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Obamacare’s Partisan History



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A blizzard of post-SCOTUS commentary, from the Left, expresses the view that Obamacare was an attempt at bipartisan compromise from Democrats, and that, if Obamacare goes down, it’s No More Mr. Nice Guy time from the Dems, who will start an all-out push for single-payer health care.

But a review of the history shows that it was Democrats, not Republicans, who scotched efforts to forge a bipartisan health-reform compromise. The reason that Democrats liked Romneycare as a template for national reform is because Romneycare, as a state-based plan, contained no changes to the big federal entitlements: Medicare, Medicaid, and the tax exclusion for employer-sponsored insurance.

Liberal commentators are fantasizing when they argue that a state-based approach to universal coverage, like the one in Massachusetts, would have been palatable to conservatives at the national level. Allow me to explain.

If you’re a governor, and you’re trying to improve your health care system, you are severely constrained by federal programs and federal laws. You can’t do much to reform Medicaid. Medicare dominates the system. The employer tax exclusion unnecessarily ties health insurance to employment, and creates the pre-existing condition problem.

Hence, a state-based approach to universal coverage must, by necessity, work within the federal constraints of Medicare, Medicaid, the employer tax exclusion, and myriad federal regulations. That’s why few governors—Republican or Democratic—have made any headway on the issue.

Indeed, a big part of the appeal for Democrats of adapting Massachusetts’ reforms to the federal level was that doing so required no structural changes to the three big federal entitlements.

But adding on new federal health-care entitlements, without fixing the existing ones, was reckless from a policy standpoint. Any serious federal approach to health-care reform must tackle runaway spending in Medicare and Medicaid, and reform federal laws—especially the employer tax exclusion—in order to make the insurance market more efficient.

#more#Democrats could have easily gained bipartisan support for a proposal that reformed entitlements along with expanding coverage, but once Al Franken gave them a 60th vote in the Senate, they felt they didn’t need to:

Hence, a bipartisan health-care agenda at the federal level will necessarily look quite different than one at the state level. If liberals had bothered to ask, they could easily have elicited bipartisan support for a proposal that [expanded coverage using serious entitlement reform as a funding source].

But they didn’t. The Democratically-controlled House passed its plan in 2009 with nearly zero Republican input. In the Senate, the Gang of Six—Democratic Sens. Baucus (Mont.), Conrad (N.D.), and Bingaman (N.M.), and Republican Sens. Grassley (Iowa), Snowe (Maine), and Enzi (Wyo.)—failed to come to an agreement because the Republicans were concerned about the bill’s dramatic increase in taxes and spending…

Simply expanding coverage without raising taxes would have been enough, as contemporaneous reporting makes clear. But the Democratic leadership had no interest in a bipartisan deal.

Universal-coverage activist John McDonough, in his book Inside National Health Reform, recounts that Max Baucus’ original November 2008 blueprint for health reform “had made known [Baucus’] intention to use changes in the tax treatment of health insurance as his major financing source to pay for reform.” As Baucus put it in his blueprint, “It is time to explore ways in which tax incentives can be modified to distribute benefits more fairly and effectively…This could be done by limiting or capping the tax exclusion based on the value of health benefits, or as an alternative, based on a person’s income—or both.” A salutary idea.

But the President, and Senate Majority Leader Harry Reid (D., Nev.) were having none of that. As Roll Call reported at the time, “According to Democratic sources, Reid told Baucus that taxing health benefits and failing to include a strong government-run insurance option of some sort in his bill would cost 10 to 15 Democratic votes; Reid told Baucus it wasn’t worth securing [Republican] support.”

McDonough, who was on the inside during these discussions, notes that Democratic leaders felt that it was unnecessary to solicit Republican support because Democrats had 60 votes in the Senate. “Reid’s directive, backed by the White House and supported by the House, was motivated in part by the seating of Minnesota’s Al Franken, the Democrats’ elusive sixtieth vote, meaning that Republicans were no longer needed to pass a bill. This directive, though, left Baucus’s plan with a gaping financial hole.”

Democrats, unwilling to budge on broader reform, then tried to ram through a partisan expansion of coverage, with substantial tax increases and an individual mandate, and zero structural reform to Medicare, Medicaid, and the employer tax exclusion. They got what they wanted. But blaming Republican intransigence for this outcome is myth-making, pure and simple. The blame goes to left-wing Democrats, who refused to entertain a more balanced approach to health reform.

Put simply, liberals’ principal goal was and is universal coverage, and conservatives’ principal goal was and is entitlement reform. These two goals could have been simultaneously accomplished in a bipartisan bill, but liberals had no desire to reform entitlements.

More at my Forbes blog.

 Avik Roy is a senior fellow at the Manhattan Institute and the author of The Apothecary, the Forbes blog on health-care and entitlement reform. You can follow him on Twitter at @aviksaroy.



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