Tax Analysts Blog

Healthcare Reform Goes to the Sausage Factory

Posted on Jun 16, 2009

It's not about providing health insurance to America's 47 million uninsured. It's about restoring the nation to long-term fiscal health. That's the way the White House is packaging its effort to reform heathcare. Veteran New York Times reporters Jackie Calmes and Robert Pear spell this out for us in their excellent report in this morning's edition:

Obama advisers say the focus on cost savings has appeal for all Americans, not just the uninsured. Some advisers, including veterans of the Clinton administration, say President Bill Clinton’s emphasis on covering the uninsured helped doom his health care plan in 1994. “We have made cost control a coequal objective, just as important as the expansion of insurance coverage, which has traditionally been the dominant goal for Democrats,” said Rahm Emanuel, the White House chief of staff. “The entire discussion has to be centered on controlling or reducing costs.”

Following the White House script to a T, Budget Director Peter Orszag gave Financial Times readers a lecture on the necessity of controlling healthcare costs. Increasing coverage was hardly mentioned. Yes, we understand that administration strategists are trying to broaden the appeal of a plan that might otherwise not have enough political momentum to become law. The problem is that: (a) savings may never materialize, (b) savings may not materialize soon enough to satisfy the president's short-term political needs, or (c) the official scorekeepers will not recognize the savings so that healthcare reform founders on the rocks of budget rules.

Reality is starting to overwhelm the rhetoric. The Congressional Budget Office released a report estimating that the plan being championed by Senator Ted Kennedy would only reduce the nation's uninsured from 49 to 37 million -- from 19 to 13 percent. Hardly universal coverage! And the report said the cost of the draft, partial plan would exceed $1 trillion. Despite his personal preferences for healthcare reform, CBO Director Douglas Elmendorf is perfectly comfortable fulfilling his professional responsibility to be a budget "skunk."

The Senate Finance Committee will release details of its version of healthcare reform on Wednesday. This will be different from all the others because it is being billed as "bipartisan." This will almost certainly include some taxation of the most expensive employer provided healthcare plans. Meanwhile, as reported by Calmes and Pear, key House leaders -- repulsed at the thought of taxing benefits -- were "trying to decide whether to finance coverage of the uninsured with one broad-based tax, like the value-added tax, or a combination of smaller taxes." Ay, caramba! A VAT is a sure political nonstarter. House leaders know this but this shows just how desperate they are.

With all these details emerging, expect vested interests to take off the gloves and protect their turf like grizzly bears protecting their cubs. And Republicans -- relatively quiet so far -- are starting to attack in force. To save healthcare reform Democratic leaders are going to have to cut a lot of deals. Sausage is going to be made and it won't be pretty.

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