the establishment of a government commission which would analyze costs and prices in health care. Even if this commission's power was limited and it only made recommendations, it could still make life more difficult for the pharmaceutical industry.

Industry Is Playing Along

Somewhat ironically, the pharmaceutical industry is cooperating with Obama, one of his only rays of hope. The insurance industry, drug companies and a recently established initiative called "Health CEOs for Health Reform" are expressly supporting "quality, affordable coverage for all." Karen Ignagni of the industry trade association America's Health Insurance Plans told the president: "You have our commitment to play, to contribute and to help pass health care reform this year."

The industry would rather be part of the solution than part of the problem. It wants to prevent government price regulation, strict budgeting based on the German model and the ongoing import of low-cost medication. Somewhat surprisingly, Bruce Bodaken, the chairman and CEO of the insurance company Blue Shield of California, said: "We stand ready to change our business model if coverage is made universal. We hope the process the president has kicked off ... inspires others to make similar commitments to achieve the goal of affordable health care for everyone."

And former Republican Congressman, Billy Tauzin, now a powerful lobbyist for the pharmaceutical industry, was particularly accommodating, saying: "We recognize that a medicine which sits on a shelf out of reach of patients financially doesn't do anyone any good." He even promised that the pharmaceutical companies within the trade group he directs would find ways to save the government $80 billion over the next decade.

The president liked what he heard. Sounding mildly triumphant at a student rally at a high school in Ohio last week, Obama said that the pharmaceutical industry has "already put $80 billion on the table."

One of the students in the audience then asked how he could help, to which Obama promptly replied: "Make sure you're persuading your parents if they're not already convinced."

Translated from the German by Christopher Sultan.

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