Wanted: More Reform In This Reform

For liberals, the public option has become a line in the sand. Given that the public option is carefully circumscribed and not open to everyone who may want to choose it, I find that more curious than ever.

President Obama and leading Democrats have stressed that people who like their employer-sponsored insurance would be able to keep it, under a health care overhaul. But they haven't emphasized the flip side: That people who don't like their coverage might have to keep it.

Under the main health bills being debated in Congress, many people with job-based insurance could find it difficult to impossible to switch to health plans on a new insurance exchange, even if the plans there were cheaper or offered better coverage. The restrictions extend to any government-run plan, which would be offered on the exchange [...]

Democratic lawmakers and administration officials say the restrictions are critical to maintaining a strong employer-based insurance system, which covers 158 million Americans.

But critics argue that the rules run counter to suggestions from health care reform advocates that an overhaul could provide people with a broader choice of insurance options. The rules, they say, could be especially unfair to some lower-income workers who are enrolled in costly job-based insurance. Also, they argue, the restrictions would hurt the proposed public plan by limiting enrollment.

Why are the Democrats putting up these firewalls? For years now, they have professed to have learned the lessons of 1994 by stating that "if you like what you have, you can keep it." That's been called the "beauty" of the current plan by people like Howard Dean. But what it means on a practical level is that the employer-based system, with all its inefficiency, must be sustained, in this case through forcing workers to accept their employer-based coverage. There are other reasons, too, which Ezra Klein lays out.

The political reason is that people like what they have, or are at least scared of what they don't know, and are thus skeptical of any health-care reform plan that would change their current arrangements. One of the goals of health-care reform, in fact, is to maximize employer-based coverage, which will be accomplished through the employer mandate. If employers could simply move over to the exchange -- which would probably be quite a bit cheaper for them -- then a lot of people will find their current insurance changing, and reformers don't want that.

The economic reason is that the exchange is where the subsidies live. If you make $30,000 but you work full-time for The Washington Post, The Washington Post pays for the bulk of your health-care coverage. If you were moved over to the exchange, you'd be eligible for pretty significant subsidies. That would make health-care reform costlier to the government, which would in turn make it tougher to pass. Another way of putting this is that the fewer people on the exchange and using subsidies, the cheaper health-care reform will be.

And the policy reason is that if the exchange is open to all employers in the first year, it's likely that the employers having trouble affording health-care insurance -- that is to say, the employers with sicker and older workforces -- will quickly buy in, while the young, cheaper employers won't. That could leave the exchange with a bad risk pool and thus high costs.

It's important to note that Ron Wyden is trying to change this. He's trying to allow individuals who get coverage through employers the choice to buy coverage through the insurance exchange. It's technical, but something that progressives ought to get behind.

But this issue with the insurance exchange firewalls is symptomatic of a lot of the moving parts of the health care debate. Reformers want to cut the internal costs from the current system, and are making deals with providers to do so. But in so doing they're giving up even bigger potential cost savings.

If only that were true. Far from being "game-changers," those agreements are the same old Washington game of bribes, backroom deals, profiteering and protectionism -- and a harbinger of what health care will look like if the president’s reforms succeed.

In June, the pharmaceutical lobby PhRMA agreed to give 50 percent discounts to seniors in Medicare's "doughnut hole," where enrollees now pay 100 percent of their drug costs. President Obama hailed the agreement as a "significant breakthrough," while PhRMA spun it as their $80 billion contribution toward health care reform.

Yet the PhRMA agreement would not save taxpayers $80 billion. It would cost them $80 billion, and then some.

Under the agreement, the full price of each drug would continue to count toward seniors' catastrophic deductible. As a result, even more seniors would exceed that deductible, after which taxpayers would pay 95 percent of their drug costs. Obama also agreed to oppose stricter price controls for government purchases. PhRMA members agreed to cut their prices for seniors only because Obama agreed that taxpayers would buy more drugs at higher prices.

I know, it's from Cato, but the guy's not totally wrong. For instance, in the Senate HELP Committee markup, biologic drugs were given 12 years of patent protection before competition from generics kicks in. This was a defeat for the Obama Administration, but even the victories have strings attached.

Even the revenue mechanism in the House, a surtax for the wealthy, is the result of a political concession, albeit one that Republicans walked into and ought to own (Republicans demonized sensible taxes for so many years that wealth taxes are really all that's left). The truth is that we have this fundamental paradox in the health care debate.

And that's pretty much where we are now. Democrats are making a lot of bad policy compromises because doing so is good politics. They're trying to fund the bill in the way pollsters would advise rather than policy wonks would choose. They're leaving the employer-based system alone. They're letting everyone keep what they have, even though what everyone has is expensive and inefficient, and is in fact the reason we need health-care reform.

Is it worth being disappointed about that? Sure. But legislation cannot be understood in a vacuum. The place to change the tax argument isn't in final days of health-care reform. It's in the intervening years when Republicans are attacking the very idea of taxation. Any given piece of legislation is only as good as the political culture that's produced it. Right now, our political culture isn't that good. The question is whether legislators are getting the best plausible outcomes out of a badly compromised process.

As Ezra says, we have a terrible political culture, and you're starting to see the results. If 30 million Americans get health insurance and you don't add a penny to the debt, you make that deal. And cementing something like a public insurance option into policy, given that it can only expand, which is an easier lift politically, is a good bargain as well. But the counter-intuitive compromises are a bit hard to take.