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The Trillion Dollar Project: US healthcare reform begins

Published on 17/07/09 at 10:02am

The battle to determine how the US healthcare system will be reformed is heating up, with dozens of interest groups and lobbyists promoting their recommendations.

President Obama has followed up on his pledge to make reform of healthcare a priority, but even his popularity and parliamentary majority cannot guarantee that the vision will become reality without major compromises along the way.

No-one in America now doubts the need for reform. The US currently spends $2 trillion a year on its healthcare. This represents a very considerable 16% of the country's GDP and is far higher than any other developed nation - most European countries spend around 10-12%. Worse still, US healthcare costs are expected to hit 20% of GDP by 2017.

Meanwhile, nearly one in every six people in the US (46 million) has no insurance whatsoever, a figure that continues to rise as those unable to pay rising premiums drop out of the system.

The question of whether reform will happen has now been replaced by a three-fold question: How radical will the final plan be; how much will it cost the nation in the long-term; and finally, will it actually succeed in providing greater access to good healthcare to more Americans?

Obama has to wrestle with many different demands from within his own party, the electorate, and interest groups. One of the most pressing concerns for the White House is persuading the middle classes that they won't lose out financially by having to pay for insurance of poorer Americans. Rising premiums have squeezed many people who already have insurance, and they will be looking for overall lower costs from any new system.

Obama's vision for healthcare

Obama wants to create a government health insurance plan for all Americans to rival the existing insurance schemes offered by private providers. As it stands, the president's plan means individuals would not be obliged to enroll on the federal insurance scheme, and could remain on a private one. Obama believes a national scheme will eventually prove to be more cost effective and cover more people than private providers - but he knows that trying to loosen the powerful grip of private insurers could be a major mistake. In this respect, Obama has heeded the lessons from 1993 when Hilary Clinton's plans to reform the system were defeated, as they included mandatory enrolment in a state insurance scheme.

Obama declared in June that the time was right for reform: "This is one of those moments where the stars are aligned. We've got insurers who are interested and doctors who are interested, nurses, patients."

"It's not going to be a completely smooth ride," he added during the question-and-answer session. "But if we keep our eye on the prize [then] I'm absolutely convinced that we can get it done this time."

Thrashing out a plan

Consequently, Obama continues to seek a bi-partisan agreement on the reforms by involving the opposition Republican party. He had pledged to pass a reform bill very quickly, aiming to have legislation agreed by October. The president has asked Congress to develop plans to reduce healthcare costs and cover most of the 46 million Americans without health insurance, but the complexity of the issue and breadth of opinion is preventing rapid progress.

Five different committees in the two chambers (the Senate and the House of Representatives) are working on their own separate solutions, but hopes that bills could be tabled before August parliamentary recess are now diminishing.

All of the legislative groups are aiming to minimise the costs of introducing reform - but all agree that it will cost in the region of $1 trillion dollars over ten years.

Stage by stage reform

The complexity of the US system and the multiplicty of players means that the Obama administration is having to make a series of individual reform deals.

The pharmaceutical industry has already agreed a deal that will see an $80 billion cut in government spending on medicines (see page opposite) and this has been followed by a deal with three leading hospital groups. The deal will save $155 billion in spending over 10 years, mainly by lowering charges for services to the poor and elderly.

Vice president Joe Biden said associations representing thousands of hospitals had agreed to contribute $155 billion in Medicare and Medicaid savings over the next decade.

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