Two cheers for US health reform

[Joanne98]

After a frazzled week, the politics of US health reform looks messier than ever. Yet the odds on a bill passing in the end are improving. It will be an untidy thing, but if it moves the country close to universal health insurance the administration will call it a success. And on the whole, despite the avoidable mistakes this legislation seems bound to embody, that will be a fair assessment.

At the moment this view may seem unduly optimistic. The Democratic leadership in the House of Representatives had hoped to produce a finished bill last Friday. That plan came to nothing when the party’s fiscal conservatives demanded further savings. House Democrats are also divided on revenue-raising measures. Proposals ranging from a fat tax on sugary drinks to a fat-cat surtax on households earning more than $350,000 a year are still being debated.

The Senate is struggling with the same issues: how to contain the cost of expanded insurance coverage, and how to pay for what remains, so that the reform adds nothing to the budget deficit over 10 years. Like the House, the Senate aims to broaden coverage with a mixture of mandates, regulation and subsidies. Those basic elements are decided. But at the end of last week the chairman of the Senate budget committee said that the bill’s drafters would have to start all over on key aspects of the proposal.

This apparent lack of progress is misleading, however. A mixture of creative accounting and substantive amendment on both the cost and revenue sides is closing the financing gap. Meanwhile, the already broad consensus that some kind of comprehensive health reform must pass continues to strengthen. Action is now seen as inevitable. Barack Obama has staked his presidency on it. Even those who oppose elements of the bills – including organised interests that felled previous attempts—concede that something must be done. Almost certainly, something will be.

But what? How you pay for the plan remains the crucial puzzle. On the face of it, the answer is straightforward: tax employer- provided health benefits. At the moment health insurance is tax-free in the United States if provided by an employer; an individual purchaser has to buy it with after-tax dollars. This anomaly costs nearly $250bn a year in forgone revenue – ample to pay for universal coverage, and then some. Yet many Democrats in both the House and the Senate oppose ending it. Might this be a breakthrough waiting to happen?

If the unions get their way, no. They fought hard over the years for those generous tax-sheltered benefits. They do not want to see their value rolled back. Another worry is that without the tax shelter, many employers will stop offering health insurance altogether, throwing workers into the individual market – where high-risk buyers, such as those with existing illnesses, would no longer benefit from group rates negotiated by their companies.

These objections are misconceived. Getting employers out of health insurance should be a goal, not something to be feared. Tying insurance to employment worsens the insecurity many US workers complain of: lose your job and your health insurance goes with it. The policy hides the rising cost of health benefits from workers, who perceive it as stagnating wages instead. It encourages overconsumption of medical services twice over, first because the link between the consumer and the cost is broken, and second because the tax treatment is a subsidy.

What about high-risk workers thrown on to the individual market? Not a problem, if the tax break were abolished as part of a larger reform obliging insurers to offer affordable coverage to all regardless of pre-existing conditions – exactly what is proposed. Yes, this change is a tax increase, something which many in Congress are reluctant to contemplate in any form. But some kind of increase is inescapable. This one makes more sense than most.

The president should say so. He may be inhibited by the fact that his Republican opponent John McCain called for this change during the election campaign, though not as part of a wider reform such as the Democrats propose. At any rate, Mr Obama and other Democrats assailed the idea. So what? Mr Obama has changed his position on other aspects of health reform. He now appears to favour an individual mandate to buy insurance, for instance. Let us see a similar flexibility on taxing employer-provided insurance.

Ending the tax break altogether would pay for universal coverage, with revenue left over to set against the long-term budget deficit. At most, Congress is likely to snip, adding some revenue to other tax increases and cost-side nips and tucks. As a result, the country’s labyrinthine tax code will end up even more complicated, the full benefit of ending the US model of employer-provided insurance will be lost and needed reforms in the delivery of services will mostly be ducked. But a law will be signed. Coverage will be widened. Health reform will have happened.

Continued>>>
http://www.ft.com/cms/s/0/37b9990c-6f10-11de-9109-00144feabdc0.html

[Lydia Leftcoast]

1. Knowing the way the Dems like to "compromise," I'm afraid they'll agree

to a system by which employee benefits are taxed AND there are no restrictions on the insurance companies.

[FormerDittoHead]

2. Here's what I don't get about compromise. What are we "bargaining" for???

There is no way, not a SINGLE Republican is going to vote for this thing, NO MATTER WHAT.

So what's the GIVE when they do nothing but TAKE?