From Awful to Worse

Published December 21, 2009

The Weekly Standard

The Obama administration and congressional Democrats long ago gave up any pretense of working to rationally reform American health care. The exercise now underway in the Senate is a mad dash to get to 60 votes, and nothing more. That's why some Democratic senators who had no idea exactly what is in the “breakthrough deal” announced by majority leader Harry Reid last week immediately hailed it as a milestone. They're for anything that creates a sense of “momentum” and “inevitability.”

But the substance does matter. If Congress passes something in the end, ordinary Americans know they will have to live with it. And from those voters' points of view the latest effort to strike a compromise among Senate Democrats would, based on press reports of what it involves, take the horrendous bill offered by Reid earlier this month and make it even worse.

In most ways, the new proposal is as terrible as Reid's original bill. It would spend hundreds of billions on a new entitlement even as our debt is mounting, inflict massive tax increases on a troubled economy, impose costly mandates on employers at a time of high unemployment, squeeze money out of Medicare without fixing the program, insert the government in countless new ways between doctors and patients, and cause millions of middle-class families to lose the employer-based insurance they have today and pay even higher premiums.

But in one crucial respect, the new proposal is far worse than the last one. For most of this year, the liberal Holy Grail has been the so-called “public option” — a new government-run insurance program offered to working age people and their families, much as Medicare is available to senior citizens. But, despite a full-court press by liberal activists, the idea has foundered on its complete lack of sense.

The only plausible reason to put more people in government-run insurance would be cost control, but no one believes the federal government now knows how to control costs sensibly. Liberals say a new insurance bureaucracy should be given the power to use Medicare's price-setting and regulatory structure to cut costs. But that structure has never successfully controlled Medicare spending because price-setting doesn't address volume — and so creates an incentive for more and more spending. Indeed, the Obama administration admits that Medicare's current arbitrary bureaucratic payment systems are a prime source of the inefficiency and inequity throughout the entire health sector, driving up costs for everyone. That's why the president and his team are proposing to set up an independent Medicare commission to straighten out the mess. They know they don't know how to do it and can only hope someone else does. So if Medicare is a big part of the problem, how is its model the solution?

Since no one has been able to answer that question, prospects for the public option have dimmed in the Senate. Liberals in Congress have been looking to save face and find another route to their ultimate goal of moving the country toward a single-payer health system. They may have found one in the compromise touted by Reid.

Apparently, in exchange for dropping the “public option,” moderate Senate Democrats have tentatively agreed to open up Medicare to people age 55 to 64 (retirees can currently sign up for it at age 65). In other words, rather than build on the failed cost-control model of Medicare, they now want to actually further burden Medicare itself. Why take a roundabout path to failure when a direct one is available? The irrationality of this solution is staggering. But, of course, it's a solution to Reid's political problem, not to the nation's health care financing crisis. Moderate Senate Democrats don't want to vote for anything called a “public option,” but some of Reid's more liberal colleagues won't give up the dream of marching toward a single payer health care system. So he has offered up an even more direct path to such a system, but given it a different name and frame than the “public option.”

Liberals are ecstatic at the prospect. New York representative Anthony Weiner, a single-payer advocate, called the idea the “mother of all public options.” His excitement is understandable. According to the Census Bureau, only 4.3 million people age 55 to 64 were uninsured in 2008. But the total population in this age range was 34.3 million — so the Medicare buy-in is not a means to help the uninsured but a means to socialize the health insurance of a vast swath of the public.

Initially, a voluntary Medicare program might attract only a small number of enrollees, especially because those who opt in would be required to pay the full premium. But over time, employers would likely find it convenient to put their early retirees into Medicare to shed some of their costs, providing only wraparound coverage as they do for retirees over 65. Once the opt-in is established, moreover, pressure would build for Congress to ensure “premiums” are affordable. Directly or indirectly, the government would find ways to subsidize enrollment. If established, a Medicare option for the 55- to 64-year-old population would quickly become the default option for the entire age group, and a case for further lowering the age of eligibility would emerge.

And when that happens, those who have fought all year against a new government-run insurance plan will have lost the battle, and those seeking means of actually cutting the growth of health care costs will pretty much have lost the war. The Reid bill already assumes a 15 million-person jump in enrollment in Medicaid, bringing the total enrollment to 60 million Americans. If 20 to 30 million new people end up on Medicare, on top of Medicare's current 45 million enrollees, then more than one-in-three Americans would be covered by government-funded health insurance. A single-payer health care system would be all but inevitable.

Every criticism lodged against Obamacare this year applies to this new “compromise,” and at least one more in addition: The only thing it compromises is the chance of reforming American health care for the better.

James C. Capretta is a fellow at the Ethics and Public Policy Center and a health policy consultant. Yuval Levin, also a fellow at EPPC, is the editor of National Affairs.

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