Code Red: Two Economists Examine the U.S. Healthcare System

August 31, 2009

Ted Kennedy and the Irony of Health Reform Politics

Filed under: Health insurance,Health Reform,Tax deduction — David Dranove and Craig Garthwaite (from Oct 11, 2013) @ 10:56 am
Tags: , ,

The passing of Senator Ted Kennedy is a sad reminder that it is easier for a camel to pass through the eye of a needle than it is for the U.S. Congress to enact comprehensive health reform.  All the arrows are pointing down.  There are now only 58 solid votes for reform in the Senate (Joe Lieberman is wavering).  The moderate Republican block in the Senate supports a plan that falls far short of what the House leadership has proposed and there are no longer any strong Democratic senators willing to work out a compromise.  To make matters worse, the budget deficit is now projected to reach $9 trillion over ten years. sobering up those Democrats in Congress who actually care about the future of our economy.  And thanks in part to a brutally effective anti-reform campaign, conservative Democrats are scared of their own constituents.   I just don’t see anything significant emerging from this Congress.

At the risk of having my own words come back to haunt me, I will take this opportunity to say “I told you so.”   This is what I blogged a year ago:

Comprehensive health insurance reform seems to be dead in the water.  But politicians need to appear to do something about health care.

They still need to appear to do something, but the set of viable options is shrinking.  There seems to be  no way to expand coverage without raising taxes.  Tax increases are already built into the $9 trillion budget deficit, even without health reform.  If the new tax dollars are used for healthcare, then either the deficit will hit double digits (in trillions!) or marginal tax rates will go through the roof.   Democrats may yet get their additional taxes, but they will soon thereafter be ushered out of office.

President Obama foolishly painted himself into a corner by ridiculing John McCain’s proposal to limit tax deductibility.   I hope he has the courage to admit his mistake.  Curtailing this subsidy to middle class and wealthy Americans is the only viable way to pay for expanded coverage while at the same time making health insurance markets more competitive.  Absent that, all we can expect is the kind of creeping incrementalism that has set in ever since the demise of serious managed care.  Electronic health records — eventually.  Payment reform — see electronic health records.  Technology evaluation — too hot to handle.  SCHIP expansion — not when states are almost bankrupt.

It is nearly 40 years since Wilbur Mills was found cavorting with nightclub stripper Fanny Foxe, putting the last nail in the coffin of the Kennedy-Mills proposal for comprehensive national health insurance.  Democrats have been waiting ever since for the right moment to revive NHI.  They missed their chance in 1994.    Now, in their moment of greatest power, they choose to be the most audacious.  And in this moment of audacity, the Democrats seem poised to fail the people who need the most help — the tens of millions of uninsured.

Senator Kennedy understood the importance of compromise.  But the Democratic leadership is in no mood for compromise.   I hope they keep their eyes on the prize and focus on expanding coverage.  We can cut the number of uninsured by half or more without totally remaking the system or raising marginal taxes.  If the Democrats continue to try to have it all, they will end up with nothing.  And both parties will make the death of health reform their rallying cry for campaign contributions and votes in the next election.   I fear that Senator Kennedy will turn over in his grave.

1 Comment

  1. […] President has “come around to what a lot of health economists, including myself in my last blog, had been suggesting he needed to do, which is get rid of the public options, focus on covering the […]

    Pingback by Tax on gold-plated plans music to economists’ ears « Expertly Wrapped — September 11, 2009 @ 3:24 pm

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