Health Care Sausage Making

If you thought the sausage-making on the stimulus was bad, wait until you see health care reform. The players are more invested in getting their way and more rigid in their opinions. Chuck Grassley seems to be mad about the Obama Administration cutting 60 worthless private tax collection jobs in Iowa (that were costing the IRS more money than the tax collectors were taking in), and folks are worried that he'll take it out on the bill. That's the silliness that we're dealing with.

Everyone's making goo-goo eyes at each other at this point, but when you get to the actual facts, there are yawning divides between the parties. Karen Ignani of AHIP, the health insurance lobby, thinks she's sketching a "deal" by offering guaranteed issue in exchange for an individual mandate. In other words, force everyone to buy health insurance and we'll sell it to everyone! But there's one missing ingredient:

The missing ingredient is affordability. And the expectation is that affordability will be guaranteed by "community rating," a policy that ends the ability of insurers to charge different customers different prices based on age, health status, location, etc. At Brownstein's forum, Ignani addressed this, too, and her comments are worth quoting:

She suggested an arrangement in which insurers and the government in effect would divide the cost of insuring the biggest risks through a combination of rating reform and public subsidies. "You have to think about the ratings and the subsidy in tandem," she argued. For instance, she noted, a pure form of community rating--in which everyone is charged the same premium regardless of their age or health status--would substantially increase rates on young healthy families (while reducing them on older or sicker people). In that instance, "you might decide well then we could subsidize those [young] individuals to cushion that," she said. Alternately, she said, you might allow insurers to vary rates somewhat based on age, but use subsidies to ensure that say, "nobody over 55 would have to pay more than 10 per cent of income" for premiums--as California did in its reform. More details on the issue are coming: "You will hear a great deal from us soon about rating," she said.

That just doesn't seem like it would work, but Ezra Klein argues that insurers are not even the main factor in affordability concerns (they take one out of every three dollars for themselves, so I'm not sure I agree), compared to pharmaceutical companies and device manufacturers and doctors and hospital associations.

So this is, simply put, a mess. And Max Baucus addressing costs by wanting to tax health care benefits, precisely what John McCain got hammered for during the campaign, is not helpful at all. I could possibly see capping the health care deduction at a certain level of care, but employers are really not the people to bargain with for revenue. It's far more important to bring down costs.

Meanwhile, Republicans are laying down markers.

Does that matter? It's hard to say. Rhetorically, the GOP has staked out a very narrow corner of opposition. Last week, Mitch McConnell, Chuck Grassley, Mike Enzi, Orrin Hatch, and Judd Gregg -- essentially, all the Senate Republicans with jurisdiction over health reform, and McConnell -- co-signed a letter to President Obama. I've obtained a copy, and it's up for download here. They draw two lines in the sand. First, they warn against using the budget reconciliation process to pass heath care. Doing so would "make it difficult to gain broad bipartisan support" and "do a disservice to this important issue." Substantively, they fear a public insurance option. "Forcing free market plans to compete with these government-run programs would create an unlevel playing field and inevitably doom true competition," they say. "Ultimately, we would be left with a single government-run plan controlling the market."

That leaves, of course, plenty of room for eventual argument and obstruction. But there's a caution worth recognizing here, too. Republicans do not want to begin in opposition. They have begun this debate by claiming that their objections lie at the margins of health reform, not at its core.

Ah, but it's on the margins where you can kill policy, and the Republicans know it. I think the health care debate is going to give me heartburn. Although one of these demands is silly. "Don't use budget reconciliation or the bill won't be bipartisan"? The POINT of using budget reconciliation is that you'd only need 50 votes. They're getting it backwards. And the Obama Administration should threaten to use reconciliation at every step to force Republicans to come along. They can either be involved in the process, or on the outside.