Danger & Opportunity: Stitching Together Healthcare Reform

The healthcare debate moved outside the beltway in August, as members of Congress headed back home to face, in many cases, angry mobs of constituents bent on voicing their opinions on healthcare reform during townhall meetings.

President Barack Obama held his own townhall meetings during Congress’s August recess, and stated at some of those events that he will push healthcare reform through this year whether or not he has Republicans’ support. At press time, published reports said that Obama was willing to abandon the public option in healthcare reform and instead consider a nonprofit health cooperative being developed in the Senate. Senate Finance Committee Chairman Max Baucus was leading a bipartisan group of Senators in their bid to craft a healthcare bill during the break, and gave that group a deadline of September 15 to reach consensus. Obama wants Congress to send a bill to his desk by October 15.

While the debate over healthcare reform has reached a fever pitch, the only thing that seems clear at this point is that nothing is clear. “I don’t see clarity, so what are we arguing about?” says Erika Safran, principal at Financial Asset Management Corp. in New York. She says her clients are basically “uninterested” in healthcare reform now because the ultimate outcome is still so fuzzy. Harold Evensky of wealth management firm Evensky Brown & Katz in Coral Gables, Florida, says clients aren’t calling him with questions about healthcare reform either. “Somewhat to my surprise I’ve not had any client response,” he says. Advisors’ phones will likely start ringing, however, once legislation is signed into law and the changes start to hit home.

As it stands now, all eyes are on the Senate Finance Committee to finish up legislation, as all three committees of the House passed their versions of healthcare reform bills before the August break. Those three bills will have to be combined into one piece of legislation after Congress returns from its break, which ends September 7. Just before the recess, the House Energy and Commerce Committee approved its own version of healthcare reform, H.R. 3200, the America’s Affordable Health Choices Act, by a 31-28 vote.

Frank McArdle, principal and manager of Hewitt Associates’ Washington, D.C., research office, noted during a conference call to discuss healthcare reform that the Energy and Commerce Committee plans to mark up a bunch of amendments to their bill this month. He said that some of the provisions in the Energy and Commerce bill are “interesting and perhaps game changing.” For instance, he noted that the Committee’s version says that the public plan option will have to negotiate rates with medical providers rather than pay them Medicare rates. “That was a big sticking point … and the Blue Dog [Democrats] advocated it and it’s also closer to what the Senate has done in their HELP Committee, which is to say there should be negotiated rates,” McArdle said.

The Energy and Commerce Committee is also echoing what the Senate Finance Committee is considering, notes McArdle, “saying that the states may also create consumer cooperatives (these would be plans that could compete along with the public option) because there still is a public option in the House bill.” Energy and Commerce also included a provision in its bill that the pharmaceutical companies “are calling a deal breaker,” McArdle said, “which is that Medicare would negotiate directly with pharmaceutical manufacturers to negotiate prices on drugs that are given to Medicare beneficiaries.” This part of the Energy and Commerce bill puts “House Democrats at odds with the White House,” McArdle said, because the pharmaceutical trade association has agreed to only give up $80 billion in savings in its discussions with the White House and Senate Finance Committee Chairman Max Baucus (D-Montana).

What’s This Going to Cost?