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Do The Dems Have What It Takes? We'll Find Out Soon.

You could make a credible argument that health care reform took enormous strides forward last week, given that legislation passed three of the five congressional committees considering it. But when President Obama stood at a White House podium on Friday, in order to discuss health reform, he seemed frustrated and a little drained.

It’s possible he was just reacting to recent bad news on the economy. And it’s possible he was just, well, feeling tired. But I suspect he was also reacting to some other developments on health care reform--developments that were not nearly as encouraging as the news from those three committees.

Obama had started the week by pushing Congress to get legislation done before its August recess. But several members of his party responded by saying, in some cases publicly, that Congress would need more time. Obama also spent the week saying, as he has all along, that health care reform must succeed in reducing the cost of medical care over the long run. But on Thursday, the head of the Congressional Budget Office (CBO) testified that the legislation he’d seen so far wasn’t fulfilling that goal, prompting some more conservative Democrats to make public their own concerns along those lines.

The legislative process is like this--lots of ups and downs, often in rapid succession. Obama is right that we all get too caught up in the 24-hour news cycle. And in a quick canvassing of sources on Capitol Hill over the weekend, the responses weren’t as glum as I’d expected. “We will get there,” one senior staffer e-mailed me. “Always darkest just before a breakthrough.”

Still, reform's momentum seems to have slowed, if not stalled. And it’s not going to speed up again unless the Democrats do something they haven’t done in a long time: Show some mettle and embrace some unpleasant positions. Some of them seem ready to do it. But others, particularly some of the party's more conservative members, don't.

There are really two key issues the Democrats need to confront. The first is how to finance reform in the ten years that counts for official budgeting. Making sure that everybody has access to health insurance, by providing them with Medicaid or helping them to buy private coverage, will cost at least $1 trillion over ten years. (And, if you want to do it right, it costs a fair amount more.)

The government can raise some of that money by finding savings elsewhere in the health care system. It can, for example, reduce the subsidies to private insurers serving Medicare patients or introduce a government-run insurance option that would waste less money than its private competitors.

But those moves will only yield about half the money necessary. To get the other half, the government has to raise new revenue. In other words, it has to raise taxes. A number of options have been discussed--capping the tax exclusion for group health benefits, imposing an income tax surcharge on the wealthiest Americans, limiting itemized deductions for more affluent taxpayers. Any of those would work, alone or in combination.

The second key issue is how to make health care less expensive over the long run. This is what the administration famously calls “bending the curve.” Experts have come up with a wide variety of ideas for accomplishing this--everything from better information technology to rewarding hospitals that are the safest and most efficient. But the evidence that these efforts will yield savings isn’t exactly ironclad. At least not yet.

In the absence of such evidence, the CBO--whose judgment on this matter most of Washington seems to be following, at least for the moment--has indicated government must choose from a more limited set of alternatives: imposing some sort of automatic budget limit on health care, reducing congressional oversight over Medicare payment policies, or capping the income tax exclusion for group health benefits (so that there’s less incentive to buy generous insurance). Again, these can work in isolation or together.

None of these decisions would be particularly easy. One way or another, they involve taking money out of somebody’s pockets. And while the direct impact on the finances of most middle class families would be modest, or in some cases non-existant, they’d all give political ammunition to critics--who will say that Democrats are either “raising taxes,” “rationing health care,” or some combination of the two.

But if none of these moves seem particularly pleasant, they are nevertheless necessary.

They are necessary, first, for the sake of policy. A reform that invests substantially less than $1 trillion will provide far less assistance to people--or guarantee them far less coverage. Either way, it will leave not millions but tens of millions of Americans without access to health care. Similarly, without some the serious cost control measures, health care will just keep getting more expensive--imposing increasingly unsustainable burdens on individuals, and our society.

But the rationale for making these moves goes beyond policy. There’s a political rationale too. If Democrats don’t make the difficult decisions on raising revenue and controlling costs, then the reform they pass won’t do much to help middle class Americans. If the subsidies in a reform bill go down, it’s middle class people--that is, people making between three and four times the poverty line--who would suddenly lose all assistance. And, without financial assistance, they’d be even more vulnerable to rising costs. (Kaiser Health News had a good article about this problem last month.)

Of course, that’s assuming reform passes at all. If the Democrats flinch at taking the votes necessary to finance a full package or to bring long-term costs under control, the whole enterprise could unravel. That could lead to the sort of backlash we saw in 1994, when the failure to produce health reform was a major reason voters took out their wrath on Democrats in the midterm elections. It would be one thing if Obama and the Democrats hadn’t promised reform explicitly. But, having done that, they’ve both staked their political survival on its success. As Mark Kleiman writes, "This bill is make or break for the Democratic Party."

Do the Democrats get this? Some of them do. President Obama, for example, has put on the table nearly a trillion dollars in funding--and, just this week, he sent to the Hill a proposal to create an independent board that would set payment policies for Medicare. The two House committees that approved legislation each backed an income tax surtax.

But there are plenty of Democrats who don't want to make such moves. And ironically--if not surprisingly--many if not most of them are the same ones who complain that reform either is too fiscally irresponsible or doesn't do enough to help the middle class. Unfortunately, these Democrats also may have the votes to block action, either in the two committees still considering legislation or on the floors of their chambers.

The good news for Democrats is that passing reform--a good reform--will yield enormous political dividends. And, no less important, it will create a blanket of financial security while fortifying the economy. But doing that will take a little bravery, more than we've seen so far.

Update: I added the Mark Kleiman quote and made a bit more clear that it was primarily, although not exclusively, centrist Democrats hesitating to make these moves. For more, see Steve Benen and Matt Yglesias. This might also be a good time to re-read "Why the Democrats Can't Govern," by my colleague Jonathan Chait.

Jonathan Cohn