Despite being largely devoid of new proposals, President’s Obama address to a joint session of Congress last week may have provided a good indication of the prospects for health care reform.

Paul Keckley, Ph.D., a health care economist and executive director of the Deloitte Center for Health Solutions, says he detected a newfound willingness to compromise in Obama’s words.

“I heard the President moving toward more of a moderate posture than we heard in the spring,” Keckley tells Insurance Networking News.

Nonetheless, Keckley was struck by some of the tough words contained in the speech. Early in his remarks, Obama enumerated a list of new regulations aimed at insurers, including limiting out-of-pocket expenses for patients, barring insurers from placing caps on benefits and excluding patients due to pre-existing conditions. “I was surprised by the tone toward the insurance industry,” he says. “It continued to be harsh.”

Yet, these admonitions were largely perfunctory. Keckley says that when the Obama Administration shifted from seeking “health reform” to “health insurance reform” in June, it was a signal that some substantial insurance industry reforms were in the offing.

“The new regulations were probably inevitable,” he says, noting that as far back as last November, America’s Health Insurance Plans indicated that insurers would be willing to stop denying coverage to consumers with preexisting conditions in exchange for a mandate that all individuals carry insurance.

The generous subsidies for coverage any new bill is likely to contain will translate into many more people buying insurance products, Keckley adds. “Insurers view this opportunity as an offset to what they are giving up in terms of regulations.”

Keckley said Obama’s plan closely resembles the offering of Senate Finance Committee Chairman Max Baucus (D.-Mont.) with two major exceptions. One is Obama’s support, however tepid, for a public option. The second, perhaps more daunting difference is how the plans would be financed.

Keckley notes that Obama wants to pay for his $900 billion proposal primarily by excising inefficiencies from the current system, saving $155 billion in payments to hospitals, $120 billion in curbing fraud and cutting $177 billion from Medicare advantage.

“Add those [savings] up and you are still only half the way,” he warns. “There are probably not as many efficiencies to be gained as people think.”

Conversely, the Baucus plan specifies a 35% excise tax on insurance companies and insurance administrators for any health insurance plan that is above $8,000 for singles and $21,000 for family plans, and additionally mandates a “health insurance provider fee” that would impose an annual levy of $6 billion on the health insurance sector beginning in 2010.

“The Baucus plan anticipates a broader set of funding sources and that’s a significant difference.” Keckley says.  

So, what are chances of either of these bills—or more likely some amalgamation of both—passing? Keckley says a centrist bill with a triggered public option to appeal to the left, mixed with liability reform to assuage the right, may have a better chance.

“The President’s willingness to mention medical malpractice was a plus,” he says. “It opens the door to something more substantive. I still think that there is a bill there that could make moderate Senate demo crats and some republicans comfortable.”

The trouble for Obama then would be to mollify the House democrats who have vowed to vote against any measure that doesn’t contain a strong public option. Keckley thinks this is feasible. “His political calculus about keeping democrats together is pretty good,” he says.

If this last-ditch, centrist approach fails, the sole remaining option, Keckley says, will be to ram a purely Democratic bill through the Senate using the reconciliation process. 

Another challenge confronting the Obama Administration is time.  “Were down to the next 30 days. After October 15, all bets are off. You’ll be going into the 2010 election cycle with an acrimonious partisan debate on health care. Then, I don’t think anybody wins.”

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