The Policy Window

Health Reform Under Obama > The Policy Window (last updated 11.14.16)

Momentum for health care reform appears stronger than it was at the equivalent time period under the Clinton administration:

• Senator Kennedy said on March 5 “he had witnessed many efforts to overhaul the health care system. But, he said, ‘they haven’t been the kind of serious effort that I think we’re seeing right now…This time we will not fail.'”
• The House Ways and Means Committee agreed in a June 9 meeting with President Obama to aim for a timetable in which final passage of the bill would take place in October.
• Ezra Klein on 6-11 put chances for passage of health reform in 2009 at 70% and passage of reform that includes a public plan at 50%. By 6-19, he acknowledged that health reform is “in danger right now.”

Why the Policy for Health Reform Opened under Obama

A Filibuster-Proof Senate

The ACA was enacted on a strict party-line vote, with the Senate version passing 60-0 in late 2009. The 60th vote did not arise until July 2009, when a recount effort in Minnesota reversed the initial result of the Senate race there, resulting in Democrat Al Franken taking the seat.

• An academic study subsequently concluded: “Noncitizen votes likely gave Senate Democrats the pivotal 60th vote needed to overcome filibusters in order to pass health care reform and other Obama administration priorities in the 111th Congress.”
• However, this study also has been criticized for methodological errors that grossly inflated the incidence of non-citizen voting.

Why the Policy Window Closed

President Obama has strongly argued that health reform must be accomplished in 2009, else it may not be possible later. It remains to be seen whether this strategy is successful. The following lists factors that have contributed to opposition against his plan.

National Efforts

Presidential Failure

Poor Communication. CMS, the chief agency responsible for managing health reform, had not had a regular Senate-confirmed administrator since October 2006, when Dr. Mark B. McClellan stepped down. Its chief operating officer, Charlene M. Frizzera, has been the acting administrator since January.

Public Skepticism. Clinton pollster Stan Greenberg has weighed in on the eerie parallels between public opinion today and during the debate over the Clinton plan. “Then and now, more people favor the president’s health care plan than oppose it, but the supporters make up less than a majority…on most of these questions that the desire for change and support for reform was slightly stronger 16 years ago.”  The public cares more about holding down health costs than expanding coverage, but appears increasingly dubious that reform can be achieved without increasing their own taxes or health spending.

Partisan Division

Republican Opposition. According to David Broder: “even the optimists in the White House acknowledge privately that it will be hard to collect more than a handful of GOP votes in the House, where most of their efforts focus on negotiating agreements between liberal and conservative Democrats.”

Budget Reconciliation. Senate Democrats want to use budget reconciliation as a fallback option in the event Republicans seek to block health reform. The special rules permit under reconciliation would permit the bill to be enacted with a majority vote instead of the 60 votes needed to override a filibuster.  This would turn health care reform into a blatantly partisan battle.  Enthusiasm for this option seemed to dwindle over time: for example, Senate Budget Committee chair Kent Conrad in mid-June expressed skepticism that reconciliation was a viable strategy: “Reconciliation was never designed to write substantive legislation. It was designed solely for deficit reduction. The whole idea was you would change numbers, not policy. You would change numbers on the revenue side of the equation and the spending side of the equation.

And so, the way it works, under current rules, if you’re in reconciliation, you have to be deficit neutral over five years. Under the budget resolution, health care can be deficit neutral under 10 years. That’s a big difference.

Two, under reconciliation, you’re subjected to the Byrd rule. The Byrd rule says that anything that doesn’t cost money or save money, or that only costs money or saves money in a way that’s incidental to the policy, are subject to strike. The result, for instance, is that all the insurance market provisions are subject to strike. All the wellness and prevention provisions are subject to strike. The Senate parliamentarian said to us that if you try to write substantive health reform in reconciliation, you’ll end up with Swiss cheese.”

Concern Over Affordability

Colin Powell, who endorsed Obama over McCain in the 2008 election, has expressed concerns over Obama’s ambitious agenda, saying “we can’t pay for it all.”

Lack of Consensus On Financing

Insufficient Short-Term Savings from Health Reform. “Reformers argue that up to 30 percent of that spending does little to improve health. If it were eliminated, the savings could be used to cover the 46 million Americans who lack insurance. The problem is that nobody knows exactly how to eliminate that spending.” CBO director Elmendorf has warned that many cost-saving steps “might not yield substantial budget savings or reductions in national health spending within a 10-year window.” “Supporters of the health insurance overhaul are concerned that it could stall if voters doubt that Obama’s plan will curb costs while maintaining current levels of care. They are pressuring the CBO to include long-term — and somewhat speculative — savings in its estimate of the health care bill.”

Opposition to a Public Plan

Senator Baucus thinks that strategically, it was a mistake to rule out a fully government-run health system (single-payer plan) because doing so “alienated a large vocal constituency” and left the Obama proposal of a competing public plan the most liberal position under discussion.

Overly Ambitious Policy Agenda

Colin Powell, though he endorsed Obama over McCain in the 2008 election, expressed concerns in early July over Obama’s ambitious policy agenda, saying “you can’t have so many things on the table that you can’t absorb it all.”

Fears of Government Overreach

Federal Deficits.  NYT published an analysis of why the annual surplus of $800 billion projected by CBO in 2001 for the years 2009-2012 had turned into an average annual deficit of $1.2 trillion. “The answers, in descending order, are the downturn in the economy (37 percent of the change), the policies passed by George W. Bush (33 percent), the extension of policies passed by George W. Bush (20 percent), the stimulus bill (7 percent), and the rest of Barack Obama‘s agenda (3 percent).  [Chart]

Auto Industry Bailout. Since December 2008, the federal government has lent G.M. and Chrysler more than $30 billion, and has lined up another $30 billion to help G.M. emerge from bankruptcy. “In March 2009, President Obama rejected both companies’ plans for reorganization. He forced out G.M.’s chairman, Rick Wagoner, and ordered it to prepare for a radically smaller future. Chrysler, which the government concluded was no longer viable on its own, was directed to quickly complete a partnership agreement with Chrysler.” On the one hand, “the speed with which Chrysler’s restructuring plan swept through the court system was an important victory for the Obama administration.” “When Chrysler filed for bankruptcy on April 30, President Obama promised its reorganization would be “efficient” and “controlled.””  On the other hand, bondholders “have argued that they are receiving less compensation for their holdings — 29 cents on the dollar — than unsecured creditors like the United Automobile Workers, upsetting bankruptcy law. They have also argued that the government overstepped the bounds of a federal bailout by giving Chrysler money meant for banks.”  The Supreme Court declined to block the sale, but one bondholder representative, Richard Mourdock (treasurer for the State of Indiana), said “The future ramifications of the court’s decision on the capital markets remain to be seen.”   Obama’s plans for the auto industry are, in the words House Republican whip Eric Cantor (VA), “almost like looking at Putin’s Russia.”  Moreover, G.M. was not expected to become a public company again until 2010.  See Did The GM Bailout Kill Healthcare Reform?
.

Restrictions on Executive Compensation.

• “On Feb. 4, the Obama administration announced a proposal to set a $500,000 cap on cash compensation for the most senior executives at troubled companies getting “exceptional assistance,” and restrictions on cashing in stock incentives.”
• Two weeks later, “Congress approved a $787 billion economic stimulus bill that included tougher restrictions.  That provision, inserted by Senator Christopher J. Dodd, the Connecticut Democrat, over the objections of the Obama administration, instructed Treasury to come up with rules for the five top officers and the 20 highest-paid executives at the largest of the troubled companies. The legislation also barred top executives from receiving bonuses exceeding one-third of their annual pay. Moreover, any bonus would have to be in the form of long-term incentives, like restricted stock, which could not be cashed out until the company repaid the government.
• In early June, the Treasury Department “appointed a well-known Washington lawyer, Kenneth R. Feinberg, to oversee the compensation of employees at the seven companies — the American International Group, Citigroup, Bank of America, General Motors, Chrysler and the financing arms of the two automakers. He will have broad discretion to set the salaries and bonuses for their five most senior executives and their 20 most highly paid employees…and will also have the right to review the compensation for the 100 most highly paid employees and any other executives.”

Cap-and-Trade. “CBO estimates that households in the lowest income quintile would see an average net benefit of about $40, while households in the highest income quintile would see a net cost of approximately $245 (see Table 2). Households in the second lowest quintile would see added costs of about $40 on average, those in the middle quintile would see an increase in costs of about $235, and those in the fourth quintile would pay about an additional $340 per year. Overall, costs for households would average 0.2 percent of their average after-tax income.”

State-Level Efforts