How Obama miscalculated on health care

Why the President is having a hard time getting a consensus: Citizens are wary of making the system worse, while politicians are deeply divided over the choices.

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By Nina Easton, Washington editor

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NEW YORK (Fortune) -- For health-care reform, 2009 wasn't supposed to be a repeat of 1993-94.

It would be different this time. That's been the conventional wisdom 15 years after the defeat of First Lady Hillary Clinton's ambitious plan, which badly shook her husband's young presidency.

This time, industry players were at the negotiating table from the outset, instead of plotting a blitz of attack ads. This time, the process of constructing a plan would be completed out in the open, in a half dozen congressional committees, instead of behind closed doors at the White House. This time, a large majority of voters were telling pollsters (repeatedly) that they were ready for universal health care. Even corporate America -- groaning under the weight of employee insurance costs -- was on board for change.

So President Obama had reasons to believe he would avoid miscalculations -- but miscalculate he did.

A health-care bill may well pass Congress and land on Obama's desk for signature this year, but it could be at a steep cost to the political fortunes of the President and the Democratic Party, which in next year's mid-term election is counting on the same independent voters that swung its way in 2006 and again in 2008.

According to this week's NBC News poll, only 41% of the public approves of the President's handling of the issue -- a number that no doubt contributes to Obama's slide in job-approval ratings.

How did President Obama get here? By underestimating the power of this simple number: More than 80% of Americans are satisfied with their health care, polls indicate. That number stays stable even as strong majorities tell pollsters they want "reform" and support "universal health care" -- even as a plurality cites "health care costs" as their top financial concern, ahead of retirement, mortgage/rent, and losing their jobs.

In other words, no matter what legislative package Congress passes, a radical restructuring of the nation's health-care delivery system threatens a status quo in which eight out of 10 people are perfectly happy with their own situations.

For all the confidence earlier this year that the President would have broad support to overhaul health care, the dynamics of the debate are shaping up to be remarkably similar to the 1993-94 debacle.

During the Clinton debate, Harry and Louise -- the paid actors in insurance industry ads -- fretted about government "bureaucrats" taking away their health-care choices. "If we let government choose, we lose," the announcer concluded. This year, Harry and Louise are the real voters, showing up to town meetings and venting their fears that they'll lose their private plans and be dumped into a new Medicare-style government plan. They're fearful, too, that the government will have a hand in their end-of-life decisions.

In the new NBC polls, 54% are more worried about government control of health care than they are worried about reform not going far enough.

While it's true that a provision in the House bill providing Medicare coverage for doctor-provided end-of-life counseling was mischaracterized as the creation of government "death panels" by conservative critics like Sarah Palin, the threat of losing private benefits is demonstrably real. According to a statistical model by the nonpartisan health-care consulting firm The Lewin Group, more than 88 million employees would lose their private employer plans and be shifted into the public plan. (The study estimates that 103 million people would be covered under a public option.)

Obama continues to insist that no one will lose their benefits if they want to keep them, but that's a promise much of the public isn't buying.

When Congress returns to Washington in September, Obama will face a series of treacherous political decisions. First and foremost is the question of whether to include a public insurance option. Last weekend, both the President and his Health and Human Services Secretary, Kathleen Sebelius, suggested a public option was not essential to the plan. Those comments prompted an outcry from the liberal groups (and a ribbing from "Daily Show" host Jon Stewart, who showed footage of what clearly appeared to be a White House flip-flop), followed by an insistence by the White House that nothing had changed and the President has always supported a public option.

Obama is trying to walk a tightrope on this question, but the rope is really too thin to walk. If he includes a public option -- raising the very real prospect that more Americans will be on a government-controlled insurance plan -- his plan is a nonstarter with Republicans and many conservative Democrats. But if he signs a bill that doesn't include a Medicare-style plan for non-seniors, he will lose support from his own liberal base, and possibly the votes of 100 Democratic lawmakers in the House.

And, no: The idea of dropping a public option and substituting member-run "co-ops" won't fly with party liberals, as former Democratic National Committee chair Howard Dean made clear in his remarks to Fortune's Brainstorm Tech conference in late July. "As long as we do the public plan, that's real reform," he said. "If you don't do the public plan, you basically have the same system and you shouldn't be wasting all this money on the system we already have."

Even leaving aside the controversial public option, there remains enough government control in any legislation the Democrats produce to anger free-market minded voters -- regardless of party affiliation. This, combined with growing voter concerns about the Obama administration's spending and deficits -- is likely to make Democrats more vulnerable in next year's elections.

Right now, it may seem inconceivable that a decimated Republican Party could make big gains in 2010. But then, six months ago it was inconceivable that Obamacare would rock a presidency like Hillarycare once did. To top of page

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