Health Care Update:

As the Christmas recess nears in Congress, the chatter over Health Care Reform in Washington has heated up again. President Obama has stated over and over again that he would like a bill to sign before Christmas. However, the events that have unfolded this week will likely stall the request of the President. If you’re anything like me, you probably keep hearing murmurs that the Health Care Bill is essentially dead. I’ve been asked a few times this week “is the bill really dead”? Well, I have to admit that since about August I have completely lost track of the status of this legislation and from the tone of most of the people I associate with on a daily basis, they have too. With that in mind, I will attempt to provide a synopsis on what is going on and try to determine what the future holds.

The raucus that you hear on t.v. and read on the internet (or newspaper) this week all has to do with Sen. Joe Lieberman (I-CT), although he's an Independent he is a key voter in the Democratic caucus. First of all, Sen. Lieberman came out a few weeks ago and said he was against any public option. So Senate Democrats took out the public option and replaced it with a private option with prices negotiated by the government. Senate Democrats need Lieberman's support so they were willing to negotiate with him. Part of the negotiations ended with Democratic leaders inserting a provision that would expand Medicare down to 55-year-olds. These provision, although not perfect in Liberal Democrats eyes, were enough to please most of them just so they could claim they passed a bill. However, a new week leads usually leads to a new stance from someone in Washington. This week that came from that rogue Independent Senator from Connecticut. Breaking news on Monday was that the Senate Democrats have agreed to kill the expansion of Medicare to 55-year-olds in order to please Sen. Joe Lieberman. This is very interesting given that from the outside, it seems that Lieberman does not really have any policy objection to expanding Medicare. He ran for Vice President in 2000 on a platform promising this and as recently as three months ago argued for a public option. The only reasonable conclusion one can assume is that he is trying to punish the Liberals who opposed him in his 2006 primary election. By denying liberals something they really wanted and giving them nothing in return, he made it clear that he is a force to be reckoned with in Washington. Another reason might be that Lieberman is carefully watching the political climate and is positioning himself for the 2012 election and might consider running as a Republican (just think opposite of Arlen Spector ala 2009). And voting for this version of the Health Care bill would without a doubt eliminate the remote possibility of him running as a Republican. Then there is always the question of where does Sen. Lieberman's "true" pay checks come from? It wouldn't be surprising to find out that he has major contributors in the insurance industry. In my opinion, his ultimate decision to abandon the Liberal Democrats on this issue probably has to do with a combination of all three possibilities.

This move by Lieberman puts the Liberal Democrats in a very difficult situation. With other moderate Democrats vacating on their votes as poll numbers continue to slip for support of this bill to all-time lows, the question has been asked if Harry Reid and Senate Democrats get this done by the President's arbitrary deadline of Christmas? I believe that the longer they spend talking about this (and we all know it's been a while), the more disillusioned Democrats will look, and the more frustrated the voters will get in an election year. Furthermore, and potentially and even bigger problem, is how does Harry Reid handle Lieberman? It is very unlikely Lieberman will be punished by his Liberal caucus because they will need his vote in the future; and on some issues he is arguably a vital member of the progressive movement. For example, his committee is about to pass a bill that would extend marriage benefits to same-sex partners of federal employees, something that many people who despise his stand on health care actively want. He has also taken a fairly progressive stand on climate change throughout the years.

So who is taking all the heat for the stall on this bill? Well, Howard Dean has taken some heat this week from the President for trying to intervene, but the real heat is directed towards Senate majority leader Harry Reid. The Liberal wing of the party is angry with Reid for giving in to Lieberman and getting nothing in return. (If you happened to flip by MSNBC this week, you’ll notice the frivolous attacks). Sen. Reid said he had no choice, but in reality he had other options. For example, I heard that he could have told Lieberman that if he filibustered the bill, it would be passed anyway using the budget reconciliation process and Lieberman could be stripped of his committee chairmanship for being an obstructionist.

Another option that Sen. Reid apparently could have done is the so-called "nuclear option," which the Republicans threatened to use in 2005 when Democrats were preparing to filibuster George Bush's court appointments.Pulling out the nuclear option is clearly hardball and something that would more than likely backfire in future sessions. The “nuclear option” works like this.

"After some debate on the health-insurance bill, Reid could recognize a Democratic senator who called for an immediate vote on the bill. Without a doubt some Republican would raise a point of order claiming that Senate rule 22 prohibits a vote unless 3/5 of the senators agree to cut off debate. The Senate's presiding officer, Vice President Joe Biden, would then ask the Senate Parliamentarian, Alan Frumin, whether the point was valid.Frumin would say it was, but Biden could overrule him and call for an immediate vote anyway. Some Republican would surely object to this ruling from the chair and ask the Senate to decide. If a simply majority of the Senate agreed with the ruling, the vote would take place. In other words, when the meaning of a Senate rule is in dispute, the presiding officer makes a decision, which the full Senate can sustain or overrule. Changing Senate rules requires 67 votes, so that is not going to happen any time soon".

It is highly probably that Reid didn't go this route because he was worried that in some future Republican-controlled Senate, the Democrats might want to filibuster something and don’t want the Republicans to have this ammunition in their back pocket as revenge.

So what is left of the Senate bill since the "public option" and expansion of Medicare are gone? What's left is a bill that requires every American not covered by Medicare, Medicaid, or the VA system to buy health insurance from a private company. It also provides about $900 billion in subsidies to “poor” people to help pay for it. (I can’t find what the definition of “poor” is under this bill). From the insurance companies' point of view, this is a good deal -- they really don't care who is paying the bill. It is estimated that about 30 million people will now be covered who weren't in the past. At its core, the bill is about the government buying health insurance from private companies for 30 million people who can't afford it now. As a result, this bill is the largest expansion of insurance coverage since the enactment of Medicare in 1965.

But the bill fails to include the two most important things that originally started this debate in the first place: cost containment and insurance company malpractice. For most people, they are pretty much stuck with whatever insurance their employer chooses to offer. In practice, they have no choice because getting individual insurance is prohibitively expensive except for the young and healthy. While insurance companies are now forbidden from refusing to accept people with preexisting conditions, they are not prohibited from dragging their feet and providing terrible service to people they don't want in the hopes they will get angry and leave. In most regions of the country one or two companies dominate the market and without competition, they will naturally exploit their monopoly or duopoly and continue to raise premiums. Nothing in this bill provides any incentives to stop this.

The second problem is that since people without insurance have no where to turn, insurance companies can try to weasel out of their obligations. For example, the bill says companies can't cancel policies except in a case of fraud. Suppose you were an insurance company lawyer, what would you do? Most likely you would have new applicants fill out forms asking them to list every doctor visit in their entire lives and also to authorize the company to ask for all the applicant's medical records. If someone got expensively sick, then the company would get all the medical records looking for some detail not mentioned on the application form and claim fraud. The insured person might be able to go to court, but litigation could take years and the result would be uncertain. In a world with competition, if a company did this too often, word would get around and it would lose business.But in the absence of competition, there is no real reason for a company to stop this practice.

And this brings us right back to the original debate from the summer: the infamous "public option" aka "government run" health care debate. However, as public opinion polls have suggested all Fall, most of the country believes this can be done without a "public option" (see here). A majority of American believe there is a way to keep the companies honest and that the answer is competition from the private sector. If the antitrust exemption for insurance companies were repealed and insurance companies were allowed to operate anywhere in the country, any region dominated by one or two companies with sky-high premiums would likely be seen as a business opportunity by some competitors. This was the essence of the Wyden-Bennett bill, but it didn't go anywhere despite the Republicans generally supporting the idea of competitive free markets. They could have gone along with the idea of health-case reform under the condition that it was a private-sector solution. But Democrats chose not to go this route.

No matter what the Senate bill ultimately looks like, it is going to have to be reconciled with the House bill. As of right now, the two bills differ in some key ways. The House bill gets its money by raising the income tax on high-income individuals. The Senate bill gets its money through an excise tax on gold-plated insurance plans. The lack of a public option in the Senate bill may not be an issue though as House majority leader Steny Hoyer (D-MD) has already said he is willing to jettison the public option and Medicare expansion to get a bill passed.

In the end, it is very unlikely that the Health Care Bill, as we knew it this summer, will ever come to fruition. The tea-parties and public opinion polls have swayed enough moderates in the Democratic caucus to ultimately kill the public option and anything associated with a public option. It will be very interesting to see who takes the blame for this within the Democratic Party. This was President Obama's prized initiative coming out of the election last year and within 12 months his big tent coalition in Washington has started to drift away. Will Obama's inexperience as a leader and inabilities to please his liberal base result in a backlash within his own party, driving his approval numbers even lower? Only time will tell....

O yeah, I almost forgot. Can you hear the snickers coming from the Hilary camp? I sure can...