Baucus Bill May Pass, But Efforts to 'Bend the Curve' are Dead
By: Douglas Holtz-Eakin
October 16, 2009
The U.S. Senate is giving Shakespeare a run for his money: generating sound and fury over the need for health care reform while producing legislation that is much ado about nothing. Whether he admits it or not, the president’s much-vaunted crusade to “bend the cost curve” and save taxpayers from runaway entitlement spending is over.
Fundamental contradictions have plagued Democrats’ efforts all year. They promised to improve quality and lower costs while simultaneously refusing to reform Medicare and Medicaid programs that are already driving Uncle Sam into the poorhouse. They promised to spare the middle class, but loaded up on taxes, fees, and penalties that ultimately the average American will bear. And they were intent on handing out $1 trillion in new subsidies, but unwilling to come up with $1 trillion in new taxes.
Fiscal reality is usually the last of Washington’s worries, but the president’s laundry list of other initiatives (bloated stimulus spending, bailouts for automakers and banks, etc.) have so damaged the federal budget outlook that fiscal reality has finally become a political reality.
The president now pins his hopes on the bill merging the efforts of the Senate Health, Education, Labor and Pensions and Finance committees. Even after the latter’s tenuous fiscal integrity was gutted by the amendment process, Sen. Max Baucus’ (D-Mont.) reform legislation earned a decent Congressional Budget Office score, showing a modest deficit over 10 years.
Alas, the Baucus bill still flunks a political reality test. The Congressional Budget Office attributes the lion’s share of its savings to automatic reimbursement cuts that will never see the light of day. For the past eight years, Congress has reliably voted to rescind the “automatic” Medicare payment cuts for physicians, and everyone knows that Congress will never surrender its budget authority to independent commissions. (It never seems to occur to anyone that every Congressional district has hospitals and doctors in it.)
In light of reality, it’s time to get back to basics: health care reform, not health insurance reform. Despite the “bend the curve” rhetoric, the Democrats’ focus has been on health insurance, since no one is fond of health insurance companies. As a result, legislation has focused on misguided reforms like community rating, guaranteed issue, and the “public option” of having the government hawk its own insurance plan, replete with Medicare price controls. The strategy was to ride a tidal wave of resentment against insurance companies to triumph.
Unfortunately, the same people who don’t like insurance companies like their insurance. The president fell into another trap of his own making by promising everyone that “you can keep what you have if you like it” while allowing Congress to produce legislation that will make “what you have” illegal and subject millions of Americans to new taxes if they don’t buy a government-approved plan. (And yes, Mr. President, a 40 percent excise tax on insurers is a tax on everyone who buys that insurance.)
The failure of the insurance-based strategy means we are back to square one: Until we address the fundamental problems with health care delivery and financing, the cost of anything approaching universal coverage will be prohibitive. Current efforts are collapsing as the fissures between moderate and liberal Democrats explode over costs. If Congress manages to pass a deficit-busting bill with lavish subsidies and insurance regulations that throttle the private market, the public will revolt.
Bipartisanship was the road never traveled. Neither the Democrats nor Republicans can alone be expected to tackle the fundamental problems in the system and bear the wrath of affected interest groups.
President Barack Obama should have reached out to key Republican leaders and promised a grand bargain: Republicans support a path to universal access to private insurance in return for real entitlement and delivery system reform. By promising to welcome and protect Republican ideas in the legislative process, the president could have drummed up enough moderate votes to pass meaningful legislation. Instead, he let the most liberal wing of his party — the House committee chairmen — write the first legislation and set the agenda.
The result has been a substantive and public relations disaster. Polling consistently shows that the public is opposed to the Democrats’ reforms. They like the president, but even he can’t get them to willingly suspend their disbelief about the consequences of 1,000 pages of legislation that costs $1 billion per page.
Counting the votes will be the last act of this tragic comedy. Reform has been defeated, and America has lost.