Obama healthcare push: right issue, tough choices

Kevin Lamarque/Reuters
President Barack Obama spoke about healthcare last week during a meeting with Senate Democrats at the White House. At right is Sen. Chris Dodd of Connecticut.

President Obama's push for Congress to deliver major healthcare reforms by this fall is ambitious, not just politically but economically as well.

Mr. Obama argues that passing the legislation by October is vital to help put the economy on a solid growth track. In outlining his goals recently, the president said that "whatever plan we design" must bring costs down and give all Americans access to affordable care.

Reaching that objective will require more than a snap of presidential fingers, however.

Mr. Obama is focused on the right challenge, according to experts on the economics of medical care. Medical costs continue to rise faster than overall inflation, and the cost of healthcare is forecast to consume a growing share of US income in the decades ahead. Making health insurance available to more Americans will be very hard without cost control.

The hot months of summer will test whether Obama and top congressional leaders can thread some needles on policy. For example, Obama pledges to preserve Americans' ability to choose among doctors and health-insurance plans, but Republicans in Congress worry that an important tool for cost control – private-sector competition and consumer choice – will be short-changed in this summer's dealmaking.

Many Democrats argue that Americans should be offered a new government insurance plan. But where they see the potential to put downward pressure on prices, conservatives see a Trojan horse that could result in a gradual government takeover of the healthcare system.

Already, government programs including Medicare and Medicaid account for about half of health spending in the US.

"The administration has yet to answer this fundamental question: How will it pay for its multitrillion, government-run health care plan?" House Minority Leader John Boehner (R) of Ohio warned last month.
The choices ahead are difficult, and go beyond differences of political ideology.

Healthcare spending could rise from accounting for 15 percent of gross domestic product today to 29 percent in 2040, according to one recent study by Robert Fogel, a University of Chicago economist.

He predicts that American lifespans will keep lengthening, but that the result will be growing demand for medical care and technology.

This scenario hints at the economic challenges policymakers face:

•If more healthcare is what many consumers want, should the government provide it – even if it means raising taxes?

•If the government increasingly runs or regulates insurance coverage, how will thorny "rationing" choices be made? What services will be considered basic benefits?

•If Republican had their way and emphasized consumer choice and competition, that rationing choice would emerge in a different guise. If consumers with the most money get the most care, how would government ensure that the poorest consumers don't get left behind?

Without some new healthcare policy action, budget forecasters say the government faces a highly risky buildup of public debt.

"Healthcare costs are still growing faster than the economy, and the nation’s population continues to age," the US Government Accountability Office said in a recent report. "Absent policy actions aimed at reforming the key drivers of our structural deficits – health spending and Social Security – the federal government faces unsustainable growth in debt."

Obama's Council of Economic Advisers pitches the benefits of healthcare reform not only for fiscal reasons, but also for the broader economy.

Slowing the growth of healthcare costs, the council says, could effectively make the real income of the typical family of four $2,600 higher in 2020 than it otherwise would have been and $10,000 higher in 2030.

– Guest blogger Mark Trumbull is a Monitor staff writer.

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