Obama has lured industry to the table with his vision of an expanded government role in health care that builds health industry revenues. Lobbies like America’s Health Insurance Plans (AHIP), the nation’s largest health insurance lobby, and the Federation of American Hospitals, which represents for-profit hospitals, have endorsed expansions of programs like Medicaid and the State Children’s Health Insurance Program while backing subsidies to build enrollment in private plans, which reimburse providers at higher rates than government programs.

That could expand the market for hospital and insurance services and is in line with what Obama wants. While the president has said he favors creating a new government-run insurance plan — an idea industry hates — he also has signaled that he might be willing to give it up in negotiations or have it pay rates higher than Medicare’s.

His willingness to bend could make the difference this time around. Health industry superlobbyist Michael Bromberg, who famously predicted the Clinton plan would come to naught in the early 1990s when there was heady optimism that it would happen, sees success on the horizon for Obama. He puts chances for a deal at 90 percent, based on the fact that Democrats control the White House and both chambers of Congress.

“There’s a victory out there somewhere to be had, and it’s a question of: Will some liberal Democrats overreach, and will some conservative Republicans try to blow it up?” said Bromberg, chairman of the firm Capitol Health Group. “But we should get something this time.”

Bromberg predicted success will come either because Republicans will decide not to fight it at all — and to blame Democrats when the bill comes due — or because centrists in the party will work with moderate Democrats to negotiate three or four changes that make it acceptable to the middle. “That’s really where the fight’s going to come,” Bromberg said. “And it’s going to be 10 to 12 moderate Senate Democrats and Republicans.”

The strength of the Democratic majority will play into the dynamic of reform this time around, said Chip Kahn, president of the Federation of American Hospitals, who also predicts an overhaul. Like Bromberg, Kahn worked hard and successfully to stop the Clinton overhaul plan in a Congress run by Democrats. But Kahn, who helped launch the “Harry and Louise” ads that helped undermine public confidence in the Clinton plan, says there is too much political energy on the issue this time to sink it. “I can’t see the Democratic Congress going into the next election without having acted on this,” he said. Key members of Congress are “as turned on as I’ve seen on any issue.”

As with the Medicare drug benefit in 2003, lawmakers are under intense public and political pressure to act, said Dan Mendelson, a former Clinton administration official who, like Bromberg and Kahn, is at home in the worlds of politics and business. Mendelson, now president of the consulting firm Avalere Health, says growing joblessness and loss of health coverage are making more Americans fearful that they soon won’t be able to pay the rising costs of health care.

“The biggest motivator for reform is the economy,” he says. Because Obama talked about the issue and made promises during the campaign, “people are connecting it to their own situation” and putting pressure on members of Congress to act. “They translate reform into reducing their out-of-pocket expenditures.”

Getting Past ‘Kumbaya’

The debate of the early 1990s showed that unease over unaffordable bills can be trumped by public worry over a much bigger government role in health care. Few insiders doubt the power of business, with its deep pockets, campaign donations and advertising skill, to exploit those worries to sink an overhaul.

Yet business groups so far are holding their fire — perhaps none more so than AHIP, where President Karen Ignagni has steered the group firmly in the direction of an overhaul, saying the industry will accept tough federal regulation guaranteeing insurance to all comers and forbidding insurers to set premiums based on health status of applicants.

Ignagni gets much of the credit for negotiating an industry pledge in mid-May to shave health spending growth in the next decade by $2 trillion. Although skeptics questioned how much the pledge really meant, it was a public relations coup for Obama, because it suggested that the industry wanted to negotiate rather than undermine an overhaul.

But to analysts familiar with the thousands of policy changes required to fund and execute an overhaul and the potential for backlash that exists at every step of the way, the talk that things are different now because industry has come to the table and that lawmakers feel they must deliver is unconvincing.

While it is true that there is enormous political pressure on Congress to do something about health care, that pressure may be felt more by the institution than by individual members. “Each member can be for health reform but not for that specific flavor,” said Robert Reischauer, president of the Urban Institute.

“We’re in the consensus, hold hands, sing ‘Kumbaya’ phase now, and that will change as soon as the details are made available and decisions are made about how reform is going to be paid for,” he said. “It’s going to be very expensive, and many oxen will have to be gored.”

Insurance industry analyst Robert Laszewski, president of the Health Policy and Strategy Associates consulting firm in suburban Washington, agrees. He recalled recently on his blog, “I was there in the Indian Treaty Room with the Clinton task force” on health care convened by Hillary Rodham Clinton . “Let me tell you, in May of 1993 every one of these stakeholders couldn’t wait to be part of the process and on the right side of Mrs. Clinton. The term, ‘being at the table’ was as commonly used then as it was yesterday in all of the glowing reports. Then the details came out and it got ugly.”

If stakeholder groups like doctors, hospitals and other health care providers feel threatened, they could encourage their patients to voice opposition to the plan, he said. Public support for reform could shift if the specific plan developed by lawmakers makes patients worry that “the reform will threaten my hospital, keep my doctor from having as much time as she had in the past to see me, that kind of thing,” Reischauer said.

Perhaps the biggest threat to an overhaul is its price. Given the cost, doubts about the more ambitious aspects of an overhaul — like universal coverage for all Americans — could grow like kudzu in the early summer heat.

“The concept of universal coverage is not being discussed recently, and, I think, for a reason,” Mendelson says, explaining that he doesn’t see how it could be paid for. He foresees a credible package of Medicare and Medicaid cuts of perhaps a couple of hundred billion dollars over the next decade. Financing for expanded coverage might also include things like tax increases and deficit financing, but not enough for universal coverage.

Instead, he envisions an expansion of Medicaid to cover Americans up to the poverty line and new insurance exchanges that would enroll lower-income Americans who would receive subsidies to pay their premiums.

Kahn also hedges about how far an overhaul will go. “The biggest question is how many people are going to be covered. I view the doubts as being about scope, and not about enactment.”

Pressures for Universal Coverage

Lawmakers nonetheless will feel pressure to keep negotiating for universal coverage, even as lobbyists line up outside their doors to oppose options to finance it. One of those pressures will be financial. Many analysts say the spending growth curve can only be lowered by a universal coverage system that brings everyone into an effective system of primary care that coordinates treatment to eliminate waste and delivers good preventive care. Otherwise, there’s no hope for dealing with rising health costs that choke the economy.

In addition, the historic pledge by health insurers to accept all those who apply for coverage and to do so without charging them based on health status hinges on a mandate that all Americans carry health insurance. Without that requirement, insurers won’t have the premium dollars of healthy, low-cost Americans coming into their plans to offset the costs of sicker Americans they would cover under a “guaranteed issue” system. Sicker, more-costly-to-insure Americans may be less likely to gain access to affordable coverage.

Obama may be able to sell universal coverage with the argument that everyone must sacrifice for the wider good. Persuading the industry to accept lower Medicare payment updates and to stick by its promise to hold down spending would help him accomplish that goal.

Obama’s call on Inauguration Day for a “new era of responsibility” likely will be echoed in the overhaul debate by key congressional Democrats urging employers and individuals along with industry to share in the costs of a more efficient, equitable system.

Senate Finance Committee Chairman Max Baucus , D-Mont., outlined a financing package in late May calling for shared sacrifice. “Everything’s on the table,” he insisted. “If anyone finds something on the table that he or she has a negative reaction to, I say suspend judgment. . . . Try to see if there’s a way to get to ‘yes.’”

But Democrats may have to sacrifice, too, by dropping notions of adding a government-run “public plan” to help cover the uninsured. That may be a price that Obama has to pay to assure industry that a bigger government role in health care will strengthen rather than weaken its profits. The industry fear is that whatever financial benefit it gains from having millions of new insured customers would be outweighed by having many of them enrolled in a new public plan paying stingy rates.

The sacrifice Obama is expecting would extend to many industry groups and taxpayers, as well. Paul Heldman, an analyst with the Potomac Research Group investment firm, gives almost a 50-50 chance of passage to such an approach.

He says a 10-year package of that kind might include as much as $200 billion in hospital cuts; up to $150 billion in cuts to Medicare’s private health plans; up to $75 billion in Medicare and Medicaid cuts for prescription drugs and biotech products; $90 billion in Medicare cuts for home care, skilled nursing and other post-hospital care; $50 billion in cuts for “bundling” doctor and hospital payments and similar payment revisions; $100 billion or so in assessments on employers; and $300 billion from higher taxes on wealthy Americans, including from scaling back the exclusion of their health benefits from income taxes.

Sacrifice can only go so far, however. “There have to be more winners than losers” in industry to support such a package, Heldman notes.

A package that involves acceptable trade-offs for industry will have to be carefully assembled. Democrats at the center of the effort, like White House Office of Health Reform Director Nancy-Ann DeParle and Finance Committee staffer Liz Fowler, have worked in private sector health care as well as in government, which means they have an understanding of and credibility with the companies to put together a package that the industry can tolerate.

If Obama can pull it off, he may find — as Bush did in 2003 — that if legislation is written in a way that boosts the revenue of health industry interests like hospitals and drug companies, a bigger government role in health care need not be a deal-killer.