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U.S. Department of State

Diplomacy in Action

Prospects for Healthcare Reform in the United States

FPC Briefing
Karen Davenport
Director of Health Policy, Center for American Progress
Dr. Robert Moffit, Director of the Center for Health Policy Studies, Heritage Foundation
Foreign Press Center
Washington, DC
March 17, 2009

Date: 03/17/2009 Location: Washington, DC Description: Karen Davenport, Center for American Progress and Dr.Robert Moffit, Heritage Foundation, at the Washington Foreign Press Center Briefing on "Prospects for Healthcare Reform in the U.S." State Dept Photo

 2:00 P.M. EDT

MODERATOR: Thank you for coming to the Washington Foreign Press Center. We’re very pleased today to have two of the leading experts on the healthcare debate here in Washington. We have Ms. Karen Davenport from the Center for American Progress and Dr. Robert Moffit, who’s joined us before here, from the Heritage Foundation. And they’re going to speak today about healthcare reform in the United States. I’ve asked them each to speak for a few minutes about kind of where we’re at, and then to take your questions and open it up for discussion.

Thanks so much.

MS. DAVENPORT: Sure, I’m happy to kick if off. Thanks for inviting us, and it’s a pleasure to be here. We at the Center for American Progress seem to be getting more enquiries from international journalists these days about healthcare reform. And so it’s – one of the things I find is that I end up explaining a lot about the American healthcare system in some cases as well.

But what I just want to touch on is, you know, a little bit about why this is such a big issue in our political sphere these days, and then to touch on a couple of points that I think are important to keep in mind as the debate progresses in some areas where there might be a little bit of conflict. So, you know, I think that healthcare coverage and healthcare costs were on the political radar screen, you know, clearly through the election campaign, well before the economic crisis that we’re facing right now. And I think that that crisis has only intensified the interest in healthcare reform. We know that we’re not going to see a real sustainable recovery and long-term growth if we don’t deal with our growing healthcare costs and the millions of Americans who are losing health insurance, as well as don’t have health insurance, but those who are losing as well as they’re losing their jobs and their employer-based coverage.

You know, simply, healthcare spending is about 16 percent of GDP and that’s scheduled to keep on growing. And that – you know, we know that we need to pay attention both to cost and to coverage as we deal with the healthcare problems in the United States. But we also need to look at what are the parts of our healthcare delivery system that contribute to some of these problems and how do we make – fix as a law and those lines as well.

On, sort of, a couple of policy topics, I think, the things to keep in mind and to look out for are first on coverage – how are people who are uninsured today going to get health coverage, how are people who are at risk of losing their health coverage – what kind of security is there going to be for them? Some of the ideas that President Obama campaigned on are particularly around expanding the Medicaid program, which provides coverage today to some low-income Americans, but nothing like all low-income Americans. And then providing premium subsidies to people who have higher incomes but are not able to purchase coverage on their own or don’t have an employer who’s purchasing coverage for them. And then to be able to – and then also setting up an insurance exchange so that, using new rules for insurance in terms of rating and pricing and the people’s access to health insurance so that those subsidies can be spent, particularly for people who have chronic illness, who, in today’s market would have a very hard time finding health coverage.

I think another kind of key question is whether people will be required to have health coverage. It’s an idea that was a big part of the Democratic primary discussion about healthcare. And if they are required to have health coverage, will that coverage be affordable? While an individual mandate wasn’t part of President Obama’s plan, I think that’s an issue that we’ll see resurfacing and there will be some debate around that.

And then, finally, what about cost control? How do we deal with spiraling healthcare costs? Are we going to be looking at long-term solutions, particularly around how do we pay hospitals, how do we pay doctors, how do we reward better coordination and better management of complex patients and costly patients? Are we going to build on the investment that was in the stimulus package around comparative effectiveness research so that we have better understanding of which treatments and drugs and devices work best, and so that that information is part of patient decision making and physician decision making at the time of treatment?

And then to what degree are we just looking – and I think these are important, but I don’t think that it can be the answer to our cost control problems – but to what degree are we looking at efficiencies in existing programs? For example, the President’s budget included about $158 billion in savings from the Medicare program. I think it’s important to look at our public programs and where we can save money. But I think that we need to be having a broader strategy than simply going after where we have public spending today.

A couple of political flashpoints I’ve already touched on – one is potentially the individual mandate. I think a couple other ones will be whether there’s a publicly managed health insurance option as part of the range of health plans that people can choose in the exchange. You’ve probably already seen a lot of debate about that in the media in the United States. And also around the tax treatment of health insurance, which is something that is a potential revenue source as we are looking at how do we pay for healthcare reform, but that is an important underpinning of the system we have today. And how we either cap it or undo it will have important implications for how healthcare reform plays out as well.

And then I think, another sort of piece to keep in mind is how will people who have health insurance today be better off under healthcare reform? Are we, through cost controls, going to be able to help them reduce their overall healthcare costs? Are we simply looking at controlling federal spending on healthcare over time? Is that where they see most of the benefit? But how do we –as we get a better grip on the system as whole -- what happens to people who have coverage today?

And I think I’m going to leave it there so that we have some things to talk about. I also thought of some process questions, but I think we can get to that in Q&A.

DR. MOFFIT: Okay. Well, thank you very much, ladies and gentlemen. I’m very happy to be here. I was here before in the past talking about this issue. I’m happy to be invited back again.

With regard to this debate, this is actually a rather old debate in the American political life. We actually started this debate – actually after World War I. And we resumed it again after World War II, and we’ve had periodic debates on healthcare ever since. So this has actually become a constant in American political life. And I know that many of you probably ask yourself, why is it the Americans are constantly talking about the healthcare issue; why is it that this is an issue with the Obama Administration, previously an issue with the Bush Administration, certainly the Clinton Administration where there was a huge national debate, but before that as well, all through the ‘70s and ‘80s you had these national debates on healthcare? We have them all the time.

I think there are a lot of reasons for that. I think that the reasons for that, at least superficially, are pretty much the same. If you ask Americans what it is they are concerned about, overwhelmingly, Americans are concerned about cost. The cost of healthcare in the United States is something that concerns employers and concerns employees, government officials, ordinary Americans from every walk of life, and it’s a middle class anxiety, really. It’s a middle class anxiety. People are concerned that if they lose their health insurance coverage and they find themselves in a situation where they need healthcare, that they will not be able to afford it given the cost of healthcare today. So that is why this is a persistent issue.

Obviously, the question of the uninsured is a constant. We have about 15 to 16 percent, roughly, of our population that does not have health insurance. This is not radically different than it was back in 1993 and 1994. Actually, the percentage of the population has been pretty constant who have been uninsured. But it, again, is a source of great anxiety and there are reasons for that because of the way in which insurance is structured in the United States.

There’s little debate among analysts or economists that the health insurance markets are in many respects dysfunctional. I’m going to focus on that. There’s also a question of quality. There’s a – there is very, very good evidence that, depending upon where you are, quality in the United States is uneven. In certain parts of the country, the quality of healthcare is outstanding. It is first class in every possible respect. In other places in the United States, it’s not the case. So there’s a – there are gaps in quality just like there are gaps in coverage. So the issues of quality and cost and access to healthcare coverage, these are three major issues that have been a constant, not only in this debate, but going back for several years.

One of the reasons why this debate continues without – seemingly without resolution is that – the fact is the American people are often deeply divided on this issue. There is no national consensus really, beyond some very, very vague – very vague generalizations. And if you ask Americans what it is they’re against, they’re very, very quick to tell you. Americans are against – obviously, they’re against high cost, they’re against high rates of un-insurance. They positively despise lawyers. They do not like any kind of paperwork or bureaucracy. They don’t like filling out forms and they don’t like dealing with insurance companies that have fine print in the insurance policies.

Beyond that, however, oftentimes if you ask Americans what they think about leading healthcare proposals, they’ll say that it all depends on the details. And this is where you find a constant tradeoff. If you’re to say that you’re in favor of a healthcare policy proposal, some major proposal, whether it’s a single-payer system or an employer mandate or even a tax credit system, people will generally say they support these reforms. But if you start to talk about what the tradeoffs are, what it actually means if you actually adopt one or the other of these ideas and how it will affect them, oftentimes the support for the initial proposals starts to decline. That’s very, very common and it’s been going on for quite some time.

Let me talk to you about what I think are the fundamental problems with the system and why we’re having this debate, and maybe where we will go. We have in the United States a very unusual healthcare system. About – as Karen pointed out, we spend about 16 percent of our gross domestic product on healthcare. It’s larger than any other country in the world. We spend, on a per capita basis, about twice as much on healthcare as other countries do. The spending in the system is largely divided, actually, between public spending and private spending.

Many – I find many, many, many journalists in Europe, in particular, are under the impression that the United States has a private sector healthcare system. That’s not quite accurate. The truth is, is that about roughly half out of all the spending on healthcare in the United States is spent directly by the government, largely through these very large entitlement programs like Medicare and Medicaid, the State Children’s Health Insurance Program, and various public health programs at the state level. So roughly 50 cents out of every dollar that is spent on healthcare in the United States is spent directly by the government.

We have a private sector system in which healthcare financing and delivery is largely accomplished through employment-based health insurance. Now there’s a reason for that. The United States has a unique – and if you don’t understand this, it’s very hard to understand the American system – the United States has a very unique way of financing healthcare.

I know that in Germany, for example, healthcare, is to a large extent, employer-based, but – and but in other countries, employers play a role. But in the United States, the way this works is, very simply, this: If you’re an American citizen, you get unlimited tax treatment – a tax break or tax breaks for the purchase of insurance if and only if you get your health insurance through the place of work. So if you work for the Heritage Foundation or you work for the Center for American Progress, you work for a large corporation or a large foundation or corporation, you get, in many cases, a pretty good healthcare benefits package, and you get a large chunk of tax-free income.

If you work for a smaller company with a less attractive benefits package, well, the tax breaks to you are less. If you work for a company that does not offer you any health insurance, under the current tax code, you get nothing, you get zero. This is very important to understand because, basically, through the tax treatment of health insurance, what we’ve done is we’ve created a monopoly of employment-based health insurance.

So it’s a terrific situation if you get your health insurance through the place of work. But if you work for an employer that does not offer you health insurance, you have to buy health insurance. If you’re going to get health insurance, you have to buy it on your own, and you have to buy it in the individual market. But if you buy it on your own, you have to buy it with after-tax dollars. If you buy it with after-tax dollars, for many Americans, practically speaking, it means, because of the size of the tax break, that you could be paying as much as 30 to 40 to 50 percent for the same package of benefits that you would have otherwise gotten if you would have gotten it through an employer. It’s vitally important to understand that.

Now with a very highly mobile economy in the United States, anywhere between one-third and one-fourth of Americans change jobs every year. Americans increasingly are changing their careers. It’s not unusual for people to change their entire career. The Department of Labor estimates that by the time a man is 40 years of age, counting all the positions he’s had, he may have had as many as ten different jobs.

With a very, very highly mobile economy, the result of this is is that we have a situation where we have no real portability in health insurance. So if you lose your job and you change your job, you go from one position to another, you don’t lose your life insurance, your homeowner’s insurance, your auto insurance. The only insurance that you lose is your health insurance, your insurance that is most important to you. And if you have to buy health insurance, you can do it, you’re allowed to do it; it’s a free country. But if you decide to buy health insurance on the individual market, you – without – you pay – you basically pay for it with after-tax dollars, which makes it prohibitively expensive, plus the individual insurance market in the United States is mixed.

In some states, it works quite well; in other states, it does not. You have to buy individual insurance with very high administrative costs in some states. And in other states, you might have a situation where you cannot buy affordable health insurance because the state legislature has insisted that you may have to have a whole raft of mandatory benefits. You may not want them, but they’re expensive and you have to buy them if you’re a resident of that state.

So if I were to single out what I consider to be the genetic flaw of the American healthcare system, it is the financing of the healthcare system. And it is the financing of the healthcare system that drives virtually every incentive in the system, including the incentives to deliver care. I’m very, very much opposed to the idea of focusing on healthcare delivery, improving the delivery of healthcare without first dealing directly with what is, in my view anyway, the central difficulty, which is the financing of healthcare.

A second feature of this is that, to a large extent, you have a situation where ordinary Americans exercise no consumer control at all over the kinds of healthcare benefits they get, the medical treatments and procedures they get. Almost all of these decisions are made by third-party players – either employers, managed care executives, or government officials. As a result, in many cases, Americans who find themselves on the receiving end of bad decisions by insurance companies don’t have any practical alternatives in many cases. It’s not as if they can go out and simply get another health plan because, obviously, if you don’t like your employer’s healthcare plan, his response to you is “Tough, if you don’t like it, just go get another job.” Well, that’s not so easy. But my point is, is that practically speaking, we have this huge and growing sector of the economy where individuals and families, as consumers and patients, have actually very little control in the system.

The other point related to this is the fact that you do – you have a declining competition in the health insurance sector of the economy. In many states of the union, insurance companies, maybe two or three insurance companies, dominate the entire market. In my previous life, I was a regulator of the State of Maryland – the State of Maryland is a wealthy state, right here next to us here in D.C. – and we had responsibilities. I was a member of the Maryland Health Care Commission. We had responsibilities for regulating the small group market in Maryland. Well, we do a very good job of regulating the small group market in Maryland. We have about 62 benefit mandates, and we have a situation in Maryland where you have two insurers that cover roughly 90 percent of the lives in the state – in the small group market.

Now what does that mean? It means, in effect, that if employees or employers don’t really like what’s available to them, they don’t have many practical alternatives. It also means that doctors, hospitals, clinics, other medical professionals have very, very little capacity to bargain when it comes to their own reimbursement for medical services, and so on. So we don’t have a competitive market, actually, and a competitive system. This adds to the inefficiencies of the American healthcare system.

Now where is there – are there areas of agreement? There are areas of agreement that healthcare costs are too high. There are areas of agreement relating to the number of people who are uninsured and why we should do something about that, and also improving quality care and delivery of care.

Beyond that, there are some very significant disagreements. The major disagreement, among Americans anyway, is the role of government in the system. There are those would like a much larger role for government. There are those, like myself, who would like to see a much smaller role for the government. And making the argument – in my case, I would make the argument that one of the reasons why we have the problems that we have in the current system is largely because of government policy, specifically the tax policy that governs health insurance.

What are the prospects for reform? I think it’s going to be very difficult, even though there are general areas of agreement. I myself – I’m very much in favor of universal coverage. I think there’s no American in this country who should have – not have health insurance or should go bankrupt because of medical bills. But having said that, there are very, very large areas of disagreement. The big question is how much role the government will have in making determinations over the financing and delivery of healthcare, and what benefits Americans will get, what medical treatments and procedures they get. On that – that is the – that is a major point of debate.

Thank you.

MODERATOR: Okay. Happy to take your questions. And please remember there are microphones on either side. Please wait for the mike and please state your name and your media organization. So do we have questions?


QUESTION: Hi. Reymer Kluever from the German newspaper Sueddeutsche Zeitung. Obviously, we are very much interested in the discussion – on the upcoming discussion on the healthcare reform. What will be the big challenges for this reform?

DR. MOFFITT: I would tell you there are three big ones, and Karen has already mentioned them.

Number one is the role of a public health plan in competition with private plans through a national health insurance exchange. I think that will be a major point of debate. The reason for that is whether it will be an option for people or whether it would be a mechanism which would erode existing private insurance that many Americans value, actually. This is an employer based system, so individuals in the United States don’t pick, in many cases, what insurance they will get. And the concern is that many employers will say, “Well, if the taxpayers are going to pick up the bill, you know, and I don’t have to do it anymore, why shouldn’t I take my employees and dump them into the public plan?” Now of course, some people think that would be a good thing. But there’s an awful lot of Americans who might not feel that that is the best thing for them. So that’s going to be one major point of contention.

Another point of contention will be the issue of the – the issue of the individual mandate. Americans have a legal right to healthcare in the United States. This is often not understood in Europe, but it’s understood here by every hospital executive and every physician in the country. Any American who is ill can walk into any hospital in any state in the union in the United States and get medical care. It is a legal right. It is a legal right on the part of Americans to get healthcare. They must be, under the current law – under federal law, they must be stabilized, which means that a hospital that sends a patient away from an emergency room who is not stabilized is liable to litigation, and you’re talking about potentially very damaging litigation.

So there’s a legal right to healthcare in the United States, but the problem is, with the uninsured, they can be very expensive. Americans pay for the uninsured, and the costs on an annual basis are very significant. Some of our colleagues at the Urban Institute have estimated that the cost of running – of the uninsured, just taking care of people who do not have coverage through hospitals and other medical facilities, cost the American people about $50 to $60 billion a year, which is a very, very sizable – a very sizable cost. It’s not – so you’re talking about a very significant issue here with regard to the uninsured.

Now the feeling is, is that with regard to insurance, for auto insurance in many states of the union, about – actually, it’s 47 states of the union – there is a law that says if you drive on American highways, you must buy automobile insurance. This is not only to protect you, but it’s also to protect anybody else in case you have a collision. The argument has been made that just like auto insurance we ought to require Americans, as a matter of law, to purchase health insurance to protect not only themselves, but the rest of us from uncompensated care costs – higher healthcare costs.

I will tell you it’s going to be a contentious debate. I personally, in the past, have supported an individual mandate. I don’t now, because I think – politically, I think it’s very hard to sell. If you ask Americans, you know, should people be required to have health insurance coverage, they’re likely to say yes. But as Mrs. Clinton found out during the debate, when you say, “Well, are you going to actually enforce the mandate, what is going to be the mechanism of enforcement,” that’s where the support for the mandate starts to break down. So people are in favor of mandates as long as they’re not enforceable. But a mandate without enforcement is not a mandate. So I think – but that will be a real discussion.

I think finally – I talked about this at great length, and I don’t want to take too much time here, but I think probably one of the most controversial issues in this debate is going to be the future of the tax treatment of health insurance. Senator McCain took a position during the campaign that was identical to the position that the Heritage Foundation took many years ago, which is to simply abolish the current tax treatment of health insurance and replace it with a national tax credit system.

At the time, Senator Obama charged that this was the largest tax increase – one of the largest tax increases on the American people and strongly opposed it. Now, the Administration is signaling that it’s open – open to a discussion of this issue again. And Senator Max Baucus, who is in charge of the effort for the Democrats in the Senate, has suggested reopening the tax treatment debate, proposing that instead of having unlimited tax relief for the purchase of health insurance, that there should be a cap on the value of the benefits that are tax-free, and using the revenue from that cap to expand coverage. Frankly, personally, I think that’s a terrific step in the right direction. I think that’s something we ought to do. But it will be controversial.

MS. DAVENPORT: I guess I want to say a couple things about what Bob has said and then identify a couple of other – other barriers which aren’t so much policy as process.

First, I think in terms of the public plan and generally thinking about the role of government in the healthcare system, I think that it is a false assumption to believe that the public plan is actually just going to be fully subsidized by – by taxpayer money. I mean, one way of running a public insurance option would be that it is run by a public agency, but that it is financed just like the private plans that it’s competing against through premiums. So I think that that’s one of the areas where there’s a lot of work yet to be done on what that option might look like before we really know how that debate is going to end up playing out.

Nevertheless, I think because the public role in our health insurance system is such a flashpoint, you know, it’s sort of no matter what the design ends up being, you’re going to see a lot of debate about this. And I think generally, we’re going to see a fair amount of debate on other things about the role of the public sector in the healthcare system.

We saw that on the stimulus package in terms of a lot of, I think, overheated rhetoric that started going out about a big government database about everybody’s healthcare when we were talking about public investments and health information technology. I think, you know, while that was simply not what was in the bill, I think that it speaks to both how a debate can get and I think is likely to be replayed in terms of a big government takeover of the healthcare system when a proposal that’s in front of us may be a larger role or a different role for government, but is certainly not anticipating government owning the hospitals and government paying the physicians. So I think we’ll see a lot of sound and fury around some of those – some of those issues.

On the – in terms of kind of other barriers, I think some of the things – an immediate hurdle – will healthcare be part of the budget resolution, how is it going to move through the Congress, what are the process pieces of how the healthcare debate goes forward? So are we – and are we looking at paying for all of our new investments, whether it’s through new revenues or cuts in existing programs, or is there a borrowing aspect of healthcare reform as well?

If you look back to the Medicare prescription drug debate, which was the last big healthcare debate that we had, that was part of a budget resolution and there was a reserve fund that actually was a reserve fund that added to the deficit. And the question was sort of how big that was going to be as the budget debate was going on. What the President put on the table was the deficit-neutral reserve fund, which would mean that it would be funded through either cuts in existing programs or new revenues or some combination thereof. These are kind of inside-the-beltway questions, but I think how that plays out is going to have a lot of impact on how the debate itself goes and what kind of programs are on the table and what kind of strategies for paying for it are on the table.

And then I think there’s also just the reconciliation of different approaches in how – how compromise gets worked out. For example, there’s a lot of similarities between President Obama’s campaign plan and the white paper that Senator Baucus put out in the late fall. There’s another bill that’s been introduced in both the House and Senate that’s been really championed by Ron Wyden and it’s something that has garnered a fair amount of bipartisan support, but is a very different approach. So how do – how do some of these different pieces get worked out and where are the edges rubbed off are going to be some of the speed bumps along the way as well.

MODERATOR: Someone else, please? Karin.

QUESTION: Yeah, I’m Karin Henriksson with Swedish daily Svenska Dagbladet. So how hopeful are you? I mean, when will we see real reform or real progress and how long will it take?

DR. MOFFIT: Do you want to start this one?

MS. DAVENPORT: I’m pretty hopeful. I mean, I think that it’s going to be a big challenge, but I think that – I think we’re going to be making a hard-fought and good faith effort on this and I do – and I’m hopeful that it’s going to happen. I think that, you know, there are some issues that are going to be a very big deal. I think that we’ve seen momentum on healthcare already. We saw the passage and signing of the Children’s Health Insurance Program earlier this year. We saw a lot of healthcare investments in the stimulus package. And I think we’ll be building on some of that momentum and I think that that’s both in terms of political momentum, but then also – those two pieces have given us some platform to build on as well.

DR. MOFFIT: I think that this – the success of this effort will depend on a number of very key decisions that are going to be made by the Administration. First, will it be a bipartisan effort? I mean a legitimate bipartisan effort. And what I mean by that is you don’t get a couple of liberal senators --

MS. DAVENPORT: That might mean (inaudible), for the Republicans as well. (Laughter.)

DR. MOFFIT: (Laughter.) You know, yeah but – you know, it’s a very, very key thing. You know, it’s one thing to say that I can depend upon the ladies from Maine and Arlen Spector, but –and to get a bill passed you’ve got to have something that is real here, a bipartisan agreement. I think if it is a bipartisan agreement, there’s a chance for serious healthcare reform.

The second thing is, frankly, is there going – the actual – I think the success of this will be decided almost exclusively in the Senate. It is the Senate that is going to make the key decisions in this area, not the House. The House will pass whatever the House passes. In the Senate, because of the structure of the Senate, the nature of the Senate’s debating rules, the potential for a filibuster – in the Senate, if you don’t have 60 votes, you really can’t pass anything. And so it’s not a majority rule institution. In the Senate, if there is agreement in the Senate among some of the key members of the Senate on both sides of the aisle to agree on a bill, I think that there’s a chance there.

I think the other thing is besides that, beside that procedural question, those procedural questions, I think it will pass if they’re – if they keep the legislation focused on what – on areas where there is, in fact, a genuine consensus in the country. Now, the President has actually – actually outlined a couple of those areas. I think that they could be very significant. One is the President has said that he wants a healthcare reform that will enable all Americans to be able to keep what they have today. That is to say if they are satisfied with what they have today, that they will not be coerced into something else, that they will have a matter of personal choice. I think that’s critical.

The second area where I think there is real consensus and there’s no debate is that if we’re going to spend money on people who are uninsured, the right target is low-income working families. That is to say subsidies to – for low-income families to get health insurance coverage. As far as I know, as far as I know, I don’t know any serious person in either the House or the Senate who does not agree with that principle. And I think if you were able to do those two things, you could have a major impact on the future of the healthcare system.


QUESTION: Hi, it’s Frank Aischmann, German public radio. My question is – I mean there are different healthcare systems all over the world. Good systems, you can debate a lot, take Germany, Great Britain, whatever. What are your specific challenges here? Why don’t transform your system, take these role models, and adopt it?

DR. MOFFIT: Well, I’ll start. I’ll – you know, I’ll jump into this. The fact of the matter is we have many different systems in the United States. There is no such thing as an American healthcare system. It does not exist. People talk about the healthcare system and then there are specious articles written sometimes in professional journals comparing the American healthcare system --

QUESTION: (Off-mike.)

DR. MOFFIT: All right, okay. But what we have – we have Massachusetts right now and we have Hawaii, actually, which is a universal system. So actually, we got two of them at the state level. But the thing is, is that there is – as I say, there is no single healthcare system. This is governed by both federal and state law.

And I think it’s critical to understand the fact that the United States, a country of 300 million people – the healthcare system – the healthcare systems in the United States differ radically. If you go from one state to the next, you will find radical differences in the health insurance markets. You will find some very significant differences, for example, in the kinds of regulations that exist in different states. You will find very, very different social and economic and demographic characteristics of these states. And you will find great differences, for example, in the cost of medical services.

In Massachusetts, for example, Massachusetts is an outlier. It’s an outlier in the sense that it has got a healthcare system which is the highest-cost system in the United States. Healthcare costs in Massachusetts are literally off the chart. At the same time, you have Utah, which has the lowest healthcare cost in the United States. The states wrestle with different problems. In some states, for example, the biggest difficulties are not with what we would call the normal uninsured issue.

Their problems – for example, I was in South Dakota not too long ago. Their biggest difficulties are the – is the functioning of the Indian Health Service, which is a government program. But the Indian Health Service, in many states, is not a functional institution. I mean, it’s a – it’s a very poorly performing system. It is, in effect, a single-payer system for Indians, but it doesn’t work very well. However, the Indian Health System works very well, for example, in Alaska. It just does. I don’t know why, but it does. So part of the reason is that there is no single system, and the other part of the reason is, is there’s no common agreement about what a good system is.

I mean, so that’s – that’s the answer to your question. It’s not a satisfactory answer, but it’s the only one I’ve got and I’m sticking to the story. (Laughter.)

QUESTION: So what does it take to organize a comprehensive healthcare system in the United States? Do you have to change the Constitution, or what will it be? What do you need?

DR. MOFFIT: You have to have people agree with it. You have to have people who are willing to say yes, I think we ought to do X, and whatever X is. And that is almost – and that has been elusive. The Clinton Administration proposed a comprehensive healthcare reform and it became very unpopular. It became so unpopular the Democrats lost the Congress over it. So yes, you have to just convince people that you’ve got the right ideas. Now if you can do that, you’ll do fine even if you have to get 60 votes in the Senate. But you’ve got to convince people that you’ve got a better idea. And one of the reasons why I think that, you know, you can get serious healthcare reform if you tell people that they can keep what they have and what they like, you can get from here to there if you practice the politics of addition. But don’t tell them that you’re going to take things away from them, because Americans don’t want to have things taken away from them.

MS. DAVENPORT: I guess I would – when you asked your first question, I just had a very different way of thinking about it, which was, I guess, more of a cultural piece. You know, there’s plenty of data on how poorly the U.S. healthcare system performs compared to other countries, but – across a range of measures. But if you look try to build a case doing that, the public just simply doesn’t believe you. That even if you have the data, that really by using that as sort of how you start your argument, you discredit everything that comes after that in terms of your idea. I think that we have, and maybe it’s because we have oceans on either or whatever, but even in this very globalized world, I think we have this kind of cultural thing about think that, you know, we’re not – we’re not that interested in learning on how they do it some place else.

As it happens –countries all over the world deal with a lot of the same problems that we do. And obviously an aging population and the growth of technology in healthcare and things like that; those are cost drivers that are affecting other countries as well as the United States. But I think that there’s just a kind of cultural mental block on kind of picking up models from other places. And then I think you also have to ask where are we starting from? And it’s not like you’re just creating a new healthcare system from scratch. We have the mix of public and private and employer coverage and public programs and people who are uninsured that we have today, and where do you go from there, not, where do you find a model that you like better? I think that’s the other complicating factor.

MODERATOR: Other questions? Yes.

QUESTION: Yeah, maybe very basic question to understand the proposal. Mr. Obama proposed universal healthcare. Doesn’t that imply that you’ve got the choice to choose between, for example, employer-based healthcare or public – and a public healthcare system or isn’t that the debate was going on about?

DR. MOFFIT: I’ll take a crack at it. I don’t think the debate’s over universality. I don’t think there is a debate about universality. You could make an – Obama, for example, refused to accept the idea of an individual mandate. He took the position during the campaign that he was not going to adopt an individual mandate.

Many of his opponents in the Democratic primary said, look, if you can’t have an individual mandate or you can’t have an employer mandate, you’re not going to have a universal system; you’re not going to have 100 percent coverage. But he insisted on taking the position that he was not going to have an individual mandate. And he said that the reason why he didn’t want to do it is because he didn’t think it was enforceable. And he also said that he did not want to enforce a mandate for people to buy health insurance that was not affordable for them. So it was a very practical decision.

You could make an argument that – and he still took the position he’s in favor of universal coverage, so did John McCain. John McCain took the position, basically, that he was in favor of universal coverage. It was a different approach, but it was basically universal coverage. I don’t think the issue is universality here.

When you say people can choose where they are (inaudible), whether they could choose a public plan or a private plan, ideally that would be true. But as Karen says, we are where we are, and we start from where we start. In the current system in the United States most employees, most people under the age of 65 do not choose their health insurance. They simply don’t. They get their health insurance through the employer. The employer makes the choice of the healthcare. The employer makes a determination about what is in the contract and what is not in the contract. The employer makes a decision about whether the healthcare plan that people get will be relatively liberal with regard to the use of fee for service or whether it will be very restrictive, like a managed care plan. So the employer, for most Americans under the age of 65, is the key decision maker. So it’s not quite simple.

I mean, your question is a good question. I’m not saying it’s not. But where we are is that the decision making in the current healthcare system is not a decision making that is the decision making of consumers or individuals in most cases. The only place where people actually buy their own health insurance coverage is in a very small market called the individual market. And in the individual market the record there is very mixed. If people have a serious illness, in many cases, they cannot get coverage in the individual market because they will not be accepted by the insurance company.

In other cases, in other states it’s a much more liberal situation and things are better. But there is no – so there is really no such thing as the individual market. It varies from state to state. But it’s where we are. It’s where we are. And the decision making now is employment based or employer-based decision making.

MS. DAVENPORT: I was just wondering if you could rephrase your question actually, because were you asking whether choice --

QUESTION: Yes, just a simple, you know, the discussion. I always thought that if you – sorry, I always thought that if you have – the question is that if there’s universal healthcare that it does mean that there’s the opportunity of a public health insurance, that you can basically choose between – if you’re employer based – have your employer-based healthcare or you could choose also the public healthcare. But obviously, this is not – the discussion is about.

MS. DAVENPORT: Well, and I think if you think of the Obama health plan, I think that some of those – I think there are some key decisions in terms of how people enter a health insurance exchange and what kind of choices are available to them, that would determine how much choice there is. So whether their employer just continues to provide coverage for them, and as Bob was saying makes the choices about what health plan is available to them, or because some employers also offer a choice of plans, which choices are available to people, or if they may subsidize people to go through the exchange. I think that this is where – this is an evolving discussion and we’ll see what kinds of choices are available in terms of what the policy options are.

For folks who are buying their coverage through an insurance exchange, the idea in the Obama plan, at least, is that there would be private plans and a public plan there that somebody could choose one of five private plans or a public plan or whatever the kind of range is in their market. But I think – I think Bob’s right in terms of it’s not a question about universality, but I think that below that it’s what are the mechanisms for making coverage available to people and that’s where the choices start to come in.

MODERATOR: I think we’ll take one last question from New York – in our Center in New York.

QUESTION: Actually, I have a very quick and straightforward question, written in two parts. The first is I would like to have insight from both speakers on your – on your projection on the – when a consensus could be made? Although it was mentioned that the House – I mean, the Senate – those in the representative House will be making a major, sort of a contribution leading to a consensus. So the first part of the question is when do you think the consensus is likely to be made?

And secondly, once there is a consensus, I mean, in terms of execution – because the key point is to enter, to combine the – to include the lower income people into the coverage, so where do you think the new investment is likely to be from? In terms of allocation of this money, will it be from the tax reduction or tax increase? Thanks.

MS. DAVENPORT: I guess in terms of timing, having worked on Capitol Hill, I’d say there’s always the schedule that the committee chairmen lay out, and then there’s where you eventually get to. The plan, as far as it’s been laid out by Senator Baucus and Chairman Waxman and some of the other chairmen who are going to be involved, is largely to have bills on the floor of the House and the Senate before the August recess, and that then there would be the effort to conference through the summer in having final legislation in the fall. Whether that actually happens or whether it gets pushed more to the fall, I do think that this is a 2009 kind of activity, not a 2010 or later kind of effort.

And in terms of the – the second part of the question was where are the resources coming from, I think we – we just simply don’t have the answers to that yet. I think that we will see Chairman Baucus has made it very clear that he is interested in looking at other sources of revenue besides the one that the Administration put on the table in their budget, including the tax exclusion which we’ve now talked quite a bit about. But I think that that we know both in terms of making some of the investments in prevention and health IT and some of the other pieces that we need to have a more efficient system, and then certainly subsidizing lower income folks into coverage, that we do need to be looking at where the money is and where it’s coming from.

DR. MOFFIT: I would agree with that. I think that the – I think the decision will probably be made, if it’s going to be made this year, it’ll be made before August, some kind of an agreement to move forward in the fall. We will know one way or the other by August whether a bill will move this year. It’s not absolutely certain that a bill will move this year. I mean, it could be that, as a result of other things that the Administration has got to deal with, including the continuing financial crisis and also the energy issue that this could be pushed off to next year. I’m not saying that, but I’m just saying it’s a possibility. There’s an awful lot to handle here in a relatively short period of time. These are big issues.

I think with regard to the revenue issue, I would like to see the Administration and the Congress do a serious scouring of all the money we are spending right now in the healthcare system to try to redirect and retarget a lot of these funds to deal with the uninsured. One of the great achievements of the Massachusetts health plan was the redirection of money that was going to the uninsured through hospitals and other institutions into a pool of funding to expand coverage for the uninsured. The result of that was that they did, in fact, reach a situation where we’re looking, as time goes on, we’re looking at a 98 percent rate of insurance coverage in Massachusetts and a 40 percent decline in uncompensated care; so this can be done. But this means taking a very serious look at the uncompensated care funding that we do right now at the federal and state level, as well as some of these poorly performing programs like Medicaid, which frankly could do a much better job. But I would like to see some of the – I would like to see the Administration look at this much more seriously. But I think that that’s one way that can be handled – that the uninsured can be handled.

I will be frank, I don’t think the idea of going after the deductions for people making $250,000 a year or more – I know it’s a very populist idea, let’s go after rich people – but cutting into charitable deductions, I don’t think is going to work politically. I just don’t, especially in this environment where there’s a greater demand for charitable services in recent memory. So I just then don’t think it will. I think they will probably have to look at other sources of revenue.

MODERATOR: Ms. Davenport, Dr. Moffit, thank you so very much. Thank you all.