The Bottom Line: Health Care Reform

President Obama has been strong and calm and reassuring.  Most voters like him and trust him.  But he still must play the risky hand he was dealt, and in the end his success will be measured by his accomplishments, not his image.  One central achievement will make or break his legacy: health care reform. 

Like FDR and LBJ, Obama is trying to use active government to improve the lives of average people.  President Clinton, after his health care fiasco, was content to run a thrifty but sound fiscal policy and to trust his legacy to the peace and prosperity the country enjoyed when he was president. 

Obama was dealt an economic crisis that required swift, substantial spending if only to assure people that he was at work.  As in the Great Depression, he has proposed a set of programs to put people to work and to give citizens hope.  Yet, as in the Great Depression again, it is not clear how fast a fiscal stimulus can bring back prosperity.

Moreover, when prosperity returns, it will be necessary to restore fiscal balance (missing for nine years) through unpopular measures, tax increases and spending cuts.

Hemmed in by these economic and historical constraints, the president recognizes that controlling the growth of health care costs is the single biggest long-run challenge the economy faces.  Note that it is not simply President Obama or the federal budget that face the health care cost challenge.  It is the entire economy.  If health care costs continue to grow significantly faster than the rest of the economy, we will have to devote more and more of our resources to health care.  Just extrapolating trends of the past three decades has health care absorbing 20 percent, then 30 percent, then half of all resources in the economy in this century.  Health care costs will cause crises not only in Medicare and Medicaid, but in the boardroom of every firm that continues to insure its employees, or in every family that finds the burden of paying for health care thrown into its lap.

Right now, nobody wants to cross Barack Obama in public.  Nobody disagrees with the idea that we must control the growth of health care costs.  But the crunch cannot be far away.  The share of the health care dollar going to insurers will have to be cut drastically.  Prescription drug prices and profits will have to fall as well.  Health care providers – doctors, hospitals – will have to see their income growth slow down.  And patients will have to see some procedures postponed or denied.

Suffering and death will not increase.  After all, virtually every other rich country has better health outcomes with much lower and less rapidly growing health care costs.  But health care reform will step hard on a lot of toes.  If Social Security, Medicare, and Head Start were difficult to enact, a universal health care safety net will be much harder.

Without health care reform, universal pre-kindergarden, new opportunities in higher education, green initiatives in industry, and all of the President’s other goals will fade.  He will only be able to make ineffectual gestures in their direction.  Health care reform is the 800 pound gorilla.