Video: Obama and the governors

By John W. Schoen Senior producer
updated 2/22/2010 4:05:58 PM ET 2010-02-22T21:05:58

When President Barack Obama was pushing his plans for health care reform last summer and fall, he said change was needed to put the nation's economy on a firmer footing.

But with his new compromise proposal Monday aimed at forcing a congressional vote on the issue, Obama appears to be making a pure political gambit with little explicit reference to the economic struggles still afflicting millions of jobless workers.

Obama's latest proposal, which would cost nearly $1 trillion over 10 years, would differ from previous versions mainly by allowing the government decide how much insurance companies would be allowed to boost premiums.

The White House insists the proposal wouldn’t increase the deficit, but it’s not yet clear how the revisions would affect the overall cost of the package. The changes outlined by the White House were contained in an 11-page summary and have not been "scored" yet for their final cost. The bills approved by the House and Senate ran more than 2,000 pages each.

In any case Obama is expected to have a tough time getting support from lawmakers who seem reluctant to try to revive the unpopular issue now that Democrats have lost their Senate "supermajority" and any bill can be derailed by a Republican filibuster threat.

And Obama no longer can argue that the health care proposal will create jobs or at least remove an impediment to job creation, some analysts said.

“What the current proposal would do is crowd out more private sector jobs by expanding the federal government and result in the country spending more money on health care, not less,” said Charles Boorady, a health care industry analyst at Citi Investment Research.

The revised plan would delay the impact of a tax on so-called "Cadillac" insurance plans, raising only $30 billion over 10 years instead of the original target of $150 billion. To make up the difference, upper-income households would pay a higher Medicare payroll tax. Those taxes would also be assessed on investment income, not just wages.

The revised plan would also get rid of some much-maligned provisions of previous bills, including a deal to let Nebraska off the hook for Medicaid payments. But the changes could add costs with proposals to close the so-called “donut hole” in Medicare prescription drug coverage and expand tax credits for middle-class workers to make insurance more affordable.

“This bill is very much a reflection of the Senate bill,” said Ipsita Smolinski, a health care analyst with Washington-based Capitol Street. "There are some elements of the House bill, but basically it's the Senate bill with some tweaks."

The hope is that by making relatively minor changes to the bill already approved by the Senate, the White House can get enough votes in the House to approve a unified package. It remains to been seen whether the Congressional summit scheduled for Thursday will yield enough votes in the Democratic-controlled House to win approval of the compromise package.

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But the changes aren’t big enough to attract any fresh Republican support, House Republican Leader John Boehner said.

"The president has crippled the credibility of this week's summit by proposing the same massive government takeover of health care based on a partisan bill the American people have already rejected," Boehner said in a prepared statement.

To control costs, the White House has proposed creating new federal caps on insurance premiums deemed to be “unreasonable or unjustified.”

But insurers argue that capping premiums won’t do anything to roll back the underlying cost of providing coverage. Without that relief, the drag of rising health care spending will continue to weigh on the economy and job market, according to Robert Zirklebach of America's Health Insurance Plans, a trade association.

“Employers are struggling with the rising cost of medical care,” he said. “If employers continue to spend more and more money on medical care, they have less money to spend on increasing employment.”

Health care spending has jumped more than 40 percent in the past decade alone, according to the White House. In 2009, the United States spent about 18 percent of GDP on health care — twice the average of other developed nations. Without major reform, the White House projects, health care’s share of GDP will hit 28 percent in 2030 and 34 percent in 2040.

Over the past decade, employers have seen health insurance premiums more than double, rising four times faster than wage increases. According to the Kaiser Family Foundation, the average cost of an employer-based family insurance policy premium in 2008 was $12,680 —nearly the annual earnings of a full-time, minimum wage job.

Since the health care debate began unfolding last year, rising unemployment has shifted the main focus of the White House agenda to job creation.

Even as the White House unveiled its latest health care proposal, Obama told a meeting of the nation’s governors Monday that creating jobs was the administration’s top priority.

“Too many Americans still haven’t felt recovery in their own lives," Obama told the National Governors Association. "So we're working to create jobs by all means necessary, be it by cutting taxes for small businesses that create them, to investing more in infrastructure and energy efficiency, or giving you more help with budget shortfalls.”

As federal reform languishes, states are beginning to press forward with their own efforts to change the health care system. And with historic pressures weighing on state budgets, few governors are in the mood to look for the increases in Medicaid funding called for in the Obama plan. Some are calling for more flexibility to try different approaches, including members of Obama’s own Democratic party, many of whom face re-election battles in the fall.

“We don’t believe it’s going to take more money,” said West Virginia Gov. Joe Manchin, a Democrat. “How in the world can you have the most inefficient system and have the poorest results in the quality of health care for your citizens as far as how healthy they are and say you have to throw more money at it? You have to redesign it. Let us use the money we already have a little differently."

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