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In the snows of February, take time to remember Obama's Deals of August

Or, The Two Percent Solution and The One Half of One Percent Solution....

Greg Palast wrote last August about Obama's sweet deals with Big Health Industry Players and how they actually netted out for the public and the nation's deficit reduction:

...Obama's big deal with Big Pharma saves $80 billion out of a total $3.6 trillion. That's 2%.


Now it's Let's Make a Deal with hospital lobbyists.

First, the President was caught with his principles down, cutting a scuzzy back-room deal with pharmaceutical lobbyist Billy Tauzin to limit drug price savings to just 2% over 10 years (see attached, "Obama on Drugs: 98% Cheney?"), the New York Times today reports that another deal was sealed by lobbyist Chip Kahn of the American Hospital Association.

Here are the numbers they don't want you to see: Hospitals will be allowed to hike their prices and revenues by six trillion dollars ($5,853 billion) over the next ten years, only $155 billion less than they had projected before the Obama "reform."

In all, the Obama back-room deal will "reduce" our $26 trillion total hospital bill over the next decade by one-half of one percent.


The Big Pharma kingpins did not actually agree to cut their prices. Their promise with Obama is something a little oilier: they apparently promised that, over ten years, they will reduce the amount at which they would otherwise raise drug prices. Got that? In other words, the Obama deal locks in a doubling of drug costs, projected to rise over the period of "savings" from a quarter trillion dollars a year to half a trillion dollars a year. Minus that 2%.

We'll still get the shaft from Big Pharma, but Obama will have circumcised the increase.

And what did Obama give up in return for $80 billion? Chief drug lobbyist Billy Tauzin crowed that Obama agreed to dump his campaign pledge to bargain down prices for Medicare purchases. Furthermore, Obama's promise that we could buy cheap drugs from Canada simply went pffft!

What did that cost us? The New England Journal of Medicine notes that 13 European nations successfully regulate the price of drugs, reducing the average cost of name-brand prescription medicines by 35% to 55%. Obama gave that up for his 2%.

The Veterans Administration is able to push down the price it pays for patent medicine by 40% through bargaining power. George Bush stopped Medicare from bargaining for similar discounts, an insane ban that Obama said he'd overturn. But, once within Tauzin's hypnotic gaze, Obama agreed to lock in Bush's crazy and costly no-bargaining ban for the next decade.

This week in HuffPo, Mike Mogulescu writes about Obama's deal with Big For-Profit Hospitals. I'd noticed commenters today mentioning it as new news, and it seems like something new because the major emphasis has been on the Tauzin deal with Big PhRMA.

But Obama's deal with the for-profit hospital lobby to insure there would be no public option has, as best I can tell, only been reported in two articles in The New York Times. On August 13, The Times reported that while President Obama had presented himself as "aloof from the legislative fray," particularly in connection with the public option, "Behind the scenes, however, Mr. Obama and advisors have been...negotiating deals with a degree of cold-eyed political realism potentially at odds with the president's rhetoric." One of the deals reported in The Times article was the Pharma deal. The other was a deal with the for-profit hospital lobby to limit its cost reductions to $155 billion over 10 years in exchange for a White House promise that there would be no meaningful public option.

According to The Times:

"Several hospital lobbyists involved in the White House deals said it was understood as a condition of their support that the final legislation would not include a government-run health plan paying-Medicare rates...or controlled by the secretary of health and human services. 'We have an agreement with the White House that I'm very confident will be seen all the way through conference', one of the industry lobbyists, Chip Kahn, director of the Federation of American Hospitals, told a Capitol Hill newsletter...Industry lobbyists say they are not worried [about a public option.] 'We trust the White House,' Mr. Kahn said."

Mr. Kahn's lobbying group, with whom the White House made the deal, represents America's investor-owned, hospitals whose profits could be diminished by a public option with the negotiating clout to negotiate lower prices. To say that the deal included ensuring that any public option would not be "controlled by the secretary of health and human services" is code for saying it would not be national in scope and would lack negotiating clout--In other words, the Obama administration made a deal that a national public option on day one comparable to Medicare was off the table.


On September 9, a few weeks after The Times reported Obama's deal to gut the public option, President Obama gave his big health care speech to a Joint Session of Congress. In the speech, Obama said one of the programs he was considering was a "not-for-profit public option available in the insurance exchange." Supporters of the public option took this as a sign that Obama was on their side.

But Washington insiders noticed that Obama parsed his words very carefully. The New York Times noted that:

"Mr. Obama's call for a public plan, however, omitted any discussion of what rates it might pay or who might control it...'He worded it really carefully, because he said 'not for profit' and he didn't say it had to be controlled by the government,' Mr. Kahn [the hospital lobbyist] added. 'The way he described it, we could support that!"

In other words, Obama signaled the private health care industry that his deal that there would be no meaningful public option still stood.


There is no evidence that President Obama has ever twisted the arm of a single Senator to support a public option and plenty of evidence that he has assiduously avoided doing so, sending a message to Senators that he doesn't want a public option. When the Senate passed its version of the health reform bill, the reason the White House gave for there being no public option was that it couldn't garner 60 votes. But Joe Lieberman, who could have been the 60th vote, insists that the Obama administration never pressured him to support either a public option or a Medicare buy-in. And Sen. Russ Feingold blamed the demise of the public option in the Senate on the White House's failure to push for it.

He wants to cut costs? He wants to provide access to insurance? What a guy, what a negotiator! Sells out for 2% and 1.5%.

And the health and welfare of our nation's people.

No votes yet


dblhelix's picture
Submitted by dblhelix on

I'm almost with Obama on this. The problem is the multipayer structure and the PO concept.

In MD, the high-risk pool, which is functionally equivalent to the "progressive" PO concept:

1. administered by the state
2. mix of insurance co plans
3. open only to the uninsured

is paid for by MD hospitals. 13% of its members account for 100% of its costs, primarily critical care. Since it can't pay for itself via member premiums, the overrun assessment is on hospitals. Currently, it varies state by state -- for example, in IA, the assessment is on insurance companies. The only other alternative is exorbitant premiums to "pay for itself," which some states do, or policies w/ very high deductibles and co-pays. A handful of states balance the books this way.

So, of course insurance companies and hospitals don't want to foot the bill for a PO serving the uninsured. Scale-up doesn't work here -- if you expand state high-risk pools (POs) to cover all of the uninsured, you're still dealing w/ a small fraction consuming all of the available (revenue from premiums) income for care. So the assessments skyrocket.

My opinion is that the House PO is nothing more than a cynical ploy. Realistically, Obama is not able to support this -- read the above again -- unless a new revenue source pops up to cover expenses.

Opening up said "PO" -- if providers are shunning Medicare/Medicaid patients now, what happens when the rolls swell? Need some realism here. That HuffPo author can say:

The most popular aspect of health care reform is the public option, which is supported by nearly 60% of voters while the overall bill is supported by only about 33%. Adding a public option to the final legislation may be the only thing that can boost its popularity among voters.

until the cows come home. Who will pay for this? The question in polling was not for a crippled PO, but for one "open to all" and "Medicare-like."

The one thing I've not heard from "progressives" is that WE'LL pay for this. What I mean is that everyone seems to be happier than a pig in poop with "Medicare savings" as a prime resource for so-called reform, or some sort of delayed "excise tax," which is hardly just an assessment on unions but on older policy-holders as well.

"Progressives" should have been calling for a progressive tax from day one, where everyone, as Obama would say, has "skin in the game." Of course, that puts one on the route to single-payer type concepts -- too bad for "progressives" that the shenanigans landed up in a political snarl w/ no easy solution.

Submitted by jawbone on

$400B per year--meaning $400 Trillion over 10 years. And that's with everybody in, nobody out, comprehensive care including vision and dental.

What's lost? Usorious parasitic for-profit insurers, burdensome and costly paperwork, time spent dealing with many differing insurance companies, waste of the time of highly trained and in some specialities scarce human resources.

I haven't heard any supporters of single payer saying that Medicare cuts will pay for overall universal care. Indeed, the very point of Medicare for All is that payment structure is already set up, it works, it has most working people on its rolls. We're already paying for Medicare -- make improvements and have the largest possible pool in the US (like, everybody, conception to grave), and there's the payment source. We the people.

But, the point of this post is that Obama negotiated away two important ways of cost cutting and savings within the strictures of his own design for health insurance reform.

And what did he really get for the giveaways? Precious little, per Palast and Miles M, along with many others.

dblhelix's picture
Submitted by dblhelix on

I haven't heard any supporters of single payer saying that Medicare cuts will pay for overall universal care.

the context for my comment is the (general) acceptance of a multipayer system w/ some sort of public component. This is also the status quo -- the insurance market that covers healthier 19-64, while the public component absorbs the elderly (Medicare), lower-income children (CHIP) and higher-risk uninsured (partially by high-risk pools).

With boomers headed for Medicare, it should have been obvious that carving out a new public component within a multipayer system would draw on the insurance market, which would be unacceptable to them unless they could off-load higher-risk customers --> hence the crippled PO.

But! The demand on the crippled PO was/is fiscal soundness: must pay for itself by premiums! A brief look at the high-risk pool data at Kaiser will quickly reveal that this is impossible, unless the hospitals pay the overruns, or the insurance companies, or the subscribers (via outrageous premiums).

In other words, the crippled PO is a more reactionary concept than even high-risk pools, which is referred to as a "Republican idea."

"Progressives" ignored this throughout because it was really a marketing gimmick (fund-raising), as well as a way to keep a single-payer type system out of the discussion. I do not support this idea of a self-sustaining "PO" open to the uninsured because ... it's cruel and a joke ... Its claim to fame is lowering premiums a tad in the private insurance market at the expense of the uninsured paying a tad more w/ no identifiable source of revenue for the inevitable overruns.

Let's imagine a scenario where a House-style PO passes. We all know what would happen -- SOMEBODY would have to pay for the overruns. One of the reasons states have been unable to expand high-risk pools to meet actual demand (number of uninsured) is because it's unrealistic to expect the hospitals/insurance companies to pick up the tab, which would be astronomical. Of course, they'd just pass the costs on to the private market, which defies the rationale for reform ...

Where I don't agree is viewing BO as the PO-killer -- since I find the concept unrealistic, it makes sense to bargain it away for pennies on the dollar.

Where I think the hcr discussion got bamboozled is the up front guarantee that most everything would "stay the same." It reduced the stakeholders to the weaker in society, the uninsured, the elderly vs. health industry interests like hospitals, insurance companies, pharma etc. We all know who wins that game. It made it easy for progressives to ignore reality and shout and scream for their public option toy. Isn't going to make a difference in their lives. Using Medicare for funding hcr AND reducing the deficit? Fine by them.

dblhelix's picture
Submitted by dblhelix on

is of course another public component which should have been included in the first para.

CMike's picture
Submitted by CMike on

I assume that was a typo but nobody else caught it so let me beat this horse to death.

$400 Billion/year X 10 years = $4 Trillion years/year = $4 Trillion.

If you were saving $400 Billion a year it would take one hundred decades(!) to save $400 Trillion (if you weren't investing the savings at interest or in appreciating assets).

100 Trillion (100, 000, 000, 000, 000 or 10^14) is 1000 times more than 100 Billion (100, 000, 000, 000 or 10^11).

dblhelix's picture
Submitted by dblhelix on

progressive demands for a PO as described in House legislation. It is unworkable.

BDBlue's picture
Submitted by BDBlue on

I think Ian Welsh had it right (at least I think it was him). You cut a deal with big Pharma to roll insurance for single payer. Pharma and insurance don't like each other, but they're too powerful together to try to fight them both off. So buy Pharma off now. Then after dealing with the insurers, you take on Pharma. Then after Pharma, you take on the doctors. You've got to divide and conquer.

Of course, Obama has no real interest in conquering, which is the problem. So we get nothing in return for these expensive deals.

Kick Baucus to the curb's picture
Submitted by Kick Baucus to ... on

Shortly after his negotiation with the drug companies for a paltry $8 billion a year, they raised prices by more than that. Same with his other negotiations - IIRC with the insurers - they have already raised by more than the supposed savings. There are no savings.