Harry Reid


Getting to “Yes”

With the collapse of the Boehner-Obama talks, it looks as if something closer to “regular order” in the legislative branch will probably be needed to produce the final deal to raise the debt limit. The House is moving toward taking up a plan drafted by the speaker and his lieutenants, and Senate Majority Leader Harry Reid is drafting a competing version for his chamber.

This is a good development. Because it’s been clear for some time now that President Obama has been the real roadblock.

The president and his advisors wanted to take what looked on its surface as a potential problem for them—the need to raise the debt limit—and turn it into an opportunity. They have had three primary objectives in this fight. First, the president has wanted to force congressional Republicans to agree to a large tax hike. Such a hike would partially mask the government’s spending problem for a time (though not permanently), and thus ease the pressure for spending cuts. It would also badly divide the conservative coalition going into an election year. In other words, it would be a real “twofer” for the president and his party and would certainly be trumpeted as such by the mainstream press.

Second, the president has wanted to further advance the Obamacare vision for health care. That has meant no meaningful move toward repeal and replace, and in fact further changes in Medicare and Medicaid that are in the spirit of Obamacare’s central-planning philosophy.

The president’s third objective was to reposition himself politically. His first two years in office were dominated by the so-called “stimulus” proposal and Obamacare — efforts that cemented the electorate’s perception of him as a big spending, big government liberal. Heading into 2012, the president and his advisors desperately want to change his image, especially among independent voters, and they were hoping that a “$4 trillion” deficit-cutting plan would do the trick.

Unfortunately for the president, as the details of his talks with Speaker Boehner have spilled out into the press, it hasn’t helped him shed his well-earned reputation as a big spender. The dominant story line that has emerged is that the president has insisted on a $1.2 trillion tax hike to get a deal, and Republicans have said “no,” especially given the president’s insistence that a serious re-write of the health care entitlements, including Obamacare, is “off the table.” By holding firm, Republicans have — so far — denied the president the ability to shift political blame onto them for the tax hikes he wants to impose on working Americans. Consequently, as matters stand today, the debt-limit talks have only further exposed the president as a big government liberal.

So Republicans have acquitted themselves remarkably well to date. The question is, what should they do now?

First, House Republicans must realize that, at this stage, they have to pass a credible plan through their chamber. Having rejected the Obama “grand bargain,” they need to show the country they are willing to pass a debt-limit increase on reasonable terms to avoid the real, if sometimes exaggerated, risks associated with a debt-limit crisis. The two-step process that Speaker Boehner outlined to his colleagues today looks like it should do the trick in that regard. It would impose discretionary spending caps for a decade, thus producing real restraint on domestic appropriations. The savings — about $1.2 trillion over ten years — would be accompanied by a substantial and immediate increase in the debt limit.

In addition, the Boehner plan would empower a special bipartisan joint committee of House and Senate members to draft further budget-cutting reforms, including entitlement changes. The target would be an additional $1.8 trillion in deficit reduction over ten years. The recommendations of this committee would go to an up or down vote in both the House and the Senate, probably sometime in early 2012.

Senator Reid and his Democratic colleagues are objecting to the Boehner plan on the grounds that it would force another debt-limit showdown in 2012, almost certainly with the same disputes about taxes and entitlements. Fair enough. House and Senate Republicans should be open to a reasonable counter-offer from Senator Reid, especially if it is an offer that could actually pass in the Senate.

The details of course matter immensely here. The legislation to raise the debt limit needs to include real spending restraint, not gimmicks or smoke and mirrors. But if the cuts in a Reid counter-offer are real, and if they are of a size to comfortably allow an even larger bump up in the debt limit, Republicans should be open to moving in that direction if doing so would produce a final deal with Senate Democrats.

Because, from a strategic point of view, even a resolution of the kind Reid is pursuing — one giving the president a debt-limit hike into 2013 — would give Republicans all they need from this fight, if the spending cuts are indeed real and not focused on defense. There would be no “grand bargain” for the president, and no “Gang of Six” plan. There would be sizeable, even historic, spending cuts, with no accompanying tax increase. There would be no tacit approval of Obamacare. And there would be no political fallout from the unpredictable economic turmoil that could accompany a hiatus in federal borrowing.

It’s true that such a deal would also mean giving up on entitlement reform before 2013. But, given what’s happened over the past two months, it’s obvious that genuine entitlement reform isn’t going to happen with this president in the Oval Office.

Republicans have successfully dodged several bullets to this point. It’s now time for them to see that they are in a good position to close a deal on their terms — and then move on.

[Cross-posted to the Corner.]

posted by James C. Capretta | 5:48 pm
Tags: John Boehner, Harry Reid, Barack Obama, debt limit
File As: Health Care

Not As Advertised

Now that health care bills have passed in both the House and the Senate, Democrats just can’t seem to stop themselves from rhetorical excess. Just before Christmas, as the bill sponsored by Majority Leader Harry Reid was clearing its final hurdles in the Senate, Democrats took to the chamber floor and cable television shows to trumpet the “historic” nature of the legislation they were about to vote on — legislation that would, at long last, move toward their long-sought goals of “universality” and a government-guaranteed right to health care.

But is it so?

Yes, both the House and Senate would provide essentially free health insurance, through the Medicaid program, to many millions of low-income people. But, even so, enrollment in Medicaid is a far cry from getting good care when it’s needed. For starters, about 40 percent of the nation’s physicians don’t see Medicaid patients because the payment rates are too low, which also means certain hospitals have very low rates of Medicaid admissions. The truth is that current Medicaid enrollees already have trouble getting access to high-quality care when they need it because the network of providers willing and able to see them is constrained and over-burdened. The House and Senate bills would add 15 million or more people to this program’s rolls without any guarantee whatsoever that there will be doctors and hospitals that can see them.

Ironically, the very Democrats who most frequently tout “universality” as the goal are also the ones who ensure it will never actually come about by insisting that America’s lower-income families enroll in government-run insurance — with no other options.

Beyond the Medicaid expansion, Obamacare is really an obligation, not a right. Every citizen would be required to sign up with a government-approved health-insurance plan or pay a tax penalty for going without coverage. According to the Lewin Group, households with at least one uninsured member and an income between $50,000 and $75,000 per year would see their costs rise for health care by $2,133 under the Senate bill. “A new tax on the uninsured” isn’t exactly a catchy slogan for Obamacare — but that’s essentially what it is. There would be a lavish new entitlement program to offset some of the premium for some households, but the vast majority of working Americans would get no additional help. They would just get the unfunded mandate, and that’s it.

Meanwhile, despite all of the talk of painlessly slowing the pace of rising costs with more efficient care, the Democrats’ bills would cut costs mainly by imposing arbitrary rate reductions in the Medicare program — pushing it more and more toward the Medicaid model. In fact, at the end of December, the Mayo Clinic announced that it would no longer see Medicare patients at one of its clinics in Arizona because the program’s payment rates are simply too low to cover its costs. A small glimpse into our Obamacare future.

In the coming days and weeks, we will hear a great deal more about how close the nation is to making history. Readily available health care for all, without limit — that’s what the overheated rhetoric will imply. But the public figured out months ago that the reality under Obamacare would be very different. There would be higher costs, higher taxes, and more regulation. Worst of all, clumsy governmental “cost-control” efforts would put the quality of American medicine at risk for everyone. Which is why public sentiment has hardened in opposition, and why the debate is not over yet.

posted by James C. Capretta | 7:51 pm
Tags: Obamacare, Medicaid, Medicare, Harry Reid
File As: Health Care

Why the Senate Bill Makes No Sense

In the new Weekly Standard, my colleague Yuval Levin and I discuss the bill that has emerged from the Senate. An excerpt:

The [Democrats' original] goal was to get a large swath of the public insured by the government, and so gradually create a socialized insurance system. Conservatives opposed this scheme because they believe a public insurer would not be able to introduce efficiencies that would lower prices. Liberals supported it because they think a public insurer would be more fair and more effective.

But in order to gain 60 votes in the Senate, the Democrats have now had to give up, for all practical purposes, on any version of that public insurer, while leaving the other components of their scheme in place. The result makes no sense whatsoever — not to conservatives, not to liberals, not to anyone. Rather than reform a system that everyone agrees is a failure, it will subsidize that system and compel participation in it — requiring all Americans to pay ever-growing premiums to private insurance companies, most of which are for-profit, while doing essentially nothing about the underlying causes of those rising costs. The thought that, after all of this, a Democratic Congress is going to force Americans to send their premiums to the despised insurance industry and then subsidize that industry to boot has sent the left into such a state of frenzied recriminations it could sink the whole enterprise yet.

And that is by no means the only problem for the left in this bill. The mad rush to pass something obscures a crucial component of the bill's design that could prove very problematic for Democrats. For all of President Obama's insistence that we must have action now, and all the talk by congressional Democrats about the terrible costs of delay, the key components of the Senate bill would actually not go into effect for four years. Essentially all of the spending provisions and insurance reforms — including the individual mandate to purchase health insurance, the employer mandate to provide it, the state insurance exchanges, the federal subsidies for coverage, and the Medicaid expansion — would only go into operation in 2014....

This timeline of tax and spending implementation corresponds rather awkwardly to the political calendar confronting the Democrats.

The entire article is available here.

posted by James C. Capretta | 8:16 pm
Tags: Yuval Levin, Harry Reid, Senate bill
File As: Health Care

Ben Nelson caves on taxpayer funding of abortion

From a new piece my colleague Yuval Levin and I have over on the Weekly Standard website:

Now that Senator Nelson has announced his intention to vote to end debate on the Reid bill, it's worth looking at whether his actions match his words....

The new Reid language that Senator Nelson now finds acceptable would allow federal subsidies to flow to plans that cover elective abortions in the insurance exchanges. Senate Democrats try to create the impression that only the enrollees' premiums will pay for the abortion coverage. But it's an artificial bookkeeping exercise. Taxpayer funding would support the same insurance policies that pay for abortions. Senator Nelson is touting the fact that states can enact laws which prohibit elective abortions in the exchanges (the so-called "opt out"), but that was already permissible under the previous Reid language. And in any event a state can't protect its taxpayers from financing abortions beyond its borders. Senator Nelson's "compromise" leaves Nebraska's voters entirely vulnerable to paying for California's and New York's abortions.

posted by James C. Capretta | 6:45 pm
Tags: Ben Nelson, Harry Reid, abortion, Yuval Levin
File As: Health Care

Reid 2.0: It’s Still a Budget Buster

The Obama White House and its congressional allies have tried all year to push their various bills through to passage by truncating the time between introduction and a decisive vote to the bare minimum. They figure the only way to get something passed is to minimize public review and scrutiny of whatever their latest idea is to engineer American health care from Washington, D.C.

To date, that tactic hasn’t worked out so well. In July, House Democrats tried to unveil a bill on the 14th for a planned vote on the 31st. A firestorm erupted, however, pushing back the vote into November. In the Senate, meanwhile, a series of self-imposed deadlines have been missed as Democratic pronouncements of inevitability have bumped up against the reality of steadfast and growing public opposition.

Nonetheless, Senate Majority Leader Harry Reid is running the same play again today, and very possibly with different results. He unveiled the latest version of his reform legislation this morning, filled to the brim with outrageous payoffs to buy the votes of holdout Senators. Virtually no one else has seen the bill before today, much less had a chance to give it the scrutiny it deserves. And certainly the public has not had a chance to weigh in. No matter. Senator Reid has simultaneously set in motion the procedures necessary to force a vote on his new health-care plan in a matter of hours, not weeks.

And yet, despite the unprecedented effort to short-circuit public review and input, it is likely that this latest version of the Reid plan will be just as unpopular as the previous one, and for many of the same basic reasons.

According to the Congressional Budget Office (CBO), the amended Reid plan would reduce the federal budget deficit by $132 billion over the period 2010 to 2019, but that is a mirage.

For starters, as CBO notes, the bill presumes that Medicare fees for physician services will get cut by more than 20 percent in 2011, and then stay at the reduced level indefinitely. There is strong bipartisan opposition to such cuts. Fixing that problem alone will cost more than $200 billion over a decade, pushing the Reid plan from the black and into a deep red.

Then there are the numerous budget gimmicks and implausible spending reductions. The plan’s taxes and spending cuts kick in right away, while the entitlement expansion doesn’t start in earnest until 2014, and even then the real spending doesn’t begin until 2015. According to CBO, from 2010 to 2014, the bill would cut the federal budget deficit by $124 billion. From that point on, it’s essentially deficit neutral — but that’s only because of unrealistic assumptions about tax and Medicare savings provisions. By 2019, the entitlement expansions to cover more people with insurance will cost nearly $200 billion per year, and grow every year thereafter at a rate of 8 percent. CBO says that, on paper, the tax increases and Medicare cuts will more than keep up, but, in reality, they won’t. The so-called tax on high cost insurance plans applies to policies with premiums exceeding certain thresholds (for instance, $23,000 for family coverage). But those thresholds would be indexed at rates that are less than health-care inflation — forever. And so, over time, more and more plans, and their enrollees, would bump up against it until virtually the entire U.S. population is enrolled in insurance that is considered “high cost.”

Similarly, the Medicare cuts assume that hospitals, nursing homes, home health agencies and others can survive with a permanent annual cut in their payment rates for presumed productivity gains. Medicare’s chief actuary has already signaled that this reduction could push one in five hospitals into insolvency, thus forcing them out of the Medicare program.

What’s more, the benefit promises are sure to expand well beyond what CBO has assumed. There are 127 million people living in households with incomes between 100 and 400 percent of the federal poverty line, but CBO assumes that only 18 million of them will get the new subsidized insurance under the Reid plan by 2015 because of rules that make most workers ineligible for assistance. But, if enacted, employers would find ways to push more workers into subsidized arrangements, and Congress would loosen the rules to make more people eligible. Costs would grow much faster than CBO currently projects. In addition, the Reid plan continues to include a new entitlement program for long-term care that every actuary who has looked at it says is a financial disaster waiting to happen. If passed, it would only be a matter of time before another federal bailout would be necessary.

It is now plain as day that the Reid plan has evolved into nothing more than a massive entitlement expansion, which subsidizes more people into an unreformed system with soaring costs. Several Senate Democrats claim to be strong fiscal conservatives. Their votes on the Reid legislation will provide conclusive evidence whether that’s true or not.

posted by James C. Capretta | 6:42 pm
Tags: Senate bill, Harry Reid, CBO, Medicare cuts
File As: Health Care

For Nelson, It Shouldn’t Be a Close Call

Nebraska Senator Ben Nelson announced yesterday in an interview with a home-state radio station that new language regarding abortion coverage in subsidized insurance plans was not acceptable to him, dealing yet another blow to Senate Majority Leader Harry Reid’s mad-dash rush to pass a bill before Christmas.

Of course, it’s crucial that Senator Nelson stick to his guns on abortion. He has always been a self-described pro-life Democrat, and attracted votes accordingly in his election campaigns. So far, he shows every indication of sticking to his guns and insisting on language that is at least as stringent as that offered by Representative Bart Stupak and passed in the House last month. This is no time to go wobbly, or to listen to those who are transparently trying to divide the Senator from his pro-life supporters. If abortion language offered by Senator Reid doesn’t meet the test of the Catholic bishops — and it doesn’t — Senator Nelson owes it to those pro-life voters who have stood with him over many years to stand with them at this critical time.

But, just as importantly, Senator Nelson made it clear in the same radio interview that his concerns with the Reid bill go well beyond protecting taxpayers from financing elective abortions — as they should. Senator Nelson considers himself to be a fiscal conservative too. The Reid bill provides a ready opportunity to prove that he actually is.

Even before a new health-care entitlement program is stood up, the nation’s budgetary outlook is very grim, and has been made more so by the policies of the Obama administration. CBO projects that the Obama 2010 budget plan will drive federal debt up from $5.8 trillion at the end of 2008 to more than $17 trillion by 2019. And it will only get worse from there. Federal spending on Social Security, Medicare, and Medicaid is expected to increase from 11.1% of GDP this year to 17.1% in 2030, a jump in spending of 6% of GDP in just two decades. To put that in perspective, that’s like adding another Social Security program to the federal budget without any new revenue to pay for it.

The Obama administration and its allies in the Senate keep arguing that the Reid bill will begin to fix the entitlement problem. It won’t. It will make the nation’s entitlement problem much worse.

If passed, here’s what’s certain. Medicaid will be expanded to at least another 15 million people. This is the same Medicaid program that is entirely unreformed in the Reid bill and has been growing, on a per capita basis, nearly 2 percentage points faster than per capita GDP growth for three decades. In addition, Senator Reid’s proposal would create a new health entitlement by subsidizing the premiums for households with incomes between 100 and 400 percent of the federal poverty line. In all, CBO says these “coverage expansion” provisions (including tax credits for small businesses) will cost nearly $200 billion by 2019, and that cost will grow 8 percent annually every year thereafter.

And that’s a lowball estimate. The new insurance premium subsidy program is available only to households getting their insurance through the new “exchanges,” not employees who have no choice but to take the plan offered at work. But, as Gene Steuerle of the Urban Institute and I have pointed out elsewhere (see here and here), this kind of two-tiered system of subsidies creates large disparities in the treatment of households with identical financial resources. As matters stand, CBO says only 18 million people would get the premium subsidies in 2015, even though, in 2008, there were already 127 million people under the age of 65 living in households that would be eligible for subsidization. If enacted, it would only be a matter of time before tens of millions of additional people ended up in the subsidy program.

And what does the Reid bill do to slow the pace of rising costs? The President’s Council of Economic Advisers touts the slowdown in Medicare and Medicaid costs, as scored by CBO. But these spending reductions don’t come from more efficient health-care delivery. The savings are from arbitrary, across-the-board payment-rate cuts for hospitals, nursing homes, home health agencies, and others. These cuts do nothing to improve the efficiency of medical practice. Indeed, in the past, they have led to cost-shifting, and Congress has shown no stomach to sustain such cuts in the face of warnings of reduced access to care, such as was provided by the Medicare program’s chief actuary last week.

The administration also believes the new Medicare commission will work wonders. But, as the Concord Coalition has noted, the commission’s mandate is incredibly limited. It can’t propose any changes to hospital or physician reimbursement arrangements. It can’t restructure the Medicare entitlement. And its targets after 2019 wouldn’t save anything. That means, for a few years, the commission might get to cut home health and other ancillary service payment rates. That’s it. Medicare won’t look any different as a result. Never has so much been made about so little. Moreover, the commission itself represents an incredible admission of failure. At the beginning of the year, the Obama administration was promising to come forward with new whiz-bang ideas to painlessly root out inefficient health care without harming quality. They never did. Now they are saying a new independent commission will do it for them. Don’t hold your breath.

Senator Nelson is clearly uncomfortable with the bill as written. Any fiscal conservative would be. It’s not a close call. As the senator said yesterday, the country would be far better off with a more scaled-back bill. He’s right about that. And it’s in his power to deliver just such a bill. Pushing the discussions into 2010 would not end the health-care debate. It would only make it more likely the Senate voted in the end for something the public — and Nebraskans — would find acceptable.

posted by James C. Capretta | 5:28 pm
Tags: Ben Nelson, Medicare, abortion, Harry Reid, Senate bill
File As: Health Care

The Irony of Mandatory Payments to Profit-Hungry, Private Insurance Companies

Senator Joe Lieberman announced today that he is ready to support “health-care reform” now that both a new, government-run insurance option and the ill-fated Medicare “buy in” idea have been stripped from the legislation.

It’s not really surprising that Senator Reid and the White House, desperate to pass anything called “health care reform,” would succumb to Senator Lieberman’s demands to get his vote.

Still, though long in coming, the jettisoning of all flavors of the so-called “public option” — to appease Senator Lieberman, of all people! — must be an awfully bitter pill for the left to swallow. After all, what is the Reid plan now that those provisions are out? In essence, it’s a requirement that all Americans pay health insurance premiums to secure qualified coverage. And if there is no government-run option, the public will have no choice but to pay their premiums to private insurers. Yes, that’s right. The Democratic party is on the verge of enacting a requirement, enforced with federal tax penalties, which would effectively require hard-working Americans to hand over even more of their wages to profit-hungry, private insurance companies.

Yes, the Reid legislation may still include the half-baked idea to offer national, not-for-profit insurance plans out of the Office of Personnel Management. But no such plans currently exist in the marketplace, and it’s hard to see how they could get up and running and stay viable without crossing into the no-fly zone of a government-run option that would push Senator Lieberman out of the yes column. The not-for-profit concept is therefore either non-viable window dressing to make liberals feel better, or a foot in the door that will draw opposition when its details are revealed.

Of course, even without a new government-run insurance plan, the Reid bill is a policy monstrosity. It’s filled to the brim with mandates, fines, and new federal controls which will erode the quality of American medicine and lead to government-driven rationing of care. It’s a governmental takeover by regulation and bureaucracy, not program enrollment.

Still, it’s easy to see why liberal Democrats are screaming over the Lieberman apostasy. There’s really no industry they despise more than private health insurers. And now they are being told they have no choice but to vote for a bill that would hand over to those greedy insurers a captured marketplace of guaranteed insurance purchasers. Ironic indeed.

posted by James C. Capretta | 3:46 pm
Tags: Joe Lieberman, Harry Reid, mandates, Office of Personnel Management
File As: Health Care

Harry Reid's Ticking Entitlement Time-Bomb

Senate Majority Leader Harry Reid is scrambling today to pick up the pieces from his collapsing “breakthrough deal” between moderates and liberals. It seems the Senate’s top Democrat rushed out with a compromise plan that none of the critical players had actually agreed to support.

At the center of the storm is Connecticut Senator Joe Lieberman, who is an independent but caucuses with his Democratic colleagues. Because of how he was last reelected — in spite of, not thanks to, the national Democratic party — Senator Lieberman owes the Obama administration nothing.

For months, Senator Lieberman has warned his colleagues of the dangers of pursuing an excessively partisan health-care agenda. In August, he told CNN that it would “a real mistake” to jam through an unpopular health bill with no Republican support and passionate public opposition. And he has been sounding the alarm for months that the emerging Democratic plan is too heavy with entitlement expansions at a time when the nation’s finances are already drowning in unaffordable commitments. In an interview in October, he said that Democrats were “trying to do too much” in the health-care bill and were unnecessarily creating additional risks for an already over-burdened federal budget.

But his warnings have fallen on deaf ears. Ever since the August town-hall meetings, the Obama administration and the Democratic leadership in Congress have been rushing full speed ahead to try to pass a highly partisan and bloated bill that they know is strongly opposed by a majority of voters. Their goal is to pass it as fast as possible so that they can lock in a massive entitlement expansion with time to recover politically before the 2010 midterm election.

Senator Lieberman has done the country a great service by, rather mildly, voicing his concern and disagreement with the prevailing Democratic approach. In recent days, he has said that, to get his support, the health-care bill must drop any and all variations of the public option (including the flawed Medicare “buy-in”), as well as the new long-term care entitlement — the so-called CLASS Act — which would almost certainly lead to unfunded obligations down the road. Senate liberals, not wanting to compromise with Lieberman, are howling at the prospect of having their long-cherished goal of “universal coverage” boil down to forcing tens of millions of Americans to pay premiums to profit-greedy, publicly-traded insurance companies.

But even if Senate Democrats made some concessions to Lieberman, the Reid version of Obamacare would still be a runaway entitlement expansion and budget buster. That’s because the primary entitlement it promises is a ticking budgetary time-bomb certain to go off in a few years time.

The Reid bill promises households with incomes between 100 and 400 percent of the federal poverty level that the premiums they owe for health insurance will be limited to a fixed percentage of their incomes. In 2016, a family at the poverty line would pay no more than 2.1 percent of its income toward health insurance. The premium cap would increase on a sliding scale until it reaches 10.2 percent for families with incomes between 300 and 400 percent of the poverty line. The Congressional Budget Office (CBO) expects this entitlement, plus the Medicaid expansion and tax credits for small businesses, to cost about $200 billion by 2019, and to grow 8 percent annually every year thereafter.

But even that staggering cost doesn’t reveal the true price tag of the Reid bill because, expansive as the entitlement is, Senate Democrats make most workers ineligible for it. Workers who are offered qualified coverage by their employers, with employee premiums below specified “affordability” thresholds, would have no choice but to take their job-based plan with no subsidization. True, the vast majority of the premiums would be paid by their employers — but, of course, when an employer pays for health insurance, it is really the worker who pays in the form of lower cash wages. That is the consensus of credible economists, including those working at CBO. There is a federal tax preference for employer-paid premiums, but it is worth much less for most low- and moderate-wage workers than the subsidies the Reid bill would hand out in the exchanges.

Let’s imagine what this would mean in practice in the year 2016, by which time (according to CBO estimates) the average cost of family coverage will be $14,100. Consider a hypothetical family of four with an income at 200 percent of the federal poverty line (or about $48,000 for a family of four in 2016). Under the Reid plan, that family would pay 6.5 percent of its household income as a premium, or $3,120. Their employer would pay a fee of $750 to cover some of the cost. The rest of the premium — $10,230 in this example — would get paid by the federal government.

By contrast, a worker with the same total compensation from his employer but with job-based insurance would enjoy a tax advantage of about $4,300 from employer-paid premiums. That's nearly $6,000 less in governmental support than the worker who is eligible for direct subsidization in the exchange.

According to the Census Bureau, in 2008 there were 127 million Americans under the age of 65 living in households with incomes between 100 and 400 percent of the federal poverty line. But CBO assumes that in 2015, only 18 million people would get subsidized premiums in the Reid plan.

But of course it will never work. If enacted, employers would find ways to place more low-wage workers into the exchanges, thus driving up the cost of subsidized insurance. Congress would also respond to political pressure and liberalize the eligibility rules. Like almost every other entitlement ever enacted, this one will grow far beyond current projections.

Truth be told, though, that’s what most Democrats want. They just don’t want to face up to the costs at this time, in this bill. Better to get the entitlement in place first, and then let it grow naturally as entitlements always do.

Senator Lieberman has been pushing his colleagues all year to produce a bipartisan and more measured bill that enjoys broad public support. That’s the only sure way to prevent enactment of a runaway entitlement sold on dubious assumptions and gimmickry. It’s now within Senator Lieberman’s power to bring about a major course correction. For the sake of the country, he shouldn’t hesitate to force his Democratic colleagues to do what they would not do voluntarily.

posted by James C. Capretta | 6:04 pm
Tags: Harry Reid, Joe Lieberman, CLASS Act, Senate bill
File As: Health Care

From Awful to Worse

In the new Weekly Standard, I have a piece co-written with my New Atlantis and EPPC colleague Yuval Levin. We discuss how Harry Reid's latest proposal is even worse than his original one. An excerpt:

Apparently, in exchange for dropping the "public option," moderate Senate Democrats have tentatively agreed to open up Medicare to people age 55 to 64 (retirees can currently sign up for it at age 65). In other words, rather than build on the failed cost-control model of Medicare, they now want to actually further burden Medicare itself. Why take a roundabout path to failure when a direct one is available? The irrationality of this solution is staggering. But, of course, it's a solution to Reid's political problem, not to the nation's health care financing crisis. Moderate Senate Democrats don't want to vote for anything called a "public option," but some of Reid's more liberal colleagues won't give up the dream of marching toward a single payer health care system. So he has offered up an even more direct path to such a system, but given it a different name and frame than the "public option."...

According to the Census Bureau, only 4.3 million people age 55 to 64 were uninsured in 2008. But the total population in this age range was 34.3 million--so the Medicare buy-in is not a means to help the uninsured but a means to socialize the health insurance of a vast swath of the public.

Initially, a voluntary Medicare program might attract only a small number of enrollees, especially because those who opt in would be required to pay the full premium. But over time, employers would likely find it convenient to put their early retirees into Medicare to shed some of their costs, providing only wraparound coverage as they do for retirees over 65. Once the opt-in is established, moreover, pressure would build for Congress to ensure "premiums" are affordable. Directly or indirectly, the government would find ways to subsidize enrollment. If established, a Medicare option for the 55- to 64-year-old population would quickly become the default option for the entire age group, and a case for further lowering the age of eligibility would emerge.

And when that happens, those who have fought all year against a new government-run insurance plan will have lost the battle, and those seeking means of actually cutting the growth of health care costs will pretty much have lost the war. The Reid bill already assumes a 15 million-person jump in enrollment in Medicaid, bringing the total enrollment to 60 million Americans. If 20 to 30 million new people end up on Medicare, on top of Medicare's current 45 million enrollees, then more than one-in-three Americans would be covered by government-funded health insurance. A single-payer health care system would be all but inevitable.

The entire piece is here.

Meanwhile, I recently discussed the unfolding Senate process in an interview with The New Ledger; you can hear the podcast here.

posted by James C. Capretta | 11:09 am
Tags: Medicare, Harry Reid, Senate, Yuval Levin
File As: Health Care

The Health Care Bill in the Senate

I have a piece over at First Things on the prospects of the health care bill currently under debate in the Senate, from a possible amendment on abortion coverage to potential hold-outs such as Senator Lieberman:

While Senator Reid was able to garner sixty votes to proceed to his bill before Thanksgiving, it is much less clear that he has the votes locked up to pass it. He will need sixty senators at several more steps along the way to provide their assent, and some who voted with him to proceed to the legislation have publicly stated they would not now vote to stop debate unless significant revisions are made to the bill.

You can read the whole thing here.

posted by James C. Capretta | 3:37 pm
Tags: Senate health bill, abortion coverage, Harry Reid, Joe Lieberman
File As: Health Care

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