Rupert Cornwell: Healthcare is Obama's greatest test

It's a battlefield of competing interests that have stakes in the system as it stands

For Barack Obama, this is the big one. Not hauling the global economy out of recession, or saving his country's banking system, or proving there is life after death for Detroit car makers or bringing peace to the Middle East. No, I refer to his pledge to remake the dysfunctional, wasteful and ever more unaffordable American healthcare system. There will never be a greater test of the new president's way of governing.

Obama has been in charge for less than five months, but his style is already clear. Clinton was all brainstorming and touchy-feely empathy, while George W. Bush went by his gut, never listening to anyone who disagreed with him. Obama, however, does things differently.

He has the intellectual confidence to revel in the clash of opinions. His approach is cool, cerebral and pragmatic. He is a man of the Enlightenment, not a Romantic. He believes in reason, and the middle ground, where the best should not be the enemy of the good. If a problem is set out honestly and clearly, he is convinced that rational men can set aside ideological differences to tease out a solution. Healthcare reform will put this modus operandi to unprecedented test.

Everyone knows what the problem is. This year the US will spend 17 per cent – or more than one sixth – of its gross domestic product on healthcare, and that share will only increase in the years ahead as the baby boom generation enters retirement. No other advanced economy spends more than 12 per cent.

Yet for this colossal outlay (roughly $2.5 trillion in 2009) Americans get quite appalling value for money. A sixth of the population, 45 million people, have no health insurance at all; millions more who do have it through their employers live in terror of losing their jobs. Healthcare bills are the biggest single cause of bankruptcy and personal financial ruin.

But in the basic measures of public health – infant mortality, life expectancy and preventable death – the US lags behind other industrial countries that spend far less. A vicious circle has set in. Because insurance is so expensive, healthy people increasingly take a chance and go without it. This means that those who seek insurance are those most likely to need treatment, which only makes the cost of insurance higher.

But all this is well known. So too, is the basic goal of reform, to simultaneously cut costs and guarantee coverage for all. Elaborate schemes are bandied about; a veritable theology of mandates has developed. Should companies, through whom most Americans still receive their coverage, be "mandated" to provide insurance for their workers? Or should individuals be "mandated" to buy insurance – with tax incentives or straight government aid for those who can't afford it? The interesting question then arises, what happens if they refuse? For a Martian (or any foreign observer for that matter), the answer is blindingly obvious: some form of state run, single payer system.

Some in high places recognise this. Senator Ted Kennedy, stricken with cancer yet still the country's most forceful advocate of healthcare reform, advocates "Medicare for All", by expanding the Government scheme covering the old to every American. Obama, as usual recognising the facts, has declared that if he could start from scratch, he would go for a single payer model.

Alas this pristine world does not exist. He must cope with America as it is: a battlefield of competing interest groups that have enormous stakes in the dysfunctional but hugely lucrative health system as it stands. Among them are private insurance companies whose first loyalty is not to their customers but to their shareholders, spectacularly expensive hospitals that employ as many people in their accounts departments as in front line care, and drug companies with vast profits on the line.

For all of them, a genuine single payer system would mean the end of the gravy train. The last attempt to overhaul American healthcare, by the Clintons in 1993, was scuppered above all by a clever TV campaign by the insurance companies, depicting the plan as big government run amok, trampling on individual freedoms.

Much the same is already happening now. A group called "Conservatives for Patients' Rights" is running ads featuring 'victims' of Britain's NHS and the Government-operated scheme in Canada. You can bet that the insurance companies, the drug companies and everyone else with a stake in the status quo are quietly praying this scare campaign succeeds too.

And it may. The fiercest debate right now is over whether a government insurance scheme should be set up as a competitor for the private insurance companies. The latter cry foul: the public sector alternative would be under no obligation to make a profit, they protest, and would use the government's clout to drive down drug prices and fees for services. That of course is the entire object of the exercise. But we now have the absurd spectacle of backers of the government-backed alternative offering to hobble it, to appease opponents for whom it is the thin end of the socialist wedge.

As for Obama, he's been behaving true to form. He has, naturally, presented the case for healthcare reform brilliantly. He has displayed his faith in reason by inviting all parties to a debate to the White House, where they pledged to work together to massively reduce costs – alas, without any detail of how that might be achieved. Obama says he supports a government-run insurance scheme, but has made clear a single payer scheme is simply not feasible.

He may be right. Some myths are almost impossible to eradicate, among them the ingrained American assumption that the private sector generally knows best, and the less the state meddles in the system, the better – even if that approach flies in the face of the universally acknowledged deficiencies of the US healthcare system.

A mountainous task awaits Obama. But he, and probably no future president for that matter, will never have a better opportunity than now. The economic crisis has made plain that the private sector does not invariably know best. His popularity is high, and the opposition is in disarray. For once, the American public is prepared to give government a chance. For the measured and pragmatic Obama this is surely the moment to go for broke.

r.cornwell@independent.co.uk