Room For Healthcare Reform in President?s Budget: Analysts

Those who thought Obama’s health care reform plans would have to wait until the economy recovers should think again. President Barack Obama made it clear during his news conference Tuesday that health care reform will begin with his 2010 budget, despite earlier beliefs by some health care policy experts that a steep deficit and floundering economy would delay the effort.

Obama said tackling entitlement programs like Medicare and the rising cost of health are necessary to help grow the economy in the long term and it can’t wait until the economy stabilizes.

“I’ve emphasized repeatedly what I expect out of this budget,” Obama told reporters during the prime time news conference. “I expect that there’s serious efforts at health care reform, and that we are driving down costs for families and businesses, and ultimately for the federal and state governments that are going to be broke if we continue on the current path.”

Including his initiatives in the budget would make it easier for them to become law. But industry experts expect Obama’s health reform proposals to face a tough fight in both the House and Senate to get a bipartisan law.  Still, there are some proposals both Democrats and Republicans agree on that could set the stage for significant health care reform.  

Changing how health care benefits are taxed is one example, said Robert Moffitt, director of the Center for Health Policy Studies at the Heritage Foundation. Currently, employees aren’t taxed on the health care benefits they receive through their employers while individuals pay with after tax dollars. Moffitt expects that Sen. Max Baucus’ (D-Mont.) proposal to tax employer benefits above a designated value would get Republican support and create a revenue resource to help low income American’s afford coverage.

“There’s a huge consensus among economists that the health tax treatment is unfair,” Moffitt said. “By putting a cap on the value of benefits, regardless of where you got it, we could use that revenue to expand coverage to people who don’t have it today. “

Two other areas Moffitt thinks both parties could agree is providing federal funding to promote state experimentation in financing the health care delivery system and bundling payments to hospitals for the treatment of certain illnesses such as heart attacks or strokes.  Moffitt said Obama included the payment bundling proposal in his budget, but the President didn’t provide details on how to achieve it.

“The President’s objective is exactly right on this, assuming they can work out the details to get a performance based payment system,” Moffitt said.

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Despite concern that Democrats believe Obama’s health care reform goals are too expensive, the House Budget Committee on Wednesday released a budget outline that backs Obama’s bid to reform the $2.4 trillion health care system.  And Senate Budget Committee Chairman Kent Conrad of North Dakota said his budget makes room for Obama’s hope to deliver health care to the uninsured without adding to the deficit in the long term.

“The reality is we are going to have to make adjustments to the President’s budget if we want to keep the deficit on a downward trajectory. But despite these new numbers, we will adopt a budget resolution that reflects the key priorities of the President and the nation of reducing our dependence on foreign energy, striving for excellence in education, reforming our health care system, and cutting the deficit by more than half over the next five years,” Conrad said in a press release.  

In another sign that the industry is preparing for reform, the American Health Insurance Plans and the Blue Cross Blue Shield Association told senators in a letter Tuesday that they would phase out the practice of varying premiums based on health status in the individual market if all Americans are required to get and maintain coverage.

“They are trying to protect their interests and trying very hard to not have a public plan,” said Lauren Coste, a Fitch Ratings director of corporate finance.

Though both parties support universal coverage, which health care analysts say would significantly curb medical bad debt, the parties differ on how to best achieve a bipartisan plan. Democrats, however, have the power to make it reality if they use the budget reconciliation process which requires a simple majority vote to avoid a filibuster.

“I think we have a more favorable environment for reform than perhaps forever, but there are still a lot of hurdles to overcome,” Coste said.  “The key factor will be will they seek to use the budget reconciliation process,” on such an important issue, Coste said.  She said Republicans used the budget reconciliation process to get President George W. Bush’s tax cuts passed.   

Kaulkin Ginsberg Analyst Michael Klozotsky maintains that ARM companies have less to fear from comprehensive coverage than they think.  But he advises ARM professionals who operate in the health care market to cooperate and partner with their provider clients who have more clout with legislators.

“At the end of the day, providers and their ARM partners share many common goals, so a united front will most likely bring about the greatest success in protecting business interests,” Klozotsky said.