President Barack Obama's op-ed in the Sunday New York Times is a revealing indicator of the state of the health care debate. Gone is the emphasis on “health care reform” and “bending the cost-curve “and “changing the delivery system.” As polls in July began showing public support dropping for sweeping health care legislation, the Obama White House decided that those early 2009 themes just weren't working anymore, if they ever did. So now, in their place, is “health insurance reform,” “basic consumer protections” and elimination of pre-existing condition clauses.
No doubt the new sales pitch works much better in focus groups. But does it really describe what's under consideration in Congress?
At the beginning of this year, the Democratic Congress very deliberately set a course to pass the most sweeping domestic policy legislation in a generation, something akin to the next New Deal or Great Society. They weren't looking to tinker, and the legislation they have drafted reflects their ambition.
At their core, the bills moving through the House and Senate would use the taxing authority of the federal government to establish a uniform, federally-regulated system of insurance coverage for the entire population under the age of sixty-five. Every American would be required to sign up with a health insurance plan, or pay a penalty, enforced by tax laws, to the federal government for not doing so. The federal government would establish a process for determining what constitutes “qualified” insurance. Employers would be required to either offer qualified coverage to all or most of their workers or pay a tax to the federal government. Most workers would have no choice but to take the insurance offered at the workplace.
The federal government would set up a series of regional or state-based “exchanges” where people without access to employer coverage would be required to get their insurance. Private plans sold outside of the “exchanges” would be phased out over time. The government would set up a new health insurance entitlement program for households with incomes between 133 and 300 to 400 percent of the federal poverty line, but only households getting insurance through the exchanges would be eligible for it.
The cost of this new entitlement, plus expanded eligibility for Medicaid, would be at least $1 trillion over a decade, and possibly much more. To pay for this new spending through 2019, the bills would cut Medicare and Medicaid spending by $400 to $500 billion over ten years. The bills would also raise additional revenue by imposing either a new surtax on upper income households or one on expensive insurance plans (which would be paid mainly the plans' enrollees).
These are the nuts and bolts of what Congress is really working on, and they go well beyond modest consumer insurance protections. As can be readily seen in the various town hall meetings now taking place around the country, many Americans are concerned about the direction the bills are taking precisely because they have read or heard about these “details” and rightly conclude that they could have profound implications for their health-care coverage over time.
The president says no one will be forced out of insurance they like, but that's a questionable assertion, at best. The whole point of the “exchanges” is to establish group insurance pools outside of employment. Over time, it seems all but inevitable that there would be significant migration into them, especially so since the premiums will be more heavily subsidized there for low-wage workers than they are in the employer setting. Thus, it's entirely reasonable for people with good job-based coverage today to wonder if they will still have it in five years time if the bills under consideration pass. Moreover, millions of senior citizens now enrolled in Medicare Advantage plans could very well lose that option if the planned cuts in MA payment rates are adopted. Many beneficiaries could be forced to sign up with expensive Medigap insurance to get the same coverage they now get for free.
The bills now moving through Congress would also have profound economic consequences beyond the health sector. The Congressional Budget Office has said that the new federal spending contained in the House bill would very likely continue to escalate at a rate of about 8 percent per year after the first decade, while the revenue to pay for it would only grow at about 5 percent per year.
That's a recipe for another massive unfunded liability, on top of the existing shortfalls in Social Security and Medicare that are already threatening the nation's long-term prosperity. Further, the imposition of a costly requirement for job-based insurance during the steepest recession in a generation is raising concerns that it could impede hiring at a time when job growth is the most pressing concern for many voters.
For much of the year, the health care debate focused on generalities because no actual legislation was in the public domain for scrutiny. But in June and July, as the bills became available, the newspapers were filled with stories explaining what they would do and mean for average Americans as well as the country at large. It's no coincidence that momentum slowed at precisely the moment when the American people had access to what was actually being considered.
In recent weeks, the president and his team have tried to regain momentum by stressing to Americans with insurance that the legislation moving through Congress will add protections for them, won't disrupt their current arrangements if they are happy with their health plan and doctors, will lower their costs with painless gains in efficiency and won't burden future generations with debt. If only the bills moving through Congress actually did what the president has described, they might actually draw broad bipartisan support and public acceptance as well.
James C. Capretta is a Fellow at the Ethics and Public Policy Center. He served as an associate director at the White House Office of Management and Budget from 2001 to 2004.