When the cynics and skeptics of health reform argue that universal health care is financially impossible or impractical, they are partly right. As President-elect Barack Obama admitted during today’s presser, “we can’t insure everyone under the current system without bankrupting the government or bankrupting businesses or states.”

Any substantive conversation about health care reform must address cost containment. Obama, for instance, has proposed implementing comparative effectiveness research, health IT, increasing transparency and ending the government’s subsidy of private health care plans participating in Medicare Advantage.

That last point is crucial. The extra federal dollars don’t improve health outcomes, they pad insurers’ bottom lines. Eliminating the subsidy would save $62 billion in five years and $169 billion in ten.

In fact, just today the Government Accountability Office (GAO) released a report which found that “insurers offering Medicare Advantage plans made $1.3 billion more in profit in 2006 than projected“:

The report looked at the MA program for 2006, the most recent year for which data are available. MA insurers reported $50 billion in revenue that year. On average, insurers earned profits of 6.6%, compared with the 4.1% they had projected. They also spent 83.3% of revenue on medical expenses, compared with the nearly 87% that was projected.

The Wonk Room has long argued that the excessive federal reimbursements to Medicare Advantage plans raise costs for beneficiaries in the traditional Medicare program, squeeze both Medicare and the federal budget, drain resources from more productive uses, and dilute the incentive for Medicare Advantage plan efficiency— “which was one of the original reasons for including a private plan option in Medicare.”

Today, during a press conference to announce his health care team, President-elect Barack Obama linked the health care crisis to the current economic downturn and suggested that any solution requires health care reform:

This has to be intimately woven into our overall economic recovery plan. It’s not something that can be put off because we are in an emergency. This is part of the emergency.

Watch it:

Obama’s health presser comes on the heals of a new Labor Department report which found that “new claims for unemployment benefits hit 573,000 last week, the highest level in 26 years.” Rising unemployment, of course, leads to “increases in the number of individuals who are eligible for Medicaid coverage, and in declining tax revenues,” forcing states to stretch their budgets (make drastic cuts or limit eligibility or benefits) to fund coverage of additional enrollees.

To help states fund their ever-expanding Medicaid programs and stimulate their economies, Democrats in Congress are finalizing “the details of a $500 billion economic stimulus package” which currently allocates $50 billion to increasing the Federal Medical Assistance Percentage (FMAP).

As Angela Shubert of Stand Up For Health Care explains, “in addition to helping states pay for extra Medicaid costs, federal funding for Medicaid will also give state economies a jump start by generating new jobs, wages, and business activity” and “help state economies move out of recession and back into the black.”

Still, Obama and his health team seem to recognize that financial band-aids are not enough. “The time has come, this year, in this new administration to modernize our health care system for the 21st century,” Obama said at the press conference. “Some may ask how at this moment of economic challenge we can afford to invest in reforming our health care system. And I ask a different question. I ask, how can we afford not to?”

Later today, President-elect Barack Obama will nominate former Sen. Tom Daschle (D-SD) to head the Department of Health and Human Service and appoint Center for American Progress Senior Fellow Jeanne Lambrew to the position of deputy director of the White House Office of Health Reform.

As the Politico’s Mike Allen reports, the new White House health office “will be like a special-projects arm of the White House” designed to achieve “significant changes” in health care reform. Lambrew has advocated for these changes throughout her career, most notably in a 2005 Health Affairs article she co-authored with John Podesta and Teresa L. Shaw.

Lambrew’s approach builds on the two major existing sources of health coverage — the employer based system and Medicaid — and minimizes the fears that have toppled previous reform efforts: the loss of existing coverage, excessive government involvement, and limitations on choices. Obama has advocated similar reforms.

Indeed, this approach allows Americans satisfied with their plans to keep their existing coverage, while offering affordable options to those who need them:

- Americans lacking job-based insurance, for instance, could purchase affordable coverage through a new national insurance pool that would offer “the same private health plans offered to federal employees and members of Congress.”

- While the plan does not include an employer mandate, “employers would have access to the Healthy America insurance pool.” Individuals offered coverage through an employer would be free to decline that coverage and enroll in a plan through the pool instead.

- The plan would simplify and extend Medicaid to cover all below a certain income level (for example, 100–150 percent of the federal poverty level).

Under the proposal Lambrew developed at CAP, Americans would be required to have access to affordable coverage through their employer, a new health care exchange, and/or Medicaid, and the government would offer a refundable tax credit to ensure that nobody spends more than a certain percentage of income (for example, 5–7.5 percent) on health insurance premiums. During the campaign, Obama opposed an individual health mandate, but supported an employer mandate (with the exception of small businesses).

While at CAP, Lambrew also developed the idea of a ‘Wellness Trust’ to “carve prevention out of health insurance and take responsibility for a new, outcomes-oriented system.” The Trust would implement national prevention priorities, align financial incentives with effective practices for prevention, and place wellness ahead of sickness in allocating U.S. resources and priorities.

“The priority is to ensure that all Americans have affordable health coverage,” Lambrew writes. “Providing and improving health care for every American may be the current test of our country’s strength of conviction, as was enacting civil rights for all in the 1960s and the creation of the New Deal in the 1930s.”

On Tuesday, during a discussion about the significance of presidential leadership in achieving health care reform, historian Robert Dallek underscored the role of the presidency in shaping the political debate and helping voters get behind solutions to big problems.

Dallek suggested that since the nation is now “ready to think in larger terms” about health care reform, President-elect Barack Obama should “not speak to special interests, but to the national well being” — a technique mastered by President Lyndon Johnson during the struggle for civil rights:

What [Johnson] needed to do was to explain to them that segregation in the South not only segregated the races in the South, but it segregated the South from the rest of the nation…Johnson in a sense sold civil rights to the country as a program of national well being. And that’s what I think needs to be done now with national health care.

Watch it:

As civil rights served the national well being, comprehensive health care reform will, among other things, improve the nation’s current economic outlook. Growing health care costs are “straining families, businesses, and government budgets” and ultimately, Congress cannot help American families or address the economic woes “in a lasting, meaningful way without health care reform” that includes an upfront investment in coverage and health care infrastructure.

It’s up to the President to seize on the history of past reforms and help the public get behind solutions to big problems.

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