Trying to Save Health Care Reform

Posted: September 10th, 2009 | Author: | Filed under: Economics, Politics | Tags: , , , , | 1 Comment »

The speech exceeded expectations. As I’ve argued in earlier posts, there are only two routes to achieving GUARANTEED universal coverage: an individual mandate and an employer mandate, both with subsidies for the poor. There are also only two routes to finance those subsidies: massive regulatory overhaul or economies of scale in a state-supported public insurance system. Any plan that tries to compromise by having a mandate without a finance mechanism won’t be able to achieve universal coverage goals; any plan that doesn’t have a mandate isn’t even trying.

Since the presidential campaign, Obama has promised to achieve the liberal goal of universal coverage while speaking the conservative language of efficiency, positing universal coverage as a possible byproduct. Then, when challenged from the Left, he would try to hedge it by offering universal mandates without a finance mechanism, afraid to commit to either regulatory overhaul or a public option.

That changed last night. As I said he needed to, Obama came out strong first for the moral goal of universal coverage. Secondly, he came out strong on specifics, for an employer mandate and subsidies for the poor, relying on a public option to drive those costs down over time. (Until the public option kicks in four years from now, the state will just offer direct catastrophic care to the uninsured.) While he did suggest the public option was negotiable, he also said he would veto any bill that wasn’t universal: since the Wyden bill, which he’s rejected, is the only other universal proposal, Obama has implicitly committed himself to veto anything without some version of the public plan.

How did he get out of the political pickle of needing to water down the universal mandate and/or the public option for conservatives? By agreeing to pass all of their regulatory reforms anyway, most notably, torts reform and some streamlining of Medicare costs. This plan–which, Obama finally admitted, is just Hillary Clinton’s campaign proposal plus John McCain’s campaign proposal–now has a universal mandate and both sets of finance mechanisms. That means it will probably cost less than most of the specific plans we’ve seen floated in Congress, but I don’t think it supports Obama’s promise that the whole thing will be deficit neutral while reducing individual health care expenses.

If the plan doesn’t eliminate as much waste as he projects, the state promises to cut services. So the Obama administration will be able to fulfill its promise of deficit neutrality, but the only way to do so will be to cut services in the state-supported plans: ie Medicare, Medicaid and the public option. That undermines Obama’s pledge not to touch Medicare benefits. The way Obama achieves this fudge is by using a loose word, “cost,” to elide the distinction between the states’ finances/deficit issues and individual finances/the cost of our insurance premiums. In the process of extending coverage to the poor and sick (the most expensive risk pool) you have to spend more from one of those pocketbooks.

Meanwhile Obama plans to do is make private insurers cover some of those expensive patients, but incentivize the insurers to do so by bringing them lots of healthy people via the employer and individual mandate. When he says that his plan will “bend the cost curve,” all he means is that getting the healthy to buy insurance will mitigate SOME of hike in cost insurers have to bear in meeting the new requirement that they take all comers. Competing with the public option on price will force some insurers to take some of the new cost as a haircut on their profits. They will still pass most of it on to us. So if you have insurance, you will still see your premiums go up or benefits shrink, but not AS MUCH as they would without the public option and/or regulatory reform.

Conservatives are right to suggest that a universal mandate is a new tax; as with any taxation to fund new services, liberals have to make the argument that the new service is a public good. In other words, the goal is universal coverage, not cost-reduction, but since we want the most cost-effective way to get universal coverage, we’d rather have the public option than not. Obama made this case, but he tried to pull a bait-and-switch when it came to the implications and I dock him points for disingenuousness.

I’ll be especially furious if, when called on the bait-and-switch, he backs down on the plan itself. That’s what happened in August—Obama’s desire to be all things to all people led to people not understanding the specifics of the plan, and with him having to give away core elements to appease the angry and confused. That said, if Obama can hold all these pieces in place and stop fudging the numbers, I think this is a plan he can get passed. Fingers crossed that Blue Dog members see it that way too.

One Comment on “Trying to Save Health Care Reform”

  1. 1 I Stand Corrected - Instant Cappuccino said at 1:08 pm on June 12th, 2011:

    […] Three weeks ago, I thought we were moving towards a coherent piece of health care legislation. I was wrong. Let me review this one more time: […]

Leave a Reply