ECONOMIST: The beginning of the end for health care reform

  • This artwork by Matt Wuerker uses the sausage factory analogy to suggest the many steps in crafting health care reform in Congress.

?History is knocking on the door. Let?s open it. Let?s begin the debate.? So declared Max Baucus as the Senate weighed whether to take up a controversial proposal to overhaul America?s bloated health system.</CW>

He can be excused for gushing a bit, as the head of the Senate?s Finance Committee deserves most of the credit for getting health reform as far as it has come this year. Soon after he uttered those words on Nov. 21, the chamber?s Democratic leadership managed to cajole enough of his wavering colleagues to secure 60 votes, the minimum needed to proceed with debate.

The full Senate will take up the matter after the Thanksgiving recess, with the leadership keen to pass it before Christmas. This will not be easy, however. Many members of both parties have made it clear that they do not like parts of the bill as crafted by Baucus and embellished by Harry Reid (the Democrats? leader in the Senate), and intend to offer difficult amendments.

If the bill actually passes, it must still be reconciled with a version recently passed by the House before a unified bill can be sent to the president to be signed into law.

How do the two versions of reform compare? In many ways they are similar. They both promise to extend health insurance coverage to many but not all of the 47 million or so currently uninsured. They propose a comparable mix of individual requirements to buy insurance, targeted subsidies for the poor, penalties and aggressive regulations to achieve that goal.

<CW-16>The nonpartisan Congressional Budget Office estimates that the apparent cost over the next decade of both bills comes in below the $900 billion limit set down by Barack Obama.</CW>

The Senate bill is better in several ways. Its proposal for a government-run insurance plan (or ?public option?), a notion disliked by many market-minded folk, is weaker: the Senate version would allow states to opt out of such a plan.

Another improvement is that the Senate?s plan raises money not by soaking the rich through income taxes, as the House bill envisions, but through excise taxes on the most expensive health policies.

This approach has two advantages. First, it helps tackle one of the greatest distortions in America?s health system: the subsidies given for employer-provided health insurance, which encourage over-insurance.

The second benefit, according to analysis done by the Joint Committee on Taxation, another nonpartisan outfit, is that it will lift salaries for many Americans and raise tax revenues. If a tax motivates firms to trim health benefits, they should increase salaries to compensate.

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