What are the Obama Administration’s Plans for Healthcare?

The United States spends approximately $2.2 trillion annually on healthcare, equal to 16% of the US gross domestic product. Without government intervention, this figure is expected to climb significantly over the next decade, in tandem with America’s elderly population.

Reforming healthcare often took center stage during the presidential campaign. Having won the election, President Obama continues to tout healthcare reform as one of the top issues he wants addressed his first year in office. To emphasize his administration’s commitment to this goal, he has established the White House Office of Health Reform. Whoever heads this new department will work with the president and Congressional leaders to draft comprehensive healthcare legislation.

President Obama has said he wants a plan to overhaul the nation’s healthcare system moving through Congress by spring 2009, but complications in appointing someone to head the new department, as well as the Department of Health and Human Services, are likely to delay this ambitious timeline.

Public Insurance Plan

One of the central components of President Obama’s healthcare initiatives is the creation of a government-run insurance program modeled after Medicare. The intent is to give healthcare consumers—particularly the nearly 47 million (and growing) who lack insurance—an alternative to commercial insurance. Support for the president’s plan breaks largely along party lines, with most Democrats in favor and most Republicans opposed.

Supporters of the plan say forcing private insurers to compete with a public plan for subscribers would lower healthcare costs, and they emphasize its humanitarian benefits. Opponents object primarily to how President Obama has said he would pay for the plan: by rolling back tax cuts enacted under the previous administration on those earning more than $250,000 annually, retaining estate tax provisions on inheritances greater than $3.5 million, and imposing a fee on medium and large employers who do not provide healthcare coverage.

President Obama recently said, “If we want to overcome our economic challenges, we must also finally address our healthcare challenge.” He believes developing a plan that covers the uninsured and emphasizes prevention will ultimately drive down healthcare costs and is an essential component of remedying the country’s economic crisis.

A consortium of agencies, including the American Cancer Society, the American Medical Association, Families USA, Pharmaceutical Research and Manufacturers of America, Regence BlueCross Blue Shield, and Service Employees International Union, support the president’s desire to reform the nation’s healthcare system. In January 2009, they released a joint statement that said, “In order to fix the ailing economy, the nation needs health care reform that addresses the related problems of healthcare costs and people losing health coverage.”

In addition to creating an affordable public plan, the following are key components of the healthcare agenda President Obama advocates:

• Ensure that every child has healthcare coverage

• Require private insurers to cover preexisting conditions

• Offer tax credits to small businesses that provide health insurance to employees

• Establish a government fund that covers some of the catastrophic health costs of employees whose employers agree to reduce healthcare premiums

• Prohibit insurers from overcharging doctors for malpractice insurance

• Develop strategies to reduce preventable medical errors

• Require large employers who do not offer coverage to contribute to the cost of an employee’s healthcare

• Establish a National Health Insurance Exchange that offers private insurance options and a public plan

• Offer those who need it a tax credit on their insurance premiums

• Computerize the nation’s healthcare records

• Expand the number of providers in rural areas

Senator Edward Kennedy, a Democrat from Massachusetts, has long been a proponent of universal healthcare and is working with other legislators and administration officials to craft President Obama’s healthcare plan. Although the plan is expected to offer coverage to nearly all Americans, it is not considered a “universal” healthcare initiative because it does not create a one-payer government system. People will retain the option of subscribing to private insurance plans.

Reducing Healthcare’s Financial Burden

Families are not the only ones bearing the weight of a bad economy and high healthcare prices. Businesses currently spend a significant chunk of revenue on employee healthcare. Starbucks chairman Howard Schultz once said his company pays more for healthcare than it does for coffee beans. Despite the high cost of care in the United States, which spends more on healthcare per capita than any other country, it ranks lower than many other industrialized nations in life expectancy and has higher rates of infant mortality, obesity, heart disease, and diabetes. The goal is to find ways to reduce costs without compromising care.

Widespread preventive care. Chronic conditions consume a large chunk of the healthcare pie, and the administration says one way that it hopes to reduce healthcare costs is by promoting measures to improve public health. These include requiring coverage for preventive services, like cancer screenings, and encouraging lifestyle changes, such as smoking cessation and weight loss. Addressing some of these health concerns early—before they evolve into chronic conditions—has the potential to save billions down the road.

Comparative review and research coordination. The recently passed stimulus bill includes $1.1 billion to establish a 15-employee council under the auspices of the US Department of Health and Human Services to perform comparative studies, outlining the risks, benefits, and cost-effectiveness of available treatments for specific conditions. This provision has sparked concerns that the government will use findings to dictate treatment. The Obama administration denies this, pointing out that other US government agencies already perform this function on a smaller scale. The panel would also coordinate government-funded research initiatives in an effort to reduce costs.

Eliminating subsidies to Medicare Advantage. Reforming the Centers for Medicare and Medicaid Services is another goal of the new administration. President Obama previously stated his intent to eliminate government subsidies to Medicare Advantage plans as a way to reduce costs. These are private health insurance plans that provide healthcare for Medicare enrollees. With a shrinking number of physicians willing to accept new Medicare patients, some legislators expressed concern that curtailing the program could hamper access to care for Medicare subscribers in rural areas, where physicians are scarce. The Obama administration says it plans to implement other measures to ensure that Medicare patients in rural areas will still have access to quality care.

Revamping the FDA. Congress approved a measure in September 2008 that would increase funding for the US Food and Drug Administration (FDA) by nearly $300 million. In past years, budget shortfalls have left the FDA understaffed, delaying the review of applications for new drugs or new indications for approved drugs. Several scientists at the FDA have complained to the Obama administration about poor management at the agency. President Obama’s transition team met several times with officials from the department and stated their intent to implement reforms at the beleaguered agency.

Creating medical homes. Obama’s healthcare advisers have emphasized the need to improve care and reduce costs for patients with chronic conditions through disease management and medical homes. The Association of American Medical Colleges describes a medical home as a “concept or model of care delivery that includes an ongoing relationship between a provider and patient, around-the-clock access to medical consultations, respect for a patient’s cultural and religious beliefs, and a comprehensive approach to care and coordination of care through providers and community services.” A handful of states have already enacted legislation to fund medical homes for children with chronic conditions.

Can President Obama Do It?

A comprehensive plan to reform healthcare and expand coverage for the uninsured will cost money—a lot of it. With today’s economic situation and a government severely in debt, it is not clear how much the new president will be able to accomplish or when. President Obama has already signed legislation expanding the State Children’s Health Insurance Program (SCHIP) to cover an additional 4 million children (still leaving more than 5 million children without insurance). In addition, his economic stimulus package allots billions for healthcare initiatives. The stimulus bill will subsidize 65% of COBRA premiums for up to 9 months for workers laid off between September 1, 2008, and December 31, 2009, and provides money to computerize health records. The stimulus package also provides $87 billion in Medicaid funding, which comes at a crucial time as squeezed states have begun trimming Medicaid budgets even as demand for Medicaid services increases.

Many congressional Republicans fought to have these provisions stripped from the bill, foreshadowing how contentious an issue healthcare reform is likely to be. As the president moves forward with his healthcare agenda, you can expect to see a major political tussle between those in Congress who feel the cost of providing healthcare coverage for uninsured Americans is more than the government can bear and those who feel it is an essential step toward economic recovery. In the middle are an increasing number of people without adequate healthcare coverage hoping that healthcare reform does not once again fall to the wayside, as it has under previous administrations.