On the day of the historic House vote on the Senate bill and reconciliation package, conservative pundit David Frum wrote a piece titled "Waterloo," in which he stated that “conservatives and Republicans today suffered their most crushing legislative defeat since the 1960s.” Frum argued that, by opposing the entire legislative effort as a means to cripple the Obama presidency and refusing to negotiate in good faith, the Republicans ensured they would have no part in shaping the most significant domestic policy of the last 40 years. “Barack Obama badly wanted Republican votes for his plan," Frum explained. "Could we have leveraged his desire to align the plan more closely with conservative views?” The answer is clearly yes.
And the consequences will be large. By unilaterally ceding control over the contents of the health bill, Republicans have also ceded any claim to the policy innovations therein. Ideas that were once championed by conservatives have now been adopted by Democrats, who have become their primary champion. Going forward, if they are successful, these ideas will be permanently considered Democratic achievements.
One of the best examples of such a conservative issue is cost control. For decades, cost-conscious Republicans criticized the way health care is delivered in our country. They argued that generous insurance plans, combined with the fee-for-service system in which doctors, hospitals, and other providers are reimbursed for each point of service they deliver, creates incentives for overuse. Incentives work in health care like they do in other markets: If you pay someone to do something, they will do it a lot. Because we must pay for each check-up, each consultation, each test, the system encourages providers to approve unnecessary care for higher payment. So the fee-for-service system rewards volume over quality of care. By realigning the system to provide better market incentives, moderate conservatives argued, we could wring billions of wasted dollars out of the system. (Many also contended that we should control costs from the opposite direction, making consumers responsible for more of the cost for each service, and therefore reducing their incentive to "overconsume" health care.)
Liberals, in turn, defended this fee-for-service system from its critics, arguing that any alternative would limit access to needed care. They wanted to ensure that doctors and consumers had the primary say over health care, and fee-for-service, they argued, was the best way to guarantee that. They didn't talk about "death panels," of course, but they did imply that a system which encouraged doctors to control costs might ultimately mean patients would suffer.
Yet a funny thing happened on the way to health care reform. A moderate consensus developed, which agreed that fee-for-service is too inefficient and does create too many incentives to boost the volume of care without improving quality. As Congress developed its proposals, changes to the health care delivery system were championed in the Senate Finance Committee by Senator Baucus and others. The President pushed for them in negotiations with the Hill. And, internally, he discussed the New Yorker article by Atul Gawande, which focused on the way that geographic variation in health care is in part caused by the fee-for-service system’s incentives toward volume.
As a result, the legislation that was signed into law on Tuesday includes innovations that will modify payment systems to address the massive, unnecessary costs generated by fee-for-service. For example, it contains a provision to encourage “bundling,” by which providers are paid for an entire episode of care. So, if a patient had a heart attack, rather than paying for each test or point of contact with a doctor, the insurer would reimburse the hospital with a kind of lump-sum payment for the whole cardiac episode. In this way, if hospital delivers care more efficiently than the payment offered, it reaps the financial rewards of that efficiency. The heart attack patient receives the same quality of care under either scenario, but with a bundled payment, market incentives are introduced to eliminate the benefits of overuse. At the end of the day, if there are unnecessary tests, the hospital won’t get paid for them.
In short, the conservative argument on fee-for-service won the day. Yet, by picketing the legislative negotiating table instead of drawing up a chair, Republicans rejected the opportunity to champion and even strengthen many of the reforms that they have historically promoted. In fact, they went so far as to demagogue all of the savings derived from Medicare—all $500 billion, which pay for half of the cost of the bill—and call it “rationing.” They refused to back policies they supported just a few years ago, like the so-called Cadillac Tax, which limits the tax-exclusion benefits for high-cost health plans, because they deemed it good politics to oppose the Democrats' bill no matter what.
By placing all their bets on ideological opposition, rather than seeking to achieve any policy objectives, the Republicans ensured that it would be Democrats who championed the biggest step taken in modern history to infuse the system with better market incentives.
Many health economists applauded the bill's cost-control provisions, but hoped they would be stronger. Many wanted the excise tax on high-value plans to kick in immediately and / or at higher rates. Some argued that the bundling innovations should be stronger and kick in sooner. Had they cooperated, Republicans could have delivered these improvements. But by refusing to support the Cadillac tax or other payment reforms, the Republicans left it to Democrats to carry all the water on these proposals; and those Democrats pushed their base on these issues as far as it would go. A bipartisan bill might not have been better in every way, but it surely would have strengthened cost-control.
Now, Democrats have gone it alone, and they will reap the benefits of the bill's success. If America is able to rein in costs over the long haul, no one will ever remember that these were once Republican ideas. Intransigence, too, has its costs.
Neera Tanden is the Chief Operating Officer of the Center for American Progress. She served in the Obama and Clinton administrations.