Seven hundred billion dollars may seem like a lot of money. But when it's spread out over ten years--and you're using it to pay for health care reform--it really isn't.
It costs money to put people on Medicaid. And it costs money to subsidize private insurance for people who can't afford premiums on their own. Spending enough to make sure every American, or close to every American, has health insurance would push the price tag of reform to over $1.5 trillion, if done properly. Anything less and you have to start cutting back. You offer lower subsidies. You provide people with weaker, less protective insruance. You roll out changes over time.
Since August, it's been apparent that whatever got through Congress would include some combination of these compromises, in order to get the price tag near or below $1 trillion. The House bill, for example, managed to keep expenditures roughtly to that level--and did so, primarily, by phasing in the program slowly. Even if the law passed this year, most of its features wouldn't kick in until after the next presidential election. It was far from ideal but, for that amount of money, it was arguably was the best arrangement possible.
Now, though, getting even $1 trillion seems to be something of a reach. Given rising political opposition to reform, the administration--which is deliberating over what message to send Congress next week--may decide it has to live with a bill that lays out just $700 billion. George Stephanopoulos reported as much in his blog earlier today. Several admnistration sources have since confirmed the administration is looking more seriously at a figure in that neighborhood, although they wouldn't confirm the precise number.
Not that it's particularly surprising. Coming up with a way to finance $1 trillion, let alone more than $1 trillion, has been the central challenge of reform all along. The House solved the problem by slapping a new tax on the wealthy. Obama did too (although he mixed in some other financing). But that seems to be more than the Senate--and, in particular, the Senate Finance Committee--can stomach.
Predictably, the compromises a $700 billion bill require are a lot more severe than the compromises in a $1 trillion bill. If you cut back the subsidies, for example, you'll end up reducing them down to levels where large numbers of people still couldn't afford insurance. And if people can't afford insurance, you can't make them buy it. So a cut in subsidies is a de facto cut in coverage. The House bill (like the Senate HELP bill) would have brought insurance to an additional 40 million people, meaning some 97 percent of legal residents had insurance. At $700 billion, you fall well short of that number, although by exactly how much I'm not yet sure.
An alternative method of hitting the $700 billion mark would be to drag out implementation over an even longer period of time, but still scale up so that--by the end of the ten-year-window--you're close to universal coverage. That gets you to the same destination, but it takes a lot longer to get there.
It's still preferable to nothing, of course. And the key with a $700 billion bill--if that's the final number--is making sure it includes the structural and regulatory changes around which universal coverage could eventually be built. You'd want to make sure the insurance exchange was solid--and that the tools for sorting out good medicine from bad were being developed. You'd want a good public option. And so on.
But before trying to make the best of a $700 billion bill, it's worth asking whether a $700 billion bill could still become an $800 or $900 billlion bill--or more. To be clear, the administration hasn't resigned itself to the low figure yet. Obama would clearly prefer a more generous bill, as would his advisers. Remember, he put nearly $1 trillon on the table with his budget proposals. The question, for the White House and those around it, is whether Obama could actually pry more money from an increasingly skittish Congress--and what he risks by trying.