A Healthy Beginning

Our View: The Health Care Expansion Plans Being Developed In Congress Are A Good Start, But More Work Needs To Be Done On How To Fund Reform And Hold Down Costs

July 16, 2009

The health care reform plans moving through the House of Representatives and U.S. Senate this week appear to be an excellent starting point for an ambitious effort to cover virtually everyone in the nation.

They would: ensure that about 94 percent of Americans have coverage; provide for a government-run health plan that would compete with private insurers and drive down costs; require that individuals have coverage and that employers provide it; forbid private insurers from denying coverage because of pre-existing conditions; expand Medicaid to people making up to 133 percent of the poverty level and provide subsidies to those making up to 400 percent of poverty ($88,000 for a family of four); establish insurance exchanges so that individuals could more easily buy coverage; and invest in primary care.

One little problem: How do we pay for it?

The plan unveiled by House Democrats would cover the price tag - estimated at $1 trillion or more over 10 years - through a variety of cost-saving measures and a $540 billion increase in taxes for the top 2 percent of earners. (That's individuals making more than $280,000 a year and families making more than $350,000.) The Senate Finance Committee is working to find some bipartisan compromise on funding, if that's possible, and is considering paying for the plan through a variety of smaller measures, such as efforts to close corporate tax loopholes, fees on pharmaceutical and health insurance companies and perhaps even taxes on some health benefits.

Shouldering some of the cost through an income tax surcharge on the wealthy isn't a bad idea, but making it the primary funding source would be a mistake. As Maryland has learned after raising marginal income tax rates on the wealthy, such levies are extremely sensitive to the economy and can drop off quickly during bad economic times as capital gains evaporate. Putting all our eggs in that basket seems like a bad idea. And politically, it would provide an inviting target.

Political considerations are already driving the pace of the reform effort. President Barack Obama has been pressuring lawmakers to pass a plan before the August recess. Why the rush? Democrats are afraid that the longer the proposals linger, the more time well-funded opponents with a tremendous stake in preserving the status quo will have to torpedo reforms, as they did during the Clinton administration.

But Mr. Obama and congressional leaders shouldn't be in such a hurry. Sixteen more years of a dysfunctional health care system have made the public more eager for reform, not less. The advocacy ads now running on cable channels show a government bureaucrat standing between a patient and a doctor; that's probably not so scary for people who have spent the last decade grappling with profit-minded insurance company bureaucrats standing between them and their doctors.

But the recession and mounting budget deficit have made voters scared of the pricetag. Finding a palatable way to pay for health care expansion is crucial. So is reforming the economics of health care to stop the unsustainable growth in costs. If it takes longer than the next three weeks to develop a plan that gives incentives for doctors, hospitals and insurance companies to provide better care rather than more care, Congress shouldn't be afraid to take it.

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