October 25, 2014

We can't turn health care reform into "something for nothing"

According to a March 29 Roll Call article (subscription required), Senate Republicans have gone home for the two-week congressional recess with a strategy memorandum advising them to call for repeal of “Medicare cuts, tax hikes, mandates and sweetheart deals” in the new health care reform legislation.

Leaving aside the sweetheart deals, repeal of the other three items would amount to a fiscal catastrophe. One can legitimately argue that the law will end up costing more than anticipated or that some of the proposed savings will fail to materialize. Claims of big deficit reduction do indeed rest on some shaky assumptions, and the law certainly leaves a lot of work to be done on fiscal sustainability. However, the surest way to guarantee exploding deficits would be to leave in place all of the popular insurance reforms and repeal the politically difficult choices that have been made to pay for them.

Expanding health insurance coverage costs money. Unlike the 2003 Medicare prescription drug bill, this plan at least attempts to pay for its new spending by cutting future Medicare costs and raising new revenues. Constituents may not like these things but they are essential parts of the law. They are also protected by the new pay-as-you-go law (PAYGO), which requires that entitlement and tax changes not add to the deficit.

Similarly, the popular insurance reforms, such as eliminating denial of coverage due to pre-existing conditions, cannot be maintained without a mandate that everyone buys insurance. Without a mandate, guaranteed coverage would trigger a so-called “death spiral” for insurance plans. The uninsured could wait until they need medical care to sign up for insurance, pushing up the cost for everyone else. As costs go up, more people would drop out of the “risk pool,” pushing premiums even higher for those remaining.

And if a mandate is needed to keep a lid on costs, subsidies must be provided for those who can’t afford it. This, in turn, means that some way must be found to pay for the subsidies to keep a lid on the deficit.

Everyone needs to be realistic about the trade-offs. If we want the “good” and we don’t want spiraling premiums and deficits, we have to accept the “bad.” Promising to repeal the “bad” without repealing the good is not a responsible strategy -- however attractive it may be on the campaign trail.

For those concerned that the new legislation is deficient in cost control – and The Concord Coalition is among this group – the best approach is to find ways of beefing it up rather than promising the public that we can really have something for nothing. We’ve tried that. It doesn’t work.

Update: Here is a link to a good chart detailing the Medicare cuts and tax increase in the health care law.