Healthy debate

WASHINGTON-When the current congressional healthcare debate began, Senate Finance Committee Chairman Max Baucus gave reporters a bold prediction about the chances of passing a major medical overhaul this year: 100 percent. "It's a given," said the Democratic senator from Montana. "It's inevitable."

That boast was in early June. This is Baucus now: "We're not there yet. I'm trying the best I can to get there soon."

Against all expectations, the healthcare debate seems to be following what's become a summer pattern for major legislation: Heady confidence in June evolves into humility as the weeks progress. In 2007 it was supposed be the summer of immigration reform. In 2008 lawmakers attempted to deal with $4-a-gallon gasoline by tackling energy. But in both cases dramatic floor speeches and numerous made-for-television events wilted rhetoric in the humid Washington summers and resulted in zero significant legislation.

Now lawmakers are trying to untangle the nation's $2 trillion healthcare system and its nearly 50 million uninsured residents, and it's déjà vu all over again: The outlook for major healthcare legislation gets bleaker with each passing day.

Conservatives see reason for hope in this gradual thwarting of President Barack Obama and company's healthcare ambitions. They don't like the current system, but they like even less the Democrats' dizzying array of plans that add up to more governmental control of healthcare paid for by a deluge of new taxes.

But what's interesting is that they aren't the ones responsible for slowing down healthcare legislation. With Democrats enjoying the largest combined congressional majorities since the Carter administration, Republicans and conservatives are on the outside in this debate. It's Democrats and the industry groups that the White House has spent most of the year courting who are putting up the latest roadblocks to what is President Obama's top legislative priority.

Fissures in the Democratic coalition began to appear in June with the Congressional Budget Office's bombshell estimate that proposed changes came with a $1.6 trillion price tag. The CBO also predicted that one Democratic plan would cut the uninsured rolls by just 16 million, well under half of the total number of uninsured.

Soon even Democrats began asking how they could expand healthcare coverage without breaking the federal bank. The answer of more taxes in the midst of a troubled economy saw long-standing loyalists like the nation's labor unions balk at plans to tax employer-sponsored health benefits.

After Democrats received an earful at home during the July 4 recess, Baucus heard from the top Senate Democrat-Majority Leader Harry Reid-that taxes on health benefits were a nonstarter. Democrats began looking for other funding options and soon rested their eyes on the nation's wealthy-who may now face an income surtax of as much as 5.4 percent to pay for healthcare. This decision has killed the chances of a bipartisan agreement, meaning, if healthcare passes, Democrats will own full authorship. But many Democrats fear the repercussions of voting for higher taxes entering the 2010 mid-term elections.

Not surprisingly, the latest healthcare body blow came from 40 House Democrats in the fiscally conservative "blue-dog" coalition, whose "strong reservations about the process and direction" of the bill sent Democratic leaders scrambling.

This swift decline in the sense of inevitability jolted many in Washington because the Obama team had avoided many of the mistakes made by the Clinton administration during the last big Democratic push for a healthcare overhaul 15 years ago.

Ed Howard, president of the Alliance for Health Reform, recalled that President Clinton alienated many veteran lawmakers when he demanded they pass a 1,300-page healthcare bill largely written by a secretive task force headed by first lady Hillary Clinton. This time around, Obama's instructions to legislators ran 253 words long, allowing lawmakers to do the heavy lifting.

In addition, the large array of stakeholders tied to any healthcare changes has been better coddled by Obama's team. The economic realities behind ballooning healthcare costs have combined with the start of baby-boomer retirements to convince industry and other groups that changes are needed this time.

It was in this climate that a parade of interest groups lined up for their White House "I see the healthcare light" moments. Insurance executives, doctors, pharmaceuticals, labor groups, and hospitals joined in pledging to reduce industry-wide costs by 1.5 percent per year. Then drug manufacturers ($80 billion in discounts for Medicare medicines), hospitals ($155 billion in cuts from Medicare and Medicaid) and Wal-Mart (support for requiring employers to officer insurance) offered to help pay for and propel forward the healthcare initiatives. The bandwagon started getting full.

"If you are not at the table, then you will be on the menu," said Peter Nelson with the Center of the American Experiment, describing the stakeholder mindset as groups fought for pieces of a re-baked healthcare pie that accounts for nearly one-fifth of the nation's economy.

But then the momentum-killing details came out.

History is starting to repeat itself, according to University of Iowa professor Colin Gordon, author of Dead on Arrival: The Politics of Health in Twentieth Century America, who says the same sense of inevitability prevailed in the early stages of Clinton's healthcare efforts: "When you first talk about reform everyone is on board because it's a blank slate and anything is possible."

Adds Regina E. Herzlinger, a Harvard University healthcare expert: "It was the same with Hillary-care. Once people looked at the details they said, 'Stop the show.'"

The stakeholders' public smiles wane as each detail emerges and as congressional leaders say they are not bound by agreements between industry and the White House. On the same day House leaders last week unveiled their legislation, 31 business groups signed a letter to Congress warning that the proposed new taxes and mandates would cripple the economy.

The biggest battle lines: the insistence of Democrats to create a government-run insurance plan and the imposing of penalties on individuals who fail to buy and employers who refuse to offer health insurance.

The U.S. Chamber of Commerce and the National Federation of Independent Business oppose employer insurance mandates with tax penalties that could force businesses to shutter their doors-and at a time when the nation needs to be creating more jobs.

Meanwhile, the insurance industry supports such mandates-and the more than 40 million new customers it could bring-but balks at competing against a government-run insurance option.

Indeed, conservatives argue that such a public plan threatens the existence of private insurers by creating an unlevel playing field where the government acts as both competitor and industry regulator. Studies show as many as two-thirds of customers may lose their private insurance as companies try to compete with the government. "You can't beat an opposing team's quarterback and the referee at the same time," argues Jessica Waltman with the National Association of Health Underwriters.

In the end, this well-cultivated sense of healthcare industry togetherness is turning out to be only TV camera deep. "Now you have a bunch of people with one foot on the bandwagon and one foot off, and they are doing this little dance," says Iowa's Gordon.

While mired in legislative outsider status, Republicans, with an eye toward remaking Congress in the 2010 elections, are offering their own healthcare alternatives. The most-praised GOP plan is the Patients' Choice Act headlined by Rep. Paul Ryan, R-Wis.

This act tries to restructure the tax code and remove healthcare's current link to employment. It empowers individuals to shop for their own insurance at state health exchanges using tax credits of $2,300 per individual and $5,700 per family. Insurance companies would compete with one another for individual customers, who can carry their insurance from job to job.

"The primary decisionmakers in our system are the patients and doctors while, under Obama, it would be the government bureaucrats," Ryan told me.

But such bills will die in the current Congress. And, despite recent roadblocks, Dean Rosen, a former Republican healthcare advisor, believes that the chances of Democrats passing some type of healthcare legislation are still good. "Failure is not an option given how far out the president and congressional leaders have gone," he said.

This ultimately may mean passage of a watered-down version that allows Democrats to declare victory. Gordon predicts Democrats will give up on a public plan, impose light insurance regulations, and create soft insurance mandates. But there are no guarantees in the difficult calculus of healthcare reform where punting on the public option may win back conservative Democrats but alienate the more liberal wing of the party.

Democrats last week renewed their pledge to pass something before August. Former House Speaker Newt Gingrich says that Speaker Nancy Pelosi is more likely to muscle a bill through the House, where Democrats vowed to start voting on the bill in committee just two days after its unveiling. This $1.2 trillion House plan expands government programs like Medicaid and provides insurance subsidies to individuals making as much as $43,000 a year. But Democrats admit that by its driving the top federal tax rate to above 52 percent-higher than total tax rates in France, Canada and Italy-the plan will be a tougher sale in the Senate.

As more Americans look at the cost side of the healthcare equation, Gingrich predicts a dramatic response: "If they continue on this road of tax increases, I think [Democrats] will end up with a bad 2010, and Obama may end up being a one-term president. They are playing with fire."