President Obama’s speech Wednesday night clarified what he will, and won’t, accept from Congress. It also was politically artful, mollifying the liberal Democrats while borrowing from Republican positions in an effort to give just enough to each to keep the process moving.
My main takeaway was this – for the first time, substantial attention was paid to cost, with a good chunk of the speech focused on reducing spending due to unnecessary care, excessive Medicare Advantage subsidies, and squeezing out administrative cost.
This is the speech that should have started the health reform campaign.
Instead we’re far into the legislative process, and many, if not most, Americans are uneducated about and unaware of the key issues reform should address. Example – I had dinner Friday night with several well-educated people in Chicago, one of whom is a nurse anesthetist married to an anesthesiologist. She railed against the reform bills’ negative impact on physicians, but could not point to any specific issues or clauses or reimbursement changes in any of the bills currently before Congress. She complained vociferously about the cost of medical malpractice insurance, stating that this is not a problem in any country but ours. The others listened, as to them, she is deeply involved in the industry and therefore an ‘expert’.
This is why the chances for health reform are dim and fading. The Democrats ceded the field of public debate to opponents of reform who successfully focused the public’s attention on secondary issues such as tort reform while avoiding any discussion of cost (which would mean lower revenues for reform opponents). Now the President is paying catch-up, trying to educate the American people about the problems, cost drivers, and inefficiencies in health care. This education will not happen overnight. Wednesday night he set the stage, raised a number of good points, and was generally accurate in describing the health care system’s cost drivers.
It would have been the perfect speech except it wasn’t in May.
I’ll temper my comments with the observation that then-Senator Obama was counted out last August, appearing to stumble while his opponents soared, only to soundly trounce Senator McCain three months later, winning several states that had historically been solidly Republican. He also defeated the Clintons to win the Democratic candidacy, an accomplishment that cannot be overstated.
Can the President get reform done? Possibly. But not probably.

This is it – President Obama’s speech tonight will be the single most important health reform event this year. Here are the key things to watch for.
The reactions of Sens Grassley, Enzi, and Snowe are more important than the content. More important, even, than any Presidential pronouncements about public options and tort reform. Without bipartisan support, however thin, nothing gets done, and these are the three keys to that elusive bipartisan stamp.
Cost control – to date the Dems in the House have passed several bills out of Committee greatly expanding coverage at huge cost. Health reform without cost control is not possible nor should it be. The President must address cost, and do so directly.
Lines in the sand – I don’t expect there will be any, especially any referring to a public plan option from day one. But there will be ‘requirements’ for coverage, perhaps timeframes, and possibly a trigger for implementing a public option if specific criteria aren’t met by the private insurance market. How tight these are will go a long way to revealing how far the President will go to get reform passed.
Tort reform – the President’s treatment of this topic will be highly instructive. If he signals a willingness to include tort reform in a health reform bill, that will show a) he’s open to make big concessions to get reform done; and b) opponents that the stakes are raised. Getting tort reform done is a high priority for many in the industry, and they will likely be willing to compromise on other points if they get what they perceive to be meaningful reform.
What to ignore
The slamming by opponents and hyperbowling (a term used to describe advocates hurling positive adjectives at any microphone) immediately after the speech. Turn off the coverage and get back to your fantasy football picks – it will be more productive and less stressful.

President Obama’s speech to a joint session of Congress tomorrow night looks like the last best hope for health reform in 2009. Despite all the protestations about ‘ObamaCare’, the reality is the President has been remarkably silent on health reform specifics, preferring to let Congress work out the details, as long as they meet his goals of coverage and ‘budget neutrality’.
This looks to be the result of a careful analysis of ‘what went wrong’ with the Clinton health care reform effort, an effort blown apart by too many details that elicited devastating criticism. While some may accuse the President of fighting the last war, others note that Obama, as a relative newcomer to the Capital, understands that many in Congress, and particularly the Senate, have long experience with health care and much pride in that experience, and would resent what they might see as a heavy handed attempt by the new guy to dominate an issue that they view as their own.
Regardless, we’re now at the point where the speech, and moderate Democrats’ and Republicans’ reactions to that speech, may be the turning point in the reform effort.
Obama has largely kept his powder dry, avoiding ‘deal-breakers’, lines in the sand, and ‘non-negotiables’, and the same can be said for the Republican Senators key to a true ‘bipartisan’ deal – notably Enzi and Grassley. (Snowe is a different story; she’s the one hope for Democrats seeking to shove something thru with some form of a public option.) Despite the escalating rhetoric on the part of the two Senators, they have – so far – pretty much avoided had line positions.
This modicum of restraint on the part of the President, Enzi and Grassley, is the key to coming up with something that a) can be passed; b) is more than just a tweaking around the margins; and c) promises to control costs while expanding coverage.
A solid set of principles that would form the basis for agreement has been developed by Bob Laszewski, and are the subject of a measured piece by Brian Klepper and David Kibbe. Klepper and Kibbe suggest the following:

* Bulletproof Health Care Security. This is the idea that everyone would have significantly improved access to care, that the employer-sponsored system would remain available for those who like it, and that Congress would be required to use the same system that they pass for the rest of us.
* Medical Malpractice Reform. The Republicans have the Democrats where they want them on this one. There is no good reason why our current Med Mal system, as capricious and ineffectual as it has been, has not been revised with expert systems, except that the trial lawyers, in exchange for hefty financial support, have received protection from the Democrats. It’s time to fix this problem that pervades our health care provider community.
* Paying for It. This is acknowledging that subsidies will be required for those who can’t afford health care at its current cost level, and that there are ways to structure the new cost that are more sensible. As Bob points out, the nearly forgotten Wyden-Bennett bill would be cost neutral in its second year.
* Tough Cost Containment. As we said above, this has been the Congressional Democrats’ proposals’ most glaring and conflicted flaw. It is an area that, with a focus on primary care, paying for results instead of piecework, and cost/quality transparency, could dramatically drive down cost while improving quality, rightsizing our health system and going a long way toward ameliorating the most pernicious drag on our larger economy. Bob tackles cost control most effectively in his Health Care Affordability Model, a plan that would use tax incentives to encourage the industry to focus on driving out waste.

There are a couple huge political plusses for the Republicans in the ‘Four Points’.
First, to date the Dem’s proposals have been woefully short on cost containment, and woefully long on unfunded entitlements. By getting tough on costs, the GOP may be able to find one issue where it has a fresh, new perspective – something the party desperately needs. Sure, they’d infuriate a big donor base, but that would be an acceptable price to pay for a party that needs something to build on for next year’s mid-term elections.
Second, Enzi, Grassley et al would earn big points from the medical provider and manufacturing industry by attacking Med Mal. A successful ‘solution’ to what is perceived to be a big cost driver (although the data don’t support that perception) would play very well with their base, and take some of the sting out of the cost containment provisions.
This is not to make light of the significance of the issue for the Dems as well – passing health reform is a must-do. There’s a lot of political capital at stake so passing it will boost the party’s credentials while failing to do so will cut deeply into the public’s view of the Democrats.
What does this mean for you?
By September 30 we’ll know if reform is still alive. If Grassley and Enzi aren’t sounding strident and protesting ‘heavyhanded Democrats’, we may still get there.

Last week’s post about what will happen if we don’t have health reform got me (and a couple others) thinking about the downstream impact – on employers, manufacturers, taxpayers.
Before we delve into the impacts, a bit of clarification.
My statement that a family policy would cost $30,000 in 2016 was based on the latest info from two large consulting firms about commercial health insurance premiums – rates are going up more than ten percent next year. And it is highly likely they will continue to accelerate at or near the ten percent number. Two commenters noted that just because something happened in the past does not mean it will continue into the future – I’d respectfully note that while that is true in the abstract, in the concrete world of health insurance, there’s a very high likelihood that costs will indeed go up ten percent – or more – per year for the foreseeable future absent meaningful cost reform.
The AON survey reports trend rates ranged from 16.0% and 18.2% for HMo, PPO, Indemnity plans in 2002, 15.7% – 17.2% in 2003, 14.1% – 15.3% in 04, 12.7% (CDHP) to 14.6% in 05, 11.9% – 14.4% in 2006, 10.7% – 12.7% in 2007, and 10.5 – 12.4% in 2008.
The past is a pretty good predictor of the future; over the last eight years cost have consistently increased more than ten percent each year, with most increases well above that level. Whether we are at the bottom of the cycle or cost inflation rates will continue to decrease is unclear, but what is clear is that the inflation rate will head back up at some point in the next few years.
Back to the real world impact.

• If nothing changes, the share of the nation’s budget paid by the government will be greater than that paid thru private insurers.
• 178,000 small business jobs will be lost by 2018 as a result of health care costs
• If employee contributions stay at their current level (about 30% of premiums), workers will be paying $9000 per year, or $750 per month, towards their health coverage – not including deductible, copays, coinsurance, and services not covered
• General Motors’ health insurance will add about $3000 to the cost of each vehicle – if it is still in business>li>In my hometown of Madison, Conn., Town employee health insurance costs are paid for with property taxes; without reform the amount of tax revenue needed to pay those bills will double by 2016, forcing tax increases and/or significant service cuts
• More Americans will have to rely on the kindness of others for their health care
• Because 65 million of us will be without health insurance

Unlike the distortions, misrepresentations, and outright lies being spread by McCaughey, Limbaugh, Palin et al, this is the real deal. So fight against reform if you wish, but don’t complain later when you can’t afford insurance, your employer can’t afford insurance, your taxes are going up to pay for teachers’ benefits, and our economy is sinking under the weight of health care costs.
(Note – as I said Friday, health ‘reform’ must include cost control, something neither party has bothered to meaningfully address)