Capitol Shortage: Can the Two Democratic Parties Get It Together on Health Reform?

As an exceptionally grumpy American summer grinds to a conclusion, it is apparent that only a bipartisan solution will enable Congress and the Obama Administration to complete health reform.  No, we’re not talking about co-operating with the Republicans. Other than a handful of contrarian Republican moderates on the Senate Finance Committee, at least one of whose votes might be needed for eventual passage, the Republicans are irrelevant to the final outcome.

No, the bipartisan solution we’re talking about is co-operation between the two Democratic parties represented in Congress:  the “Safe-Seat” Democrats- the Pacific Heights/Beverly Hills/Berkeley Hills/Upper West Side/Harlem Democrats and the “Running Scared” Democrats from the western, southern and border states, who actually require independent and some moderate Republican support to get elected.  These parties have very little in common other than the Capital D after their names.

The “Running Scared” faction of the party is loosely organized in the House into the Blue Dog Coalition.  Rahm Emaneul’s successful 2006 campaign created many new Democratic Congresspeople in traditionally Republican districts, and thus, many more new “Running Scared” Democrats. Even though Senators are not exposed to electoral wrath every two years, even modest Republican years can take out senior Senators (e.g. Tom Daschle in 2004). Harry Reid (NV) and Chris Dodd (CN) are only two of the most prominent Senate Democratic leaders vulnerable next year.

Unfortunately for the Democrats, the “Safe Seaters” appear to be running things; the Speaker of the House, the Chairmen of Ways and Means and of Energy and Commerce (the two key substantive health committees) are all “Safe Seaters”.  House Democratic leaders are seething with populist righteousness after nearly two decades of Congressional irrelevance, and they are primed, first of all, to punish.  They may end up punishing their own party as much as anyone else.

The Safe Seaters produced a health reform bill HR 3200 which really was a government takeover of the health system.   It not only created a public healthcare option that imposed near Medicare rates on providers.  It also federalized the employer’s health benefits, leaving them not only with an 8% payroll tax in lieu of benefits, but a politically defined benefit and insurance rate structure.  Employers were stripped of the regulatory shield provided by ERISA, and face criminal penalties for not adhering to mandates. It appointed an Orwellian “Health Choices Commissioner” to run the whole thing.

HR3200 created a huge problem not only for a pragmatic President Obama, but more importantly for the “Running Scared” Democrats, whose House members all have to run for re-election in fourteen months. The staged Town Hall theatrics many Congresspeople encountered in August were unsubtle reminders that a vote for “government controlled healthcare” could cost marginal Democrats their seat.

Despite the fantasy that the last election represented a fundamental re-alignment of voters toward traditional Democratic liberalism, America remains a nation of skeptical political moderates (albeit with immoderate appetites) who keep their politicians on a very short leash. When political leaders attempt something as complex and multifaceted as health reform, voters are handicapped by limited attention spans, shocking gaps in knowledge and, most seriously, a profound lack of trust in their government.

President Obama entered office just seven months ago with high hopes of reforming the health system.   In this regard, the President arrived with two strikes against him:  the economic crisis and his partnership an increasingly discredited and out of touch Congress. He had ample opportunities to postpone health reform due to the economic crisis. In retrospect, this was the sensible choice.

Rather than wait, however, the President, somewhat unconvincingly, linked the two- conflating cost containment and access expansion-  and plunged ahead.  He has clung grimly to this formulation as political and economic conditions worsened through the first seven months of his term, as his own approval ratings have wilted.

The economic crisis actually began over two years ago, when American households, faced with rising food ands energy prices, and resetting mortgage interest rates, simply  ran out of cash. The crisis deepened in 2008 and 2009 with the compounding damage of foreclosures, a stock market crash, the resultant carnage in peoples’ retirement savings and a loss of over 6 million jobs (so far).   By midyear 2009, most Americans were in a state of shock and disbelief, leveraged out the window and hemorrhaging cash.

Congress has reacted to the economic crisis by flinging trillions of taxpayer dollars at them. They burned up a huge amount of political capital with voters by doing so.  First TARP, then the Stimulus Bill, then a bailout of the automobile industry- all hasty, unpopular, untransparent and financed by the kindness of strangers. In  fiscal year 2009, we borrowed an unimaginable half of federal spending from the Chinese and other trusting investors. These actions have not only drained down official Washington’s political capital; they also burned resources that could otherwise have been used to grease health reform.

Until this summer’s Town Hall theatrics, Obama had some successes in managing the health reform process.  The White House made a sound tactical decision to neutralize health industry opposition to health reform by cutting deals with hospitals, physicians, the pharmaceutical companies and the insurers. These deals are fragile, and may unravel if universal coverage cannot be achieved.  But these deals also made it virtually impossible to fund the entire expansion of coverage by reallocating present spending, which was the prudent fiscal course.

The deals with the industry required the Administration to raise taxes to fund reform, leaving it with a very difficult political challenge.   It is hard to explain to cash strapped voters how throwing another trillion dollars at a system whose costs are already too high, and growing at an unsustainable rate, will somehow make care more affordable.  No one with more than a high school education believes that health reform will be “deficit neutral”. And the Republicans, in a spate of rank political opportunism that they will later regret, are attempting to close the door on any Medicare funding reductions to finance health reform, fully aware that this will doom the process.

The President’s handlers have attempted this summer to staunch rising public anxiety. One stratagem has been subtly to repackage health reform as “health insurance reform”, attempting to focus voters on how the proposals will help the vast majority (94%)  of the voting public that already has insurance. Even though the health insurers have been at the table and bargaining vigorously for a year, the President’s campaign disingenuously paints them as the evil core of resistance to health reform. It is not clear that voters noticed the subtle shift in emphasis here.

The other stratagem has been to attempt to explain over all the shouting what the typical voter is likely to get out of health reform. Health reform advocates have done a terrible job of articulating what those actual benefits are.  Denying insurers the ability to deny coverage due to pre-existing conditions, to rescind coverage after someone becomes sick, to shift cost onto patients  (by restricting cost sharing) all represent tangible gains for those with insurance.  HR3200 also cuts the Medicare Part D prescription drug plan’s hated doughnut hole in half, a tangible savings for people over 65.  So far, these efforts have not stemmed the rising tide of public skepticism.

So how does the President salvage health reform when he returns from his non-vacation on Martha’s Vineyard?   Not by demonizing the irrelevant Republicans and not by demonizing a healthcare industry that by and large supports reform and would benefit tremendously by it.  Demonizing anyone is only going to further raise temperatures and burn up the Administration’s rapidly dwindling store of political capital. Populist outrage will not git ‘er done.

Some health insurance reforms such as eliminating pre-existing conditions and limiting recissions of coverage after someone become sick have broad bipartisan support and could be enacted with or without the health insurance industry’s support.  Health insurance mandates and the public option, on the other hand, lack even the Democratic votes to pass the Senate, and should be put aside, regardless of the price paid on the party’s left wing.

The President should focus on covering as many of the uninsured as he can, the original impulse for health reform.  It’s surprising how much good could be done on this front if one postpones, at least temporarily, the politically and fiscally unachievable goal of universal coverage in 2009. It is certainly within reason to cover at least 30 million of those presently uninsured, with the balance to be covered by Congressional action when the economy recovers.  This would be a huge victory and it is within reach.

Up to twelve million young people aged 19-30 could be covered by innovative insurance  policies that cost as little as $60-80 a month.  You cannot do that with modified community rating.  Many parents would gladly pay for this coverage voluntarily, with no mandate.  There are also nearly 11 million uninsured baby boomers, by far the scariest and costly segment  of the uninsured, that could be covered by a 45 year old “public plan” called Medicare or by letting them enroll in the Federal Employees Health Benefit Program.    You could finance the subsidies for low-income boomers  to enroll in either existing plan with soft drink and alcoholic beverage taxes.  The balance of subsidies to the low income uninsured can be financed with the Medicare payment changes already agreed to.

One can cover the 6-7 million illegals and transient legal immigrants, who are apparently untouchable for mainstream coverage, as well as many others,  by expanding community health center funding, as many health reform bills have proposed. And you can subsidize 100% of states’ costs of funding Medicaid coverage for low income adults, delaying state matching until their local economies has recovered.

The entirely predictable primary care physician shortage should be addressed by doubling Medicare payment for evaluation and management, paid for by modest cuts elsewhere in the Medicare program. Rebalancing Medicare can await the huge Deficit Reduction bill Congress will consider after the Congressional elections in 2010. >
Politically, the reality for President Obama is that his own  party could easily kill health reform unless he can unify the Safe Seater and Running Scared factions.   His advisors remember that the Clintons had substantial majorities in both Houses of Congress when they attempted health reform in 1993-94.   Rather than unifying their own party, the Clintons made a disastrous decision to cast aside the Running Scared faction, actually threatening to “demonize” one of their leaders, Jim Cooper of Tennessee.   The price paid: 15 million more uninsured and a fourteen-year delay in addressing the problem.

Obama has to convince members of his own party that it isn’t merely his skin that is at risk if the Party fails to enact health reform.  Congressional leadership already has Richard Nixon/George W. Bush level approval ratings.  Those ratings will sink still lower if the Party cannot use its huge majorities to enact some form of health reform. And a lot of Democratic leaders could be looking for new jobs themselves in fourteen months.   I think President Obama will sign health reform legislation this fall.  If he is to get a bill he can afford, however, it’s time to get busy and knock some sense into his fellow Democrats.

There is a severe and growing shortage of political capital on Capitol Hill just now- a capitol shortage, if you will.   Husbanding that scarce capital will require making difficult choices in the next three weeks.  For better or worse, health reform is the central Democratic issue.  To mismanage it twice in fifteen years could give the entire Party a durable and, unfortunately, richly earned black eye.

Originally published on The Health Care Blog.