Crunch time for K Street on healthcare

Powerful health industry groups that have held back in their criticisms of specific reform proposals will soon have to choose whether to endorse, or formally oppose, President Barack Obama’s top  domestic priority.

The result could be a flurry of associations embracing Democratic efforts to reform the nation’s healthcare system, which would likely push the legislation to Obama’s desk. Or it could mirror the battle of the 1990s, when an array of healthcare groups crushed President Bill Clinton’s plan, subsequently leading to the GOP takeover of Congress in 1994.

Lobbying organizations representing every healthcare sector from the insurers to the drug companies to the hospitals have maintained a pro-reform stature all year.

But a health insurance industry broadside on Monday against healthcare reform could mark a turning point as interest groups position themselves for the final weeks of a lobbying battle that has been brewing all year.  America’s Health Insurance Plans (AHIP) issued a report, written by PricewaterhouseCoopers, concluding that health insurance premiums would skyrocket under a bill the Senate Finance Committee is expected to pass on Tuesday.

“This creates another hurdle on the road to reform — and not an insignificant one,” said a veteran healthcare lobbyist who asked not to be identified, citing the “sensitive” stage of the legislative process. “The key is whether [the AHIP report] is a one-time event or a domino.”

Ron Pollack, executive director of the liberal group Families USA, said if Congress fails to enact a reform package that provides coverage to the uninsured, lawmakers are still going to look at big cuts to Medicare payments to providers and insurers in the coming years.

“I don’t think you’re going to see the key industries trying to defeat reform,” Pollack said. “This [AHIP opposition] is probably an aberration.”

U.S. Chamber of Commerce Executive Vice President of Government Affairs Bruce Josten on Monday echoed AHIP’s criticisms: “This report underscores a fundamental problem with the Senate Finance Committee bill in that it does not adequately bend the cost curve and will end up costing businesses and their employees more for healthcare.”

The time to play nice and merely say the politically correct things is running short for those special interests with serious concerns about what reform will cost them. And though interest groups representing healthcare industries, senior citizens, union members and others continue to say they want reform, each special interest has its own misgivings. Moreover, the White House lacks the full-throated support of any of Washington’s major lobbying powerhouses.

By contrast, the drug and insurance industries pulled out all the stops to help Republicans create the Medicare prescription drug benefit during the George W. Bush administration.

Those two industries almost exclusively stood to gain from the Medicare bill. This time, every sector that could potentially win from healthcare reform would also have to make sacrifices to balance their gains. The fact that Democrats are insisting, as the GOP did not, that the bill be fully offset complicates the industries’ lobbying stances.

The AHIP report was triggered by the committee weakening the mandate in its bill that everyone must buy insurance while still requiring insurers to take on anyone, regardless of health status or age, and limiting their ability to vary premiums. The result, AHIP maintains, is an inadequate number of people covered and a financial incentive for healthy people to go without insurance, leading to higher costs for those who buy coverage.

AHIP President and CEO Karen Ignagni insisted that the group continues to support reform. “This is very consistent” with the group’s longstanding views, she said on a conference call. “These challenges,” she said, “can be addressed.”

The White House, Finance Committee Chairman Max Baucus (D-Mont.) and proponents of the Democratic reform bills viewed the publication of such a highly critical report as a provocation.

Ignagni had been in constant communication with the White House, but those talks may have come to an end with the leaked report that was the basis of an above-the-fold front-page article in The Washington Post.

“This is a self-serving analysis from the insurance industry, one of the major opponents of health insurance reform. It comes on the eve of a vote that will reduce the industry’s profits. It is hard to take it seriously,” White House spokesman Reid Cherlin said in a statement.

Baucus spokesman Scott Mulhauser issued a statement blasting “the same health insurance companies that have been gouging too many consumers for too long as they stand in the way of reform yet again.”

The influential seniors lobby also came to the defense of the Baucus bill — despite its own serious concerns about the legislation. The AHIP report is not “worth the paper it’s written on,” AARP Executive Vice President John Rother told The Associated Press.

Liberal groups also blasted AHIP: “Of course they’re coming out with guns blazing at the eleventh hour. They’re out to protect their money and their power, and they’ll go to any lengths,” Richard Kirsch, national campaign manager of union-backed Healthcare for America Now, said in a statement.

The counterattacks from liberal groups, the Finance Committee and the Obama administration come six weeks after Speaker Nancy Pelosi (D-Calif.) labeled health insurers “immoral villains.”

All segments of the healthcare industry have concerns about the Baucus legislation and the other Democratic bills. For the most part, however, they have done their criticizing quietly as they try to get the bills changed, rather than embarking on a public campaign to kill them.

The hospital and drug industries cut deals with Baucus and the White House to limit their exposure to $155 billion and $80 billion, respectively, under reform.

While those deals are under threat from some congressional Democrats who did not participate in the agreement, those industries have mostly worked behind the scenes to plead their cases.

Some healthcare industry groups grew increasingly anxious as Baucus’s draft bill underwent changes during its markup, especially those changes that meant fewer people would get coverage — and thus drive new business to providers and insurers.

“We all thought the Baucus bill was going to be the most centrist bill and the most workable piece of legislation,” said Mary Grealy, president of the Healthcare Leadership Council, a group of health industry CEOs. “We’re at a point where it’s not workable.”

Even though the health insurance industry ingaged in a war of words with a Democratic White House and Democratic congressional leaders may conjure up memories of the 1990s, healthcare lobbyists maintain that 2009 is different.

“I don’t see a sudden piling-on effect” with other industry groups taking out their knives to try to kill healthcare reform, said Bob Doherty, senior vice president of governmental affairs and public policy at the American College of Physicians.

Interest groups need to be careful not to push too hard or too far as they try to get their way, said Doherty, whose group wants to see huge Medicare payment cuts for physicians halted and worries about a government-run public option insurance plan.

“We’ll be calibrating our responses appropriately. We don’t want the effort to fail,” he said. “If this effort fails, and we contributed to that failure, we’re going to be stuck with the status quo.”