A Thousand Or So Words Of Despair On Health Care Reform

I may have dismissed the difficulties in paying for health care and the time frame a little prematurely. To be sure, it's a problem. Not the nature of the revenue ideas themselves - a surtax on the wealthy may work, although I'd prefer to go back to President Obama's idea to lower the charitable deduction, and Matt Yglesias explains why:

When possible, it’s better to raise money by broadening the tax base—curbing loopholes, deductions, and exemptions—than by simply raising the rates. The reason is that higher rates on a narrow base do a lot to encourage people to shift income into loopholes, which both undermines your revenue-raising efforts and also distorts the economy. Both the employer tax exclusion proposals and the itemized deductions proposal fit that good model.

The problem is that we're pretty far down the road on the various bills and we're still trying to figure out how to pay for it, which suggests to me that Congress doesn't want to make any hard choices on it. They have a bunch of ideas, but no real strategy. And they've taken the employer deduction off the table because unions don't want to give back what they already have, which makes sense for them but not necessarily the country.

One related point I'd make on this is that there is, in progressive circles, a tendency to confuse the interests of labor unions and the interests of progressivism. The two things often overlap. But they are not, in fact, the same. And that's okay. But this is very much one of those cases. The employer tax exclusion is regressive. It gives employers more power over workers. It reduces choices, fractures the system and increases health-care costs (which in turn decreases wages). Unions are protecting what they have, and that's their right. But protecting the employer-based health-care system, particularly at the expense of a regulated and integrated alternative, is not a terrifically progressive thing to do.

And without changing the incentives in health care and reversing the dynamic of doctors ordering more, insurance companies trying to pay for less and employers still paying the bulk of the costs in an inefficient way, we're not reforming health care. We're just expanding coverage and heading toward the same fiscal iceberg. Which is important in its own way, but not a full solution.

And meanwhile, as the timing of the bill slips, conservatives get emboldened and start running ads in the districts of key Senators. Blue Dogs and Conservadems get cold feet and start looking for ways to deep-six the bill. The problem in that case is that the answer to the Blue Dogs' entreaties would be more reform, which they don't want either.

The emerging bill "lacks a number of elements essential to preserving what works and fixing what is broken," 40 members of the Blue Dog Coalition of moderate to conservative Democrats wrote in a letter to party leaders. To win their support, they said, any legislation would need to be much more aggressive in reining in the growth of health care.

A public option and capping the employer deduction would go a long way for that, but they're against that, too.

Meanwhile, the White House is making all these deals with stakeholders that may have strings attached that would preserve their revenue streams and fail to rein in health care costs. Take a look at this, for example:

The Wall Street Journal reports: "Industry representatives met at the White House Tuesday with officials to consider specifics of a cost-saving agreement the industry reached last month with health-care negotiators and to discuss other concerns that the pharmaceutical industry has with the larger health-care overhaul being considered by Congress. As a presidential candidate, President Barack Obama endorsed re-importation, an idea the industry opposes. White House officials have told the industry if the larger health care bill passes, the cost savings will be so great that reimportation will be unnecessary, according to Billy Tauzin, president of the Pharmaceutical Research and Manufacturers of America." Some of the pharmaceutical companies represented at the Tuesday meeting included Merck & Co., Pfizer Inc., Amgen Inc., Abbott Laboratories and AstraZeneca.

The Wall Street Journal notes: "Sen. Bernie Sanders, an independent from Vermont, said he disagrees with any move to drop the reimportation idea. He has pushed to import drugs from Canada, where they are cheaper because of price controls" (Mundy, 7/7).

Are we going to side-deal ourselves to death here? Will we assure medical equipment makers that we will not ensure comparative effectiveness research that would align costs with results instead of the mish-mash we have today? Will we deal with hospitals but leave the full picture of how they rein in costs unanswered? Who will decide the limits to the system, and the tough choices around end-of-life care, now managed by insurers?

The major problem we are running into with health care is that the political class is so obsessed with allowing everyone to keep what they have, and not putting enough emphasis on the system's unsustainable course, that they risk wringing all the benefit for real people out of the bill, and at that point, it can tip over and die.

This isn't terribly surprising: it's not obvious what health-care reform will do for the average American. I could give you a long answer about delivery system reforms and so forth because it's my job to know these things. But it would have to be a long answer. The basic structure of health-care reform has been specifically built to avoid changing people's existing arrangements. The hope was that Americans would be convinced that their health-care coverage wouldn't change for the worse. But that's also made it hard to explain why it will get better.

One of the president's health-care reform principles is that everyone must be able to keep what he or she currently has. But that means we're not really going to change, or improve, what they have. And that means they're not getting much in the way that's new. Higher taxes aren't buying them obvious benefits. Instead, they seem to be paying the health-care bills of poorer Americans.

If support for the overall effort were more robust, the polling on the tax exclusion would matter less. People are willing to pay for things they want to buy. But though they might abstractly favor health-care reform, it doesn't seem directly related to their lives.

This is the problem of liberalism since the Great Society - people don't feel like they're getting anything for their payments to government, because Democrats have stopped pushing for anything tangible for everyone. A reform constructed to expand coverage for the poor without something tangible for everyone - like a public option to bring down premium costs and not wed people to their job for the health benefits - just will not pass. It has no shot. Because the public needs convincing that they have something at stake in this reform.