One Too Many Deals?

Robert Reich has an interesting thesis:

Right now, Obamacare is at war with itself. Political efforts to buy off Big Pharma, private insurers, and the AMA are all pushing up long-term costs -- one reason why Douglas Elmendorf, head of the Congressional Budget Office, told Congress late last week that "the cost curve is being raised." But this is setting off alarms among Blue Dog Democrats worried about future deficits -- and their votes are critical.

Big Pharma, for example, is in line to get just what it wants. The Senate health panel’s bill protects biotech companies from generic competition for 12 years after their drugs go to market, which is guaranteed to keep prices sky high. Meanwhile, legislation expected from the Senate Finance committee won't allow cheaper drugs to be imported from Canada and won't give the federal government the right to negotiate Medicare drug prices directly with pharmaceutical companies. Last month Big Pharma agreed to what the White House touted as $80 billion in givebacks to help pay for expanded health insurance, but so far there's been no mechanism to force the industry to keep its promise. No wonder Big Pharma is now running "Harry and Louise" ads -- the same couple who fifteen years ago scared Americans into thinking the Clinton plan would take away their choice of doctor -- now supportive of Obamacare. Private insurers, for their part, have become convinced they'll make more money with a universal mandate accompanied by generous subsidies for families with earnings up to 400 percent of poverty (in excess of $80,000 of income) than they might stand to lose. Although still strongly opposed to a public option, the insurance industry is lining up behind much of the legislation. The biggest surprise is the AMA, which has also now come out in favor -- but only after being assurred that Medicare reimbursements won't be cut nearly as much as doctors first feared.

But all these industry giveaways are obviously causing the healthcare tab to grow. And as these long-term costs rise, the locus of opposition to universal health care is shifting away from industry and toward Blue Dog and moderate Democrats who are increasingly worried about future deficits. My sources on the Hill tell me there aren't enough votes in the House to get either major bill through, even with a provision that would pay for it with a surcharge on the richest 1 percent of taxpayers. House members don't want to vote for a tax increase before their Senate counterparts commit to one. Yet the Senate continues to be in suspended animation because Max Baucus and his Senate Finance Committee still haven't come up with a credible way of paying for health care. In his testimony last week, Elmendorf favored limiting tax-free employer-provided health benefits, but organized labor remains strongly opposed.

I think this is very, very right, and I've been noticing that the deals made with stakeholders were beneficial to them compared to what Congress and the White House could have imposed. And while I'm not sure they've added significantly to the cost of the bill, they have restricted the cost controls that would make the bill easier to swallow for moderates and Blue Dogs.

This is the new debate, and time is running out. Obama has made deals to buy off everyone associated with health care, and now the fiscal scolds won't eat the costs. But any effort at controlling the costs will scuttle many of the deals. Labor won't allow touching the employer deduction, empowering MedPAC would probably flip providers from supporters to opposers, and going after other internal system costs would face resistance from pharmaceuticals. The coalition-building at work here certainly got health care reform this far, but it's starting to strangle it.

It doesn't mean that the President can't ram this thing through anyway. But it makes it harder when all these artificial walls have been set up.