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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

A Tension on Health Reform



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The White House continues to insist that the excise tax remains intact and that it is fully capable of encouraging cost containment. In an op-ed, Peter Orszag and Nancy-Ann DeParle, two of the most impressive public officials working today, wrote the following in the Washington Post:

For example, skeptics have pointed to the five-year delay, relative to the Senate-passed bill, that the president has proposed for the excise tax on “Cadillac” health insurance plans — a key bipartisan measure to contain health-care costs over time — as further evidence of the administration’s wavering fiscal resolve.

Here, the first thing to observe is that the key cost-containment pressure from the excise tax involves neither its start date nor the initial dollar threshold at which it takes effect, but rather the rate at which the threshold grows. And, just as with the version in the Senate-passed bill, the president’s excise-tax proposal would increase that threshold more slowly than the rate of health-care cost growth. As a result, firms would have a gradually increasing incentive to seek higher-quality and lower-cost health plans.

This is not an entirely convincing rebuttal. While it’s certainly true that the rate at which the threshold grows is important, surely some of the cost-containment pressure is lost when we raise and delay the initial threshold. But Orszag and DeParle make an excellent point all the same. Yet it’s not clear that they’ve made this point clear to congressional Democrats. Sheryl Gay Stolberg and Robert Pear of the New York Times report that Pelosi has been telling her caucus something very different:

While Ms. Pelosi said 80 percent of the excise tax would be eliminated, some Democrats remain unhappy with it. Representative Dan Maffei, Democrat of New York, warned that the tax “would still hit middle-income people in my district.”

Another New York Democrat, Representative Jerrold Nadler, said Ms. Pelosi told skeptical Democrats, “When you win 80 percent, take your victory.”

Granted, it’s possible that one can eliminate “80 percent of the excise tax” (this strikes me as an imprecise characterization) and retain the key cost-containment pressure. Note, however, that the “key” cost-containment pressure doesn’t give us a good sense of the numbers involved. Will it be enough to yield the savings promised? 

We’ve heard a great deal about the use and abuse of the filibuster. I actually don’t think that the White House is engaging in a particularly egregious practice here. Though I think the Senate health bill is wrong for the country, it did receive 60 votes. If the House passes this deeply flawed legislation, I don’t see why making changes to the funding mechanism through the reconciliation process wouldn’t pass parliamentary muster. That said, I think that House members should give serious thought to whether passing this legislation is a wise idea. I imagine they’re doing just that. 

Another complicating factor: as Alan Abramowitz’s analysis suggests, it seems very likely that 20 House Democrats will lose their seats in the event that the president experiences a massive rebound in popularity. If he does not, the losses could be even greater. Basically, about two dozens members of the House Democratic caucus face almost certain defeat. Should they try to save themselves by appealing to conservative sentiment in their Republican-leaning districts, or should they do what they can to help the president and thus improve the broader environment for Democrats? It’s kind of like the prisoner’s dilemma, only with more at stake. 



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