September 6, 2009

Ezra Klein talks about what everyone on the Hill knows: that the health-care deal will now get done by making it unaffordable for the people it's supposed to help. Only in D.C. is that considered a "victory." Well, I say it's spinach, and I say to hell with it!

The basic structure of the bill has three main planks working in conjunction with each other: The individual mandate creates a mechanism for a universal, or near-universal, system. A universal, or near-universal, system creates the conditions for insurance market reform. The subsidies make the individual mandate affordable for people to follow.

There are a few ways to destabilize this system. The most likely way is to reduce the subsidies so that the individual mandate isn't really affordable. That seems to be happening even as we speak. At that point, reformers have two options, both of them bad.

The first option is to reduce the value of the minimum insurance policy such that buying something the government considers insurance isn't very expensive. This means policies with high deductibles and co-pays, or policies that don't cover very much. But asking someone with a relatively low income to purchase a policy with a $1,500 deductible and significant co-pays is asking them to purchase something they can't really afford to use. So we're making them spend $7,000 or $8,000 a year on something they don't necessarily want and can't really take advantage of. That's a recipe for a huge backlash.

The second option is to drop the individual mandate altogether. Obama, who didn't have a mandate in his campaign plan, might be amenable to this approach. But here, too, there are problems. The young, healthy risks will hang back from the system while the older, sicker risks will flood in to take advantage of subsidies and new regulations that stop insurers from discriminating against them. The risk pool will reflect that, and health-care insurance will become even more unaffordable for the people who need it. And because it's less affordable because of the presence of the sick, it will become even less attractive to the healthy.

The happy news is that the difference between a plan with decent benefits that's affordable for people and a plan that's not affordable for people and doesn't offer decent benefits is not that large. Optimally, you'd want to spend about $1.3 trillion over 10 years. You could probably do it for $900 billion to $1 trillion. But you can't do it for, say, $700 billion, which is a number I'm hearing fairly frequently.

The difference between doing this right and doing this wrong is, in other words, about $30 billion a year, or $300 billion over 10 years. To put that in perspective, many of the legislators who are balking at the cost of health-care reform voted for the Kyl-Lincoln bill to reform the estate tax at a cost of $75 billion a year, or $750 billion over 10 years. You can make health-care reform work at a price tag that legislators are, in theory, willing to bear, at least when the tag is attached to tax cuts.

Isn't it interesting? Because I never hear them talk quite the same about costs when it comes to war. For example: "We really want to stabilize Afghanistan - but it has to be revenue-neutral" or "Yes, we know we said it was important to stabilize Iraq, but we simply can't afford this anymore."

No, the place where they decide to draw the line is... our health. War is seen as the absolute necessity and health care is seen as optional. That's just crazy.

I hope President Emanuel changes his position on this important issue.

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