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Danger ahead for health care law?

  • Fareed Zakaria says extending health coverage to millions of Americans is a good thing
  • He says that there's a danger the health cost containment features won't materialize
  • He says Democrats need to show they're serious about fixing out-of-control costs
  • He says Republicans may have driven themselves into a corner through obstructionism

Editor's note: Fareed Zakaria is an author and foreign affairs analyst who hosts "Fareed Zakaria GPS" on CNN U.S. on Sundays at 10 a.m. and 1 p.m. ET and CNN International at 2 and 10 p.m. Central European Time / 5 p.m. Abu Dhabi / 9 p.m. Hong Kong

New York (CNN) -- The health care law signed Tuesday by President Obama is designed to provide health insurance coverage for tens of millions of uninsured Americans but it carries a big risk, according to analyst Fareed Zakaria.

"Most Americans like the idea of expanding access and giving people universal coverage," Zakaria said in an interview with

"It seems like the right thing to do in a rich country. But everyone feels the health care system is broken, and expanding this health care system seems fraught with danger -- the danger being that you will have an even more out-of-control system with costs that will just multiply."

Zakaria, author and host of CNN's "Fareed Zakaria GPS," spoke to CNN on Wednesday. Here is an edited transcript:

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CNN: What do you think the impact of the bill's passage will be on Barack Obama's presidency?

Fareed Zakaria: It strengthens it for sure. I think that people who thought that it would be better for him not to pass something miscalculated. ... He had already committed to it. If it didn't pass it would be his failure and in this case at least he has the political success. And then we get into the debate about the policy. Is it popular and will it help him? ... My own sense is that everything hinges on whether the reform part of this bill has teeth. ...

The reason people are skeptical is that they understand the access part, they understand how the expansion works, which is obviously going to be expensive. They don't understand how the cost containment works, and frankly the cost containment is the less certain part of this health care bill. And so everything, to my mind, rests on whether that cost containment can be made real.

CNN: In what way does this need to be made real?

Zakaria: Eighty-five percent of Americans have health care and 15 percent don't. For that 85 percent, the great health care crisis is spiraling premiums and out-of-control costs, and so the question is what is the mechanism by which you can bring costs down? There are basically two ways -- either you use a market mechanism, which is that the consumer of health care has to pay more of the costs and therefore that direct link between the consumer and the costs will force costs down. The consumer will exercise his buying power the way he or she does with every other good.

The second method is through some kind of government control or rationing of the process. And that's inevitable in a system where 50 percent of all health care is paid for by the government.

CNN: And the other mechanism, the market mechanism, how would that work?

Zakaria: To really make that work, you would probably need to get rid of the tax subsidy to employers. .... Companies that provide health care to employees get a huge tax deduction that costs the government $250 billion a year. We as consumers really have no idea of what the services, the X-rays, the doctor visits cost. As a result, there's an incentive for costs to really spiral up, because the consumer really doesn't know what they cost and doesn't ultimately really pay for them.

I hate to use the word comparison shop when talking about health care because it's not quite like buying a flat screen TV, but still there is a reality that the information in the system is so shrouded in mystery. Most people don't know what a CAT scan costs but would think nothing of going in to get one and demanding to get one if they have a severe headache.

Anything that makes you more aware of the price, and makes you exercise some choice in terms of where you get the services would likely rationalize the system and take unnecessary costs out of it. ...

CNN: Is there anything in this bill that accomplishes these two objectives?

Zakaria: It's sort of a glass half full, glass half empty situation. There's more in here about cost controls than in any previous expansion of health care since the creation of Medicare. But objectively you'd have to say there isn't a lot.

What there is takes one of two forms. Either the cost containment mechanism or the taxes to pay for the expansion of health care have been pushed out into the future on the theory that Congress then would have the political courage to do what it now doesn't have political courage to do, which is an interesting theory.

The second is that there are mechanisms that would allow real cost containment but they are surrounded by qualifications and exceptions. So you take the Medicare commission, an independent board that would try to look at Medicare costs and really be the kind of rationing board that I was describing -- nobody will call it such because it will be politically unpopular -- but in fact that's what it will do. It will look at procedures and determine whether they're unnecessary or counterproductive.

But if you then read some of the language instituting the commission, it says oh, it won't deny services to anyone, basically language to the effect it won't in any way curtail any kind of services or ration care. But of course, if you're not rationing care, how would you bring costs down?

What's worrying about all of the cost containment is you have this feeling, given the history certainly of the United States Congress, that this is fairly unpopular stuff, and there will be caveats and exceptions and delays to all this. But the expansion of coverage to 30 million people and government paying for those who can't afford it will go on full speed ahead.

CNN: Where do you think this is headed?

Zakaria: For me this has been a battle between the heart and the head. It would be a great thing for America to extend health care insurance to all its citizens. I do think it brings us into line with the rest of the industrialized world. It has economic value.

I think part of the anxiety people in America feel about globalization and the economy is that there's a sense of a lot of churn. People are going to switch jobs, switch careers, move around. And in that situation, especially if you have a family, if you feel as though the loss of a job means your children will lose access to their doctors, it creates a lot of anxiety. And that makes people less risk-seeking in a capitalist sense. They become very conservative, less willing to try new jobs, careers, cities.

So my heart tells me this is absolutely the right thing to do, but my head looks at all these costs, and says where is the real reform, where is the real cost containment system? I guess I hope my heart wins and that these mechanisms all work.

CNN: The question has been raised about what's next on the agenda for Obama and the Democrats. What else can they realistically hope to accomplish this year?

Zakaria: I think that they've got many opportunities to do lots of things. I don't accept the idea that this sort of exhausts them. I think actually this empowers Obama.

I think he should again make the case to the Republicans that he wants real bipartisanship, that he wants their input and that he should try to meet them halfway.

We can have debates about whether he went far enough, but I think it's fair to say that the Republican Party, broadly speaking, has made a decision that they want to be highly uncooperative.

I think they are driving themselves into a corner because they come across as the party of obstructionism rather than the party that can plausibly make the case to be entrusted with the reins of government.

Whether or not Obama can do big controversial things like cap and trade would be a different issue. But I can't see why he wouldn't be able to achieve something significant on education...

But I hope the Democrats really do view this health care bill as a test of their mettle and their stewardship as the majority party of the country and follow through on all the reforms that they have talked about and, in part, enacted. Because there's a real danger that in the next year or two, we will start repealing and have exceptions made to all the tough parts of the bill, all the reform and cost containment measures.

That's where the Democrats really have to keep in mind that if this has the effect of exploding the federal budget, and if it can be plausibly claimed that this bill was the tipping point, there's a real danger that people will not trust the Democratic Party in a basic task of government, which is stewardship of the people's money.

CNN: If the Republicans have basically declared that they're going to obstruct, why do you think that Obama should meet them halfway?

Zakaria: It's better for the country to have legislation that is more broadly embraced. Often you have better legislation -- the task of getting the last 10 Democrats on the left, it does skew the bill. Whereas if you're getting 10 Republicans from the center, it has the effect of actually centering the bill more, which is where the country is to a larger extent ... and politically, he's the president of the whole country and he should be trying to bring the country together in some way. ...

It's in the spirit of the American system to attempt cooperation and bipartisanship even though it's not always going to be successful.