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Obama Places Health Care Expansion, Reform at Core of Budget Proposal

February 26, 2009 at 6:35 PM EDT
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President Obama's $3.5 trillion budget plan sets aside billions of dollars to overhaul the U.S. health care system and provide coverage to more Americans. Susan Dentzer of Health Affairs and NPR's Julie Rovner examine the plan's specifics and its potential impact.
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JUDY WOODRUFF: And take three on the budget, more about the president’s plans for health care. Ray Suarez has the story for our Health Unit, a partnership with the Robert Wood Johnson Foundation.

RAY SUAREZ: The budget plan calls for a new reserve fund for expanding health care coverage totaling more than $600 billion over 10 years. To walk us through the proposal and how it might be paid for, we turn to two women who’ve covered the health care wars over the years.

Susan Dentzer is a familiar face to our viewers. She’s now editor in chief of the journal Health Affairs and an occasional health analyst for the NewsHour. And Julie Rovner has chronicled this subject for National Public Radio.

And, Julie, this reserve fund, it’s a mixture of saving and new spending. First, where does the president want to expand spending, expand programs? What’s the new money for?

JULIE ROVNER, National Public Radio: Well, the new money is really to start to cover the 46 million Americans who don’t have health coverage now. And I think the tension has really been over the last couple of years, do you start by cutting costs or bending the curve, as Peter Orszag likes to say, what we were just talking about in the last segment, about health care costs going up so much faster than inflation, which is really the long-term budget problem?

Or do you start by getting these people who don’t have health insurance coverage? And, obviously, the two things are related. The faster health care costs go up, the more people don’t have coverage.

But people who don’t have coverage do get health care. They go to the emergency room. They wait until they get very sick because they get care. So there’s a concern that, if you don’t get those people covered or into the pool, they are going to have trouble reducing health care costs, so there’s a lot of concern about doing that at the same time.

But as you bring those people in, it’s going to cost money upfront before you start to realize those savings that people have been talking about from changing the way that health care is delivered. Thus, you need money upfront. That’s the idea of this reserve fund.

Cuts in existing programs

Susan Dentzer
Editor, Health Affairs
(Obama's) campaign universal coverage plan was priced out by independent analysts at about $1.1 trillion a year, and even that would only cover about half the uninsured. This is half, again, as much as that, $630 billion.

RAY SUAREZ: And, Susan Dentzer, a lot of the assumptions built into this plan include taking already existing programs and finding ways to spend less money on them, right?

SUSAN DENTZER, Editor, Health Affairs: That's exactly right. But, Ray, I think the really important point here is, as the president said the other night, this is a down payment to create a universal coverage fund, but it's also a down payment that is delayed.

As Peter Orszag said, the tax increases on upper-income taxpayers, which are about half of the reserve funding for this plan -- it's about $318 billion out of the $634 billion -- comes from tax increases on upper-income taxpayers. Those don't kick in until 2011. The money doesn't really start to add up to much until 2012. So it's a down payment that only starts to create money to expand coverage in a meaningful sense in 2012.

And it's also important to say, when Senator Obama was running for president, his campaign universal coverage plan was priced out by independent analysts at about $1.1 trillion a year, and even that would only cover about half the uninsured. This is half, again, as much as that, $630 billion.

So what is actually being put forward here is a plan to spend some money, starting a couple of years from now, to begin to cover some of the uninsured. And that's really the reality that has been created by the current fiscal situation we're in.

RAY SUAREZ: Even what the administration is calling a down payment rests on some assumptions about where they can save money. Are they addressing Medicare? Are they addressing the way people get their health care paid for now?

SUSAN DENTZER: They're addressing in particular a couple of pieces of Medicare. One is the so-called Medicare Advantage plans, which are the private fee-for-service plans, the preferred provider organizations. It's a way many people get comprehensive health care paid for under Medicare.

There's been a huge dispute for the last several years about whether those plans are overpaid for what they actually spend to provide coverage. This is a verdict, in the view of the Obama administration, that the answer is yes and that, by creating a whole, new system to decide how to pay those plans, a competitive bidding system, you could get $175 billion over the next 10 years. So that's significant.

There's also a piece on hospitals, $38 billion over five years, basically saying to hospitals, many of you readmit people who've been in the hospital who maybe don't need to be readmitted again. We're going to pay you a different way to incentivize you not to put people in the hospital again. So changes like that that would add up to some additional contributions toward this universal fund.

Stakeholder reactions

Julie Rovner
National Public Radio
I think everybody really in the health care industry is anxious to do something about the health care mess. Employers, even small employers [...] everybody really knows what a mess things are and they really want things to be fixed.

RAY SUAREZ: Julie, health care is one of those issues where everybody considers themselves a stakeholder at some level. Have you already started to hear from people who like or don't like what's in the plan?

JULIE ROVNER: Yes, I spent today on the phone talking to people. And, actually, what surprised me -- compared to 15 years ago, when the Clinton plan was sort of in its, you know, birth stages, I think already, when the Clintons came out of the box, they started out by kind of pitting themselves against the drug industry and the insurance industry, and to some extent, you know, the doctors and the hospitals, although less so.

I think that's not the case this time. I think everybody really in the health care industry is anxious to do something about the health care mess. Employers, even small employers who were worried last time that they might be required to cover their workers, everybody really knows what a mess things are and they really want things to be fixed.

And even the insurance industry which as, you know, Susan mentioned is concerned about these cuts to the Medicare Advantage program, the hospital industry, which is a little bit concerned about some of these, you know, readmission cuts that are proposed here, everybody says, yes, we're going to quibble about the details, but we still want to be at the table. We really need to talk about this; we really need to do something; it's really time to sit down and negotiate this out.

I'm really kind of surprised at the reaction that everybody is having, which is that we must move forward. This is a good opening bid, and it's really time for Congress to get down to work.

Stocks in drug companies lower

Susan Dentzer
Editor, Health Affairs
Most of the major decisions about how to structure health care reform are not in this package [...] The administration wants to move toward universal coverage, et cetera, but it doesn't give us a roadmap of how to get there.

RAY SUAREZ: So nobody is bailed out, but drug stocks dropped today right after the announcement came out. Does that signal an assumption that the administration is going to find a way to spend less money on drugs, hence, fewer profits?

SUSAN DENTZER: No question about it. Another piece of the proposal is actually to compel drug companies to give lower prices to Medicaid for drugs that are purchased through the Medicaid program. Also, there's a proposal to create the generic equivalent of a class of interventions known as biologics, which also could have an impact on some of the manufactures of those biologically based drugs. So, yes, very much so.

Is it anything that anybody wasn't expecting from this administration? I don't think so, so it's a little bit of a surprise that there's the reaction on Wall Street.

The important thing, though, I think to also say is that most of the major decisions about how to structure health care reform are not in this package. The budget does enunciate some principles. The administration wants to move toward universal coverage, et cetera, but it doesn't give us a roadmap of how to get there.

And essentially what that means is that many of these decisions now are left to the Congress. They're left for bills to be marked up over the next several months in the Congress.

Congressional leaders ready to act

Julie Rovner
National Public Radio
Remember, candidate Obama was the one Democratic candidate who stood out from the rest, did not have a mandate to cover everyone. He actually held back; the other major candidates did require everyone to have coverage.

RAY SUAREZ: Leaves it to the Congress, Julie, and notably doesn't venture a guess on how many of that 45 million, 46 million uncovered would get covered through a plan like this?

JULIE ROVNER: Although, rather significantly, it does say that Congress should aim for universality. And I believe the words are, you know, put the country on a path towards covering everyone. And that -- remember, candidate Obama was the one Democratic candidate who stood out from the rest, did not have a mandate to cover everyone. He actually held back; the other major candidates did require everyone to have coverage.

So this is actually a nod by the president towards what most of the leaders in Congress want, which is some sort of mandate, which is a requirement that everyone have coverage.

So I think there's sort of kind of an assent here towards what the Democratic leaders in Congress want, which is more of a push towards universal coverage than perhaps the president himself had as a candidate.

But, again, that will probably cost more; that may be more controversial. So that's something that is going to have to be balanced.

But I think the most important thing that we're seeing here is that the president has said to Congress: You go ahead. You fill in the details. Here are my guidelines. Here's what I would like to see in a final bill.

And I think another difference between now and 15 years ago is that you really have leaders on Congress who have -- who are not only poised to do this, but who have been laying the groundwork, really, for the past year or so, who are getting ready to do this, Max Baucus at the Senate Finance Committee, Senator Edward Kennedy, despite his brain tumor, has been, you know, holding meetings from afar and bringing together stakeholders, Henry Waxman, the new chairman of the House Energy and Commerce Committee.

So there's really a lot of work that's already taken place on Capitol Hill in anticipation of this.

RAY SUAREZ: Julie Rovner, Susan Dentzer, great to see you both. Thanks.

SUSAN DENTZER: Thanks, Ray.