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Was Health Reform a Mistake? Analysis from a Parallel Universe

Here is my latest column for Kaiser Health News, which delves into the controversy over whether pursuing and passing health care reform was a political mistake. The subject has generated a lot of commentary online this week--in particular, a series of smart items by Ezra Klein, Josh Kraushaar, Greg Sargent, Peter Suderman, Igor Volsky, and Matt Yglesias. Later today I'll try to weigh in on that debate more explicitly.

Mere days stand between the Democrats and a major defeat at the polls. And a lot of analysts think it's because of the way President Obama handled health care. If only Obama had followed up on his campaign pledge to pursue comprehensive reform, rather than postponing action in order to work on the economy, he and his party would be in better shape today. One Sunday morning news pundit, a veteran of public radio, summed it up this way: Americans voted for change but see a president who actually changed very little and couldn’t even deliver on his signature campaign promise.

It's a reasonable case -- although, to be fair, Obama's decision to drop health care reform made a lot of sense at the time. Remember what it was like in late 2008 and early 2009. The country was still suffering the aftershocks of the global financial collapse. Unemployment was skyrocketing. Campaign promises were all nice and well, but the nation faced a crisis. When Obama announced that he was putting off all of his major domestic initiatives so that he could focus on the economy, polls indicated that the public supported him.

True to his word, Obama introduced and campaigned hard for the American Recovery and Renewal Act. The Keynesian stimulus package included almost $800 billion worth of investments in public works, aid to states struggling to pay their bills and tax credits for consumers. Obama promised that the proposal would both get people spending money and help make America more productive in the future. Most economists agreed.

Obama and his allies had crafted the program carefully. Among other things, they created an oversight board that, according to subsequent evaluations, virtually eliminated fraud and waste. But if the design was right, the size wasn't. Although big enough to prevent another depression, it was too small to produce a robust economy. Unemployment hovered between a politically toxic 9 and 10 percent and, by the time Obama began pressing for more stimulus, the public, furious over bailouts of the banking and auto industries, wanted nothing to do with more spending. Obama did his best to showcase the results of the Recovery Act, making the (very accurate) argument that it saved millions of jobs. But "it might have been a lot worse" turned out to be a lousy sales pitch.

With the jobs agenda going nowhere, Obama returned eventually to health care reform -- arguing that it would address the country's long-term fiscal problems while providing some relief for its short-term misery. After all, losing a job so frequently means losing health insurance, too. But the fleeting, once-in-a-generation political moment had passed. Republicans had dropped even the pretense of cooperation, while more conservative Democrats began distancing themselves from the White House and party leadership. Lobbyists had spent the previous years coming to terms with comprehensive reform and strategizing about how to make it work for the industries they represented. But as the prospects of passing sweeping changes diminished, they reverted to their traditional, narrow agenda of protecting existing income streams.

As an effort at compromise, Obama scaled back his ambitions, calling only for an expansion of health insurance for children and some mild initiatives to link Medicare payments to quality. The administration used every legislative enticement it could, at one point promising to make the entire state of Nebraska, home of Democratic Senator Ben Nelson, a tax-free enterprise zone. But Republicans demonized the kids' expansion by claiming it would insure illegal immigrants, and attacked the payment reforms as British-style rationing. The underlying message was pretty simple: Obama wants to take what you have and give it to somebody else. That resonated with bailout-weary independent voters, since the scaled-down bill wouldn't have benefited most of them anyway. And while the conservative arguments didn't hold much sway with liberals, Obama's retreat from more ambitious initiatives left them too dispirited to fight.

Although Obama vows he will return to health care reform, the promise sounds just as empty as the one Bill Clinton made in the fall of 1994 after his own health care bill died. Meanwhile, news of a crumbling health care system continues to pour in. As the latest Census numbers confirmed, fewer and fewer people have health insurance and even those with coverage are frequently insecure. Just the other day, the papers carried a story about a 20-year-old car accident victim. Unable to stay on her parents health insurance, she had for the past year paid for a mini-med policy from McDonalds, where she working to put herself through community college. The policy covered just $2,000 of her hospital bills, which quickly ran into five figures. To pay off the debt, she’s dropping out of school.

The financial burden health benefits place on corporations and government hasn't gone away, either -- earning Obama the wrath of the chattering class. A Newsweek economics columnist called Obama's failure to address health care costs, at a time when the political forces for action were finally aligned, an unforgivable act of political cowardice. It's hard to know whether voters share that assessment, but the perception that Obama whiffed at tackling the nation's major issues certainly isn't helping his approval ratings. The phrase "Carterbama" comes up a lot in conversation.

Of course, the second-guessers could be wrong. Imagine for a second that the future had turned out differently -- that, after passing the stimulus, Obama turned to health care reform and made it the centerpiece of his domestic agenda. Maybe the fight would have turned into a fourteen-month-long political boondoggle, helping to turn independents against Washington and allowing conservatives to rally. Maybe the final bill would have included major compromises, leaving the liberal base dispirited. And maybe, after it was all done, Democrats would be likely to lose the House and in danger of surrendering the Senate--with losses even more severe than the ones they face now.

It's possible -- just as it's possible that the outcome of this election actually has very little to do with health care. It could have been determined back in February, 2009, when Obama and his allies settled on a too-small stimulus -- whether out of political necessity or economic misjudgment -- while standing behind necessary but unpopular rescues of the banking and auto industries. The truth about these counterfactuals is that you can never really know what might have been if history had unfolded differently.

One thing is certain, however. Had Obama succeeded in passing health care reform, he would have brought financial security and access to basic care to millions of Americans, while beginning the hard and necessary work of reengineering the health system to make it more efficient. Yeah, the voters might still be really angry. The Democrats might still be on the verge of a historic defeat. But the country would be a lot better off.

Update: Apparently I'm not the first visit to this parallel universe. Ezra was here a few months ago.

This column is a collaboration between TNR and Kaiser Health News. KHN is an editorially independent news service and is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization, which is not affiliated with Kaiser Permanente.