Ducking The Debate

I just saw Howard Dean on The Ed Show asked about "taxing health benefits" (which is an oversimplification), and while he corrected Ed Schultz by saying that the reform discussed is capping the employer deduction, he said "I don't want to get into a debate about paying for this." Sigh.

If progressive advocates aren't willing to talk about how the hell we're going to pay in the short term for health reform, it won't happen. Period. The Administration has committed themselves to a fiscally responsible approach that is deficit-neutral in the short term. Peter Orszag talks about "Medicare and Medicaid savings" without explaining that as ending these lunatic Medicare Advantage payments where insurers get to privatize the system. To the average person that rightly sounds like paying for health care by cutting Medicare and Medicaid. That just won't play politically. And nobody agrees on the other revenue raisers. At some point this will all break down.

This belt-and-suspenders approach means we are not just banking on the long-term impact from the game changers to protect the budget. We also are demanding quantifiable cuts, efficiencies, and revenue-raisers so that the budget is not adversely impacted in the medium-term. That is to say, if the long-term savings from the game-changers materialize as expected, we wind up with a more efficient health care system and a better fiscal position. If they don’t, then at worst, we have a deficit-neutral plan that will not worsen our fiscal situation.

Everyone is talking in generalities about those cuts and efficiencies and revenue-raisers, in a way that will surely doom this reform when the specifics arrive. The Council of Economic Advisers report today is great, and it states very clearly the savings to families and the general budget from enacting meaningful health care reform.

We estimate that slowing the annual growth rate of health care costs by 1.5 percentage points would increase real gross domestic product (GDP), relative to the no-reform baseline, by over 2 percent in 2020 and nearly 8 percent in 2030.

For a typical family of four, this implies that income in 2020 would be approximately $2,600 higher than it would have been without reform (in 2009 dollars), and that in 2030 it would be almost $10,000 higher. Under more conservative estimates of the reduction in the growth rate of health care costs, the income gains are smaller, but still substantial.

Slowing the growth rate of health care costs will prevent disastrous increases in the Federal budget deficit.

Slowing cost growth would lower the unemployment rate consistent with steady inflation by approximately one-quarter of a percentage point for a number of years. The beneficial impact on employment in the short and medium run (relative to the no-reform baseline) is estimated to be approximately 500,000 each year that the effect is felt.

Expanding health insurance coverage to the uninsured would increase net economic well-being by roughly $100 billion a year, which is roughly two-thirds of a percent of GDP.

Reform would likely increase labor supply, remove unnecessary barriers to job mobility, and help to “level the playing field” between large and small businesses.

All of this is true, and makes health care pay for itself. One that doesn't appear in the bullet points of the executive summary is that wage growth would likely ensue because your raise is being plowed into paying for unaffordable employer-based health care.

But as long as the commitment to deficit-neutral policies in the short term remains - and there aren't 60 Senate votes for an unfunded mandate, regardless of what the President wants, which is why Orszag is saying this - you're going to have to find the money. And everyone shies from that debate. You see Ed Schultz, who plays a liberal on TV, get all worked up about "taxing health benefits" because the unions, frankly, don't want their hard-bargained health care benefits touched. In truth, capping the tax exclusion makes sense because it's a huge cash windfall ($246 billion in 2007 alone on this subsidy), but it runs into dicey politics. So does capping the charitable deduction. So does a value-added tax. So does any revenue-raiser, and so do cuts to Medicare and Medicaid, especially when they're explained so horribly.

Howard Dean needs to talk about how the hell we're going to pay for this. So do progressives generally. We always shy away from the responsible taxation argument, and it's about to kill health care reform.