In the Balance

President Barack Obama's post-election honeymoon period is arguably at an end as he faces growing political opposition on many fronts and is forced to backtrack on some priorities. Wisely he has sought to front-load his term, pushing through the most controversial policies while his popularity is at its highest and Democrats remain in firm control of Congress. Thus he has taken the healthcare reform plunge early on, a priority that many of his predecessors have been forced to abandon. The push has already made important progress—which is described below—but the whole effort could yet unravel as the tortuous congressional process unfolds. Opponents of the administration's reform programme are meanwhile finding their voices and this is translating into some worrying opinion poll trends. Republicans have tended to focus their criticism on the plan to create a public-sector health insurance alternative to the private offerings. To them this smacks of "socialism", and would undermine the operation of free-market forces. The insurers have meanwhile mobilised their lobbying efforts to good effect.

Obama has sought to build a broad coalition behind the reforms, but he faces a dilemma over how far he should sustain this. The broader the coalition, the more concessions are required. However, a narrow coalition means greater opposition from outside and a higher likelihood that the legislation will stall. Obama has already indicated that he may abandon efforts to achieve broad bipartisan support in Congress—in the absence of this the challenge is to ensure near-unanimous Democratic support. This is not as easy as it sounds because there are many shades of opinion within the party. In recent weeks the right-leaning "Blue Dogs" have made themselves heard. They were eventually won over with some concessions that would curb costs and exempt small businesses from having to provide cover. However, such concessions have in turn antagonised the party's more liberal wing, which already felt that Obama was being too cautious. The following section summarises the current state of play.

Latest Developments

• Moderate Democrats Upbeat: Senate Democrats met yesterday to hone their message on healthcare reform, and the moderates among them later espoused optimism that the reforms would prevail. Among them was the influential Senator Evan Bayh of Indiana, who signalled that Democrats will focus on selling three key benefits of the reforms: control costs for those who already have insurance; rein in spending on Medicaid and Medicare (healthcare for the most needy) to ease the deficit; and provide insurance for the millions who are currently without. There is particular emphasis on the move to prevent insurers denying cover to those with pre-existing conditions. These benefits have been somewhat lost in recent weeks amid the chorus of attacks on Obama's "socialist" tendencies.
• Summer Recess Arrives Without Full Agreement: There is, however, no consolidated proposal agreed ahead of the summer recess (which has already started for the House and will do so shortly for the Senate). The two chambers are still working on competing proposals, and this constrains lawmakers' efforts to sell the reforms to their constituents. Obama had originally called for the full House and Senate to vote on proposals before the recess.
• Committees Make Progress: Several committees in Congress have already approved texts—the Senate health committee and three in the House—so there is important progress being made. Importantly, the House's Energy and Commerce Committee came up with a text that includes the creation of the controversial government-run health insurance plan. The key panel yet to reach agreement is the Senate finance committee. Three Democrats and three Republicans on this committee are to meet with Obama later today, as he steps up his personal intervention in the process. There have been suggestions that the Republicans on that panel are serious about trying to reach a deal, but on the other committees the partisan split has been unanimous.
• Surtax on the Wealthy?: A key difference between the House and Senate is over whether to impose a surtax on wealthy Americans to help pay for the reforms. House committees have endorsed this, but many in that chamber are unsure. Senate Democrats have resisted going down this line more strongly. Tax increases are always a political liability in the United States, even if they are only hitting the wealthiest.
• Drugmakers Win Assurance: The administration yesterday confirmed that it has struck a deal with drugmakers that caps their additional costs at US$80 billion. The industry had raised concerns that the texts under development in the House could sting them for a higher total. Lawmakers have proposed a measure that would allow the government to negotiate drug prices and demand additional rebates. The administration's confirmation should help keep the industry on side, but at the same time it has opened it up to criticism from Democrats that it is in thrall to the lobby, and that the reforms have effectively been pre-decided.
• Rhetoric Against Private Insurers Stepped Up: Although the administration has sought to reach out to the insurers, as it has to the drugs manufacturers, Democrats have not been afraid to ratchet up criticism of the sector in recent days. Insurers are being widely vilified for their policies on covering those with existing conditions. In a recent town-hall meeting Obama warned that health insurance companies "need to be held accountable". The administration is walking a tightrope as it seeks to increase pressure on the insurers, while at the same time ensuring it does not alienate key players in the whole reform effort entirely. Insurers have not committed themselves to explicit cost cuts, unlike drugmakers.
• Polls Raise Concern: Although Obama was elected last November with a manifesto stressing healthcare reform, latest polls show that public unease has been growing over the plans. It seems the main factor has been alarmist talk on the right about a government takeover of healthcare provision. The plans of course envisage private-sector insurers continuing to play a dominant role, but there is concern that the public alternative could end up undercutting them and eventually dominating the market. Nonetheless, the polls still found broad support for the principal of reform, and confidence in Obama's ability to push it through.

Outlook and Implications

There is broad consensus that the U.S. healthcare system needs fixing, but agreeing on the fine print of reforms is fiendishly difficult. Obama's push represents the best chance in decades to make real progress, but there are well-founded concerns about the fiscal implications of his plan and the impact that the inevitable concessions will have. Republicans have elected to resist the reforms stubbornly, citing in particular the public-sector health insurance alternative and the mandates for employers to provide insurance for their staff. Their fortitude is of course strengthened by the knowledge that if Obama fails on healthcare he will be left much weaker as he seeks to push through other elements of his programme. Their stubbornness carries risks for them too, however. Voters tire of partisan deadlock in Congress quickly, so the Republicans should arguably pick their battles rather than offering blanket opposition to the administration. The coming weeks will be critical for the administration as it tries to seize back control of the debate from the detractors and sell the benefits of healthcare reform more effectively. The consequences of reform failure are depressing—the country may have to wait decades before it has another president with such strong command of Congress, and such a strong commitment to reform. The stakes are so high that it is hard to see Democrats scuppering the project, even if their internal differences sometimes seem insurmountable.

Global Insight (Reino Unido)