Opening minds or closing ranks?President Barack Obama is summoning Democratic and Republican congressional leaders to a health care summit on Feb. 25. The president has already signaled that he will not discard the House and Senate bills, so Republican ideas remain in the wilderness. The meeting is apt to be more about digging in than opening up.
Douglas Holtz-Eakin, Paul Howard
February 11, 2010
The public deserves better than a photo op for these health care bills. They represent a new "achievement" in terms of fiscal gimmicks, payoffs for special interests and vote-buying bribes. For starters, the Democrats' legislation can claim to be deficit-neutral only because during its first decade it offers 10 years of taxes compared with six years of subsidies, making it look far cheaper initially than it really is (while still costing more than $800 billion).
The Republican staff of the Senate Budget Committee estimates that, fully implemented, Democratic legislation would cost $2.4 trillion over 10 years, nearly three times the cost projected by the Congressional Budget Office.
Deficit neutrality also depends on massive cuts to Medicare physician and hospital payments. Richard Foster, the Medicare actuary, believes that if these cuts are implemented, they could, in a decade, make 1 out of 5 hospitals and nursing homes unprofitable, threatening patient access to Medicare services.
But the CBO points out that its bottom line—small net savings—hinges on the legislation being enacted and executed exactly as written over the next 20 years. Because Congress is not prone to bouts of mass political suicide, these cuts are unlikely to materialize as scheduled. Indeed, the House and Senate have already drafted bills repealing the looming 20 percent Medicare physician payment cuts. The measures would very likely pass the moment the president signs a reform bill in the Rose Garden, making a mockery of the supposed fiscal rectitude.
Vote-buying, a time-honored congressional custom, reached epic levels in the Senate's final bill. From the Cornhusker Kickback to the Louisiana Purchase, to say nothing of the $60 billion tax carve-out the administration extended to its union allies, the legislation is jam packed with presents designed to defang criticism and buy off Senate skeptics. This is no way to rewrite the rules governing nearly 20 percent of the U.S. economy.
Finally, the Democrats' legislation is massively unfair, setting up a two-tiered system that will extend large taxpayer subsidies to workers outside the employer-based insurance system, while forcing those with employer-based insurance to pay for their coverage through lower salaries and higher premiums. This policy takes the illogical and arbitrary tax system for insurance now in place—and replaces it with a new but equally unfair and arbitrary arrangement.
American taxpayers are acutely aware that the current legislation is a trillion-dollar game of three-card monte. A White House infomercial will not change their minds. Instead, conservatives and moderates in both parties should take the opportunity to outline incremental bipartisan reforms that expand access to high-quality private coverage, while creating a separate track for Medicare reforms to improve quality and preserve the program for decades to come.
The first and best way to help the uninsured is to reform the tax treatment of health insurance to present a level playing field for everyone regardless of how he or she receives or buys health insurance. We should remove the current tax exclusion for employer-provided insurance and replace it with a tax credit or deduction for anyone who at least purchases catastrophic coverage.
By combining this approach with high-risk pools for those with serious pre-existing conditions (as both Sen. John McCain and Obama have suggested), Congress could expand affordable coverage to millions of Americans at relatively little new cost by simply repurposing the more than $200 billion we spend now on the employer tax deduction. In a stroke, policymakers could ensure a thriving private individual insurance market, slow health care inflation and increase middle-class take-home pay.
Both parties should also agree that the states are the best laboratories for new programs aimed at increasing affordable insurance coverage. Witness the efforts in Massachusetts, Utah and Indiana. Rather than short-circuit those experiments by thrusting all 50 states into a single, one-size-fits-all national plan, the federal government should encourage state compacts to expand interstate insurance markets, create local or regional insurance exchanges and improve the quality of care offered to the poor through the Medicaid program.
States should be held accountable for outcomes but be given great flexibility for expanding coverage and redesigning Medicaid coverage. Over time, one or more states may point the way toward a workable national model—as Wisconsin did for welfare reform.
Finally, Medicare reform must be enacted separately from insurance expansion to ensure that reforms are serious, have bipartisan support and redirect savings toward deficit reduction.
President Obama's strategy on health care—to use Democrat's supermajority to craft a partisan bill passed on party lines—was flawed; as a result, the legislation is deeply flawed. His call for a bipartisan summit and increased transparency, although long overdue, is welcome. But, unless he supports a new direction, he'll risk losing health reform not just for this year but for the remainder of his presidency.
Douglas Holtz-Eakin is president of the American Action Forum and former director of the Congressional Budget Office. Paul Howard is director of the Center for Medical Progress at the Manhattan Institute.