President Barack Obama was right Monday when he said "inaction is not an option" when it comes to reforming the nation's health care system. Health care inflation outpaces other consumer prices, and the United States outspends every other developed country on health care with inferior outcomes. The current system is unsustainable. Fewer employers will sponsor plans, fewer Americans will have health insurance, and the medical care that is available will be increasingly expensive.
But that simple truth is easily lost as Congress searches for answers amid entrenched interests and competing political agendas. The president, eager to maintain momentum, was emphatic reform could occur before Congress' August recess. But something this consequential must be done right. It must provide universal coverage without undermining employer-sponsored health insurance, it must contain health costs and it must not add to the deficit.
Estimates are that it will cost between $1 trillion and $1.5 trillion over 10 years to cover the uninsured. Obama would like to see a big chunk of the money come from Medicare and Medicaid savings. But even with those cuts, at least another $320 billion will have to be covered with new revenues.
The most reasonable plan that has emerged so far for a new levy would tax so-called "gold-plated" health insurance policies. The current exemption for health insurance premiums provides a lucrative loophole for upper income people whose employers fork over large sums for top-flight medical insurance.
A proposal floated by Senate Finance Committee Chairman Max Baucus, D-Mont., would raise $240 billion over 10 years by capping the annual tax-free benefit at $20,300 in premiums for a family and $8,300 for an individual — far above the average premiums in 2008 of $12,680 for a family and $4,704 for an individual.
Others have proposed broadening the 1.45 percent Medicare tax to capital gains and other sources of passive income. And House Democrats have suggested a tax on wealthy Americans, starting with couples who earn $350,000 or more, to bring in about $550 billion. But these potential revenues could be needed to fill other fiscal holes down the road.
The new system also must include a play-or-pay provision that charges employers who fail to provide reasonable coverage on their own.
Business lobbyists, particularly for the labor-intensive retail sector, object to any employer mandate. But even Wal-Mart, notoriously resistant to government mandates on health care, has written to Obama saying that all large businesses should be required to contribute to employee health coverage. The letter said the company understands that legislation imposing employer mandates would also promise reductions in health-care cost increases. That part needs to be delivered too.
Indeed, the entire talk of hard cash to cover costs is overshadowing a far tougher issue: The need to change the culture of how U.S. medicine is practiced. The current fee-for-service model encourages expensive testing and intensive medical interventions that are redundant and unnecessary and will become even more burdensome as baby boomers age.
Hospitals and pharmaceutical firms have stepped up in recent days to pledge they can squeeze a combined $235 billion in efficiencies. There are proposals to eliminate waste and fraud and move to electronic record-keeping.
But this doesn't tackle the fundamental flaw that as long as doctors are paid based solely on services rendered, they will inevitably order more services. Such incentives have contributed to gross disparities in different parts of the country in medical costs, from an average $9,000 annual Medicare bill in St. Petersburg to $16,000 in Miami.
It was inevitable that as Congress tackled the details of health care reform, political skirmishes would break out. But no matter how difficult the process, it cannot be allowed to fail. The opportunity is ripe and another chance may not come again within this president's administration. Congress needs to truly address the systemic problems. Just nibbling around the edges of reform is not good enough.