Health Care and the Massachusetts Senate Election

By Edward Zelinsky

The recent election of conservative Republican Scott Brown to the U.S. Senate seat previously held by Edward Kennedy is pregnant with political implications. Among the casualties of Senator Brown’s victory is any significant attempt by the federal government to control health care costs. The prospects for serious health care cost control were remote before the Massachusetts senate election. They are nil today.

At the time of Senator Brown’s election, the Obama Administration’s efforts to control health care outlays were already on life support. The central feature of such efforts has been the “Cadillac tax,” to be assessed at a forty percent rate against expensive medical plans. The drafters of the Cadillac tax anticipate that this levy, if enacted into law, would pressure employers, insurers and insureds to scale back expensive medical coverage to avoid the tax. However, to placate his union supporters, President Obama had, even before the Massachusetts election, in large measure bartered away the Cadillac tax, agreeing that this cost control device will not apply to collectively-bargained health plans until 2018.

The other major cost control initiative favored by the Obama Administration before the Massachusetts election was a commission to reduce Medicare outlays. Skeptics (myself included) doubted that Congress would ever permit this commission’s cost control decisions to take effect.

Buttressing this skepticism is Congress’s ongoing refusal to implement the Medicare cost savings of the “sustainable growth rate” (SGR) formula. Congress originally adopted the SGR to restrict Medicare expenditures by reducing payments to doctors. However, under pressure from the American Medical Association (AMA), Congress has repeatedly suspended the SGR formula. The Obama Administration has secured the AMA’s support for the Administration’s health care legislation by pledging that SGR and its Medicare cost reductions will never be implemented.

It seems unlikely that a Congress which lacks the political fortitude to permit its own SGR formula to go into effect will allow any commission-recommended Medicare reductions to be implemented.

In any event, in light of Senator Brown’s victory, it is improbable that either the Cadillac tax, however attenuated, or the Medicare cost control commission, however weak, will be part of any federal health care legislation enacted into law.

More likely to be adopted in the wake of Senator Brown’s election are federal restrictions on the medical insurance industry. These restrictions, if adopted, will curb the premiums insurers can charge particular individuals (so-called “community rating”) and will also require medical insurers to issue and keep in force medical insurance for all who want to buy it (so-called “guaranteed issue”). These federal rules for medical insurers will permit many Americans with health problems to purchase medical insurance they previously could not afford or obtain. These rules will also escalate health care costs, since the outlays for these medically-needy individuals will require higher health insurance premiums for everyone to pay for these outlays.

Moreover, depending upon how it is implemented, community rating potentially threatens one of the few encouraging developments in the health care cost control arena: employer wellness programs. Anecdotal evidence suggests that these programs often encourage employees to improve their health by weight reduction, smoking cessation, and other medically desirable behaviors. A healthier workforce is a workforce which requires less medical care.

Often an important incentive of these employer wellness programs is reduced co-payments and co-insurance for employees in return for healthier behavior. Insofar as community rating might block such financial incentives (as many advocates of wellness programs fear), such rating would impair one of the few contemporary success stories in controlling health care costs.

In short, before the Massachusetts senate election, the odds of serious health care cost control were small. Today those odds are zero.

Unfortunately, the track record under Republican rule has not been good either. During the Bush Administration, when the Republicans governed in both the White House and the Congress, they enacted the underfunded Medicare Part D. Part D lets Medicare participants purchase drugs on a subsidized basis. Part D is now projected to add roughly $500 billion to the federal debt. As an exercise in cost control, this is not reassuring.

The core of the problem is that cost control is politically difficult since medical outlays can be curbed only by denying medical services. While political leaders like to pretend that medical cost control can be painless – just eliminate the waste and fraud – the harsh reality is that we cannot reduce the costs of health care without withholding services to which many Americans have become accustomed.

To overcome these political difficulties would require a willingness to sacrifice among the American people nurtured by courageous, effective, public-spirited and bi-partisan leadership in Washington. The prospects for significant health care cost control were not encouraging before the Massachusetts senate election. Unfortunately, now, they are gone.

The Massachusetts senate election was the day the cost control died.

Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America.