Having failed
to reform Social Security last year, President Bush this year
intends to make a smaller dent in a much bigger problem-America's
health care crisis.
Other items
on his domestic agenda include trying once again to get his tax
cuts made permanent and a math-and-science initiative to keep
America competitive.
Bush mentioned
these items last week in a question-and-answer session with citizens
in Louisville, Ky. which some White House aides described as a
forecast of his State of the Union message.
Bush tried
to reform Social Security last year claiming that he'd gained
political capital in the 2004 elections. He spent a lot and failed
to move Congress, even though it's GOP-dominated.
Now, he has
less capital, his approval ratings are down and it's an election
year. The science initiative, if it's ambitious, could attract
bipartisan support, but his tax cuts and incremental, market-based
health reforms will be fought fiercely by Democrats.
Bush has
yet to use the "c" word-"crisis"-about the
health care system, but it's clear there is one, and it presents
an immediate threat to employers and moderate-income patients,
a huge long-term threat to the U.S. economy and a political danger
for Bush.
For the moment,
health care costs are not rising at double-digit rates, but they're
just under. The government just reported that total health care
spending rose 7.9 percent in 2004.
But a survey
of more than 2,000 employers conducted by the Kaiser Family Foundation
found that premiums increased an average of 9.5 percent in 2005,
down from 11.2 percent in 2004.
"The
rate of growth is still more than three times the growth in workers'
earnings (2.7 percent) and two-and-a-half times the rate of inflaton
(3.5 percent)," Kaiser said. "Since 2000, premiums have
gone up 73 percent."
The foundation
found that 60 percent of U.S. businesses now offer insurance to
their workers, down from 69 percent in 2000. Not only are increasing
numbers of firms dropping insurance coverage, but most are forcing
their employees to pay more of the premium cost and imposing more
co-pays and higher deductibles.
The White
House is fully aware of the consequence. Bush's chief economic
adviser, Al Hubbard, told me in an interview last week that health
costs were a primary reason that-despite a robust economy-wages
have been rising slowly.
That's a
major talking point for Democrats and some outsiders agree it
could severely impact the 2006 elections. On Fox News Sunday Jan.
1, Diane Swonk, chief economist of Mesirow Financial, predicted
that the Dow Jones Industial Average would roar up to 12,000 in
2006, but added, "if you're rich, this is a great economy
to be wealthy in, but other than that, it's not great. And that's
what people remember when they go to the polls."
The other
guest on the program, John Bogle, founder of the Vanguard Group,
agreed that "workers are falling behind cost-of-living increases
and I think there's a lot of economic dissatisfaction. And since
the Republicans are in power, it will redound against them."
Under current
conditions, higher costs mean more people uninsured-some 45 million
at some time during any year, and rising. About 20 million lack
insurance all year long.
According
to AHIP, the health insurance lobby, 15 million of the uninsured
are lower-income persons not eligible for public programs like
Medicaid, 9 million are eligible but not enrolled and about 10
million are higher-income persons who choose to go uninsured.
In the past,
according to AHIP President Karen Ignani, the administration has
aimed its proposals-tax credits, Health Savings Accounts and association
health pools-at about 10 million to 12 million of the uninsured.
Based on
what Bush and Hubbard said, it appears Bush will be back with
the same proposals. It remains to be seen how ambitious the administration
will be, but it's clear that health care will get more emphasis.As
Hubbard told me, "if you have insurance through your employer,
there are huge tax advantages. If your employer doesn't provide
it, you have to pay out of your after-tax income. We've got to
level the playing field."
Bush said
he would also propose expansion of HSAs-tax-protected savings
accounts that employees use to pay medical expenses and premiums
for high-deductible insurance policies.
Both Bush
and Hubbard said that HSAs would help lower health costs by making
consumers aware of what they are spending for care. "The
fundamental problem with health care," Hubbard said, "is
that people think it's free. If your employer paid for food, when
you go to the grocery you would never pay attention to price and
you would buy more than you needed."
Eventually,
supermarkets wouldn't even have prices. And if they didn't list
prices, don't you think they would charge more? Absolutely, they
would."
It's undoubtedly
true, but Bush's incremental, market-based approach is anathema
to Democrats and many health care non-profit groups, which favor
a comprehensive, government-backed plan.
It's also
not clear how much money Bush will put behind his proposals. For
sure, he will again try to trim the growth of Medicare and Medicaid,
which present ten times the long-term burden on the economy of
Social Security benefits for the baby boom generation.
And, at the
same time, he will try to get Congress to make his tax cuts permanent,
at a cost estimated at nearly $2 trillion over a 10-year period-most
of which would accrue to upper-income taxpayers.
At the end
of the year, Republican candidates will have to try to convince
voters-especially workers who wages are rising slowly-that they
care about them as much as they do about those benefiting from
tax cuts.
Mort
Kondracke is the Executive Editor of Roll Call.
