It is received wisdom among Democrats that President Clinton’s health-care plan failed in 1994 in part because he gave his opponents too much time to publicly dissect it. President Obama has been skilful in applying that lesson while hustling through his own health-care package this year. The administration has worked closely with congressional allies to keep the grim reality of what they have in mind out of public view for as long as possible.
But this kind of political maneuvering has its limits. As key Senate committees rush to push through the legislation before the July 4 recess, it is no longer possible to hide the ball. Details have started to emerge in recent days, and it is no coincidence that the political terrain has started to shift perceptibly. And the more the broader public learns about what the Democrats are contemplating, the less likely it is that the bill will pass.
The Kennedy-Dodd draft bill was the first to find its way into the public domain, and it is wall-to-wall government regulation, mandates, subsidies, and entitlement spending. Here’s one example of the massive governmental overreach it represents: The bill would allow states to block licensed, qualified insurance companies from offering coverage to citizens in the “gateways,” which are single-state or multistate insurance exchanges intended to help connect consumers with a broad selection of competing providers. The states’ability, in effect, to bar some competitors from the marketplace is guaranteed to become an instrument for protecting politically connected insurance interests while stifling innovation, shortchanging consumers, and inflating costs.
Then there’s the elephantine expense of the program. The Democratic plans envision providing new subsidies for the purchase of insurance. The Kennedy-Dodd bill would allow households with incomes of up to 500 percent of the poverty line (meaning $110,250 for a family of four in 2009) to qualify for federal support. Most estimates put the cost of such a program at well over $1 trillion over ten years.
For months, President Obama has said he would pay for this new entitlement by “bending the cost curve,” but he has so far failed to present any credible plan to do so. Instead, on Saturday, he proposed to cut Medicare and Medicaid reimbursements by an additional $313 billion over ten years — on top of the $309 billion in cuts he proposed in his 2010 budget plan.
Imagine that a Republican president had tried to cut Medicare and Medicaid spending by $625 billion over a decade. We doubt the story would have been relegated to the back pages of the major newspapers, as President Obama’s proposal was yesterday. Moreover, in the unlikely event these cuts should be adopted by Congress, that would not fulfill the president’s commitment to curb rising health-care costs, as a Washington Post story claimed yesterday. These cuts in Medicare and Medicaid payments are nothing more than reimbursement reductions with no empirical or economic basis to justify them. They will not bend the cost curve; instead, they will shift even more costs onto consumers as doctors and hospitals fleeced by the feds look to make up the difference elsewhere.
Fortunately, some hospital executives and other players with skin in the game are starting to grasp that the president’s budget-cutting proposal provides a bitter foretaste of what can be expected after a takeover by Washington. The government always promises painless savings through trimming waste and inefficiency, but what it always delivers is a regime of arbitrary price controls. The result will be to drive doctors out of the profession and hospitals out of business, meaning fewer choices, higher real prices, and longer waits for care.
The primary alternative to deep cuts in Medicare and Medicaid fees is Senator Baucus’s proposal to impose taxes on employer-paid health-insurance premiums. Fixing the tax treatment of health insurance is necessary to build a true marketplace, but Senator Baucus’s main interest is raising revenue for a government takeover, not offering market-based reform through which revenue would be returned to consumers. And to bring in real money, Senator Baucus will have to tax the middle class and unions as well as the high earners.
Speaking at the American Medical Association yesterday, President Obama promised a painless plan with no costs to the middle class and protections that would allow anyone who likes his current coverage to keep it. The details of what Democrats are pushing through Congress tell another story. To pay for Obamacare, Congress must either impose deep, cost-shifting cuts in Medicare, thereby raising insurance premiums, or they must raise taxes on the middle class. Neither measure will be easy to pass. Moreover, employers, not consumers, will get to decide where their workers get coverage. In practice, that means that tens of millions of people are going to be forced out of their current plans, which they generally like, and into a government program.
In short, Congress’s deeds are at odds with Obama’s words; it is little wonder that fissures are starting to emerge in the Democratic coalition. President Obama has made a lot of fine promises on health care; Nancy Pelosi and Harry Reid are getting ready to stick a shiv in them. Republicans should bear witness, and then get to work producing better solutions.