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Where Will the Money Come From?

And who will be left out of health reform?
May 15, 2009

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This week, The Economist zoomed in on an issue that the press has overlooked of late: the details of where the money will come from to pay for health reform. The House document released yesterday calls for an ā€œindividual mandateā€ā€”a requirement that everyone must carry health insurance. If you donā€™t get it from your employer or if you donā€™t qualify for Medicaid, you will be required to buy a policy in the dreaded individual insurance market, where prices are high and insurer scrutiny of your health problems is intense.

The mandate is sure to be controversial, and interest groups are already poised to fight it. ā€œWe know the mandate can be beat,ā€ wrote Carmen Balber on the blog of Consumer Watchdog, a vocal consumer group that helped defeat an individual mandate in California a few years ago. ā€œWe were able to beat it because the numbers behind a mandate just donā€™t add up. You just canā€™t force people to buy something they canā€™t afford.ā€
Indeed you canā€™t, and therein lies the problem. Without government subsidiesā€”and generous ones, at thatā€”itā€™s unlikely that uninsured people will rush out to buy health insurance. They may even find, as thousands do in Massachusetts, that itā€™s cheaper to take the tax penalty. Some 85 percent of the uninsured simply canā€™t afford health insurance.

And that circles back to The Economist, which clearly laid out the cost challenges facing Congress and the President. The magazine noted that Obamaā€™s budget proposal specified $634 billion in cuts to pay for the subsidies, roughly half of whatā€™s needed to cover all uninsured people over the next decade. While that fact has already been reported, The Economist tied it to the Presidentā€™s ill-fated suggestions for raising some of the money. Obama wanted to limit charitable deductions for wealthy Americans, but Congress didnā€™t like the idea. He suggested cutting agricultural subsidies for richer farmers, but that idea didnā€™t fly in the farm states. He wanted to raise $210 billion from companies with foreign operations by limiting the tax deferral on income earned overseas, but senators fear that could cause an exodus of American companies to foreign shores.

Hereā€™s another underreported fact: the Congressional budget resolution does not call for a $634 billion set-aside. It simply proposes a flexible reserve fund, with no dollar amount attached. It will be up to the various committees dealing with health reform to decide how much should be spent in this budget cycle. The administration is in sync with this approach.

If the money is not thereā€”and it may not beā€”a further question is raised: Who will be excluded from coverage if there are not enough subsidies to go around?

A few weeks ago I put that question to Charles Kahn, a long-time Washington insider who now heads the Federation of American Hospitals, the trade group representing for-profit hospitals. His answers are useful for journalists who want to move beyond covering the process of the debate and on to the substance of it. ā€œIf you donā€™t have enough money to have universal coverage, I donā€™t see how the individual mandate works,ā€ Kahn said. ā€œYou canā€™t get blood out of a turnip. It may be that the individual mandate does not fit.ā€ Then he mentioned a comprehensive, standard package of benefits that reform proponents hope will be part of the mix. Thereā€™s been little press coverage of that. Said Kahn:

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Right now, looking at what I know, I donā€™t see money being there for what people think of as an individual coverage with a comprehensive benefit package. Is it better to have more people have something, or fewer people have more benefits, the kind your congressman gets?

Sounds like a lot of trade-offs in the works. They beg for press inquiry. The public needs to know whatā€™s in store for them.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for CJR's Covering the Health Care Fight. She also blogs for Health News Review and the Center for Health Journalism. Follow her on Twitter @Trudy_Lieberman.