Right is wrong to attack Obama's health plan
Financial Times, July 13, 2009
Why Republicans are wrong to attack Obama's plan...
Especially when he's really on the verge of enacting Romney-McCain reforms
The Republican charge that Barack Obama is seeking a "government takeover" of US healthcare is further proof that American political rhetoric has become detached from reality. In fact, once you take away the proposed public insurance option, which Mr Obama's aides have signalled they will drop in final negotiations, the likely outcome is an affordable reform that embraces Mitt Romney's blueprint from Massachusetts and funds it with John McCain's best idea from the presidential campaign.
Only in America can you co-opt Republican thinking and have critics label you "socialist".
Start with cost. It's easy for foes to feign shock at Obamacare's $1,000bn 10-year price tag, but a trillion dollars ain't what it used to be. That is just over 0.5 per cent of gross domestic product over the same period, and barely 3 per cent of the roughly $35,000bn total healthcare spending during that time. If Mr Obama's approach is otherwise sensible, the idea that America can't afford it is preposterous.
The central mechanism through which Mr Obama seeks to extend coverage and restrain costs is via new "exchanges", insurance clearing-houses, modelled on the plan Mr Romney enacted in Massachusetts. The idea is to let individuals access group coverage from private insurers, with subsidies for low earners.
The approach is so sensible that Ted Kennedy urged Massachusetts Democrats to support then-Governor Romney in passing it in 2006. The results have been impressive. The ranks of the uninsured have been slashed; just 2.7 per cent of residents now lack coverage, the lowest of any stateagainst 15 per cent nationally. Costs, which overran as the programme was brought in more quickly than planned, are now on budget.
A federal version of this exchange (or federal sponsorship of state versions) would for the first time give non-elderly, non-poor Americans whose employers don't offer coverage, or offer it at premiums they can't afford, access to group insurance rates. It's difficult to overstate the breakthrough this would represent. The inability of millions of Americans to access group coverage outside the employment setting is one of the most damning features of US healthcare. It means individuals with pre-existing health conditions are often uninsurable, which in turn explains why medical bills are, shamefully, a leading cause of bankruptcy. It locks budding entrepreneurs into jobs they loathe because their families need the coverage. Structuring these exchanges so health plans have incentives to compete on value is exactly the role government should play.
When it comes to financing expanded coverage there's no way to get there without revisiting the current scheme, under which employees escape taxes on employer-provided health benefits. This subsidy is so massive, at $250bn a year, and regressivereserving its biggest bounty for those with the most generous plansthat a phalanx of health economists from both political parties recently begged Congress to trim it.
As it turns out, scrapping this tax subsidy was the bold, if unappreciated, centrepiece of Mr McCain's health plan during last year's election. The fact that candidate Obama slammed it then as a tax hike on the middle class does not mean President Obama cannot embrace it as part of a deal that achieves his goals; his top advisers have long agreed it is the soundest way to fund reform. Moreover, union leaders who defend the tax exclusion because it bankrolls union plans tell me they are open to change to get to universal coverage.
Of course, just because Obama is on a path to give America the Romney health plan with McCain-style financing does not mean the Republicans will embrace it, if it seems politically more attractive to scream "socialist". But the rest of us do not have to listen to them. Mr Obama can fairly claim to have championed a bipartisan health policy, even with few Republican votes.
Observers outside the US, meanwhile, would do well to keep in mind this gap between rhetoric and reality as Washington's healthcare endgame unfolds. Always remember: Margaret Thatcher, who gave her name to the right wing of the British Conservatives, would never have been able to insert the private sector into healthcare in the way Mr Obama wants.