Cap and Trade to Fund Health Care? Uh, Do We Have To?

It came up as a throwaway line in a not widely reported on conference call.  Sen. Kent Conrad, a centrist Democrat who chairs the Senate Budget Committee, remarked that the money raised by cap-and-trade legislation for greenhouse gases could be used to fund health care, echoing an earlier suggestion by Sen. Harry Reid.  It’s certainly an out-of-the-box idea.  The only problem is it’s also a feeble idea.

To review, the president’s budget creates a $634 billion health care reserve fund over ten years.  This fund is intended to get us halfway to universal coverage using a plan similar to what he proposed during the campaign.  The reserve fund comes from equal parts savings in the current Medicare and Medicaid programs and new revenue, with a variety of tax proposals.  By only going halfway with the cost of the program, the White House is making clear they will work with Congress to find the other half, using the legislative process to forge a plan that a majority can not only support but ultimately vote for.

But Sen. Conrad, out of sense of obligation to keep spending down, out of a desire to avoid fights over new taxes, or just because he can is inclined to zero out the health care reserve fund, proposing that Congress find the money all at once when they do health care reform.  This musing about using the money collected through cap-and-trade to fund health care is along similar lines – alternative funding that won’t be as contentious as either raising taxes or getting costs under control through reform of the public coverage programs we have now (and more sophisticated reform than what we’ve seen the past 8 years, where “reforming” Medicare and Medicaid basically translated to attempting to cut reimbursement rates.)  It’s an idea that Majority Leader Reid has also toyed with.

But honestly, the whole point of health care reform is that it can be done revenue neutral, but it can’t be done in the context of the status quo.  As Robert Laszewski writes, “The only way we can achieve sustainable health care reform is to pay for most of the cost of any reform plan out of the savings we achieve fixing the system and its perverse incentives to spend more without regard to what we receive.”  Sooner or later, we need to make the hard choices and show some leadership to repair a health care payment and delivery system whose problems go well beyond the question of who has insurance and who does not.  It will actually be more productive and more self-sustaining to start making those hard choices now rather than doing what we always do – kick the can down the road.

There’s also an element of robbing Peter to pay Paul.  Instituting a cap-and-trade system will make energy more expensive for large companies who will do what they always do – pass the costs on to consumers.  Already too many working poor families and senior citizens have trouble paying their utilities, particularly in the dead of winter.  Even after the stimulus bill money runs out, some will need help weatherizing buildings and installing energy efficient light bulbs or appliances.  Some cap-and-trade money should, out of a sense of humanity, if nothing else, go toward deferring trickle-down economic pain.  As for the rest, I’ll let Global Warming blogger Emily tell us what advances we could make in alternative energy with sufficient investment.

Finally, paying health care with energy revenue means both pieces of legislation would need to be combined in one bill.  Hey, Kent and Harry, you realize doing each of these ambitious and game-changing programs one at a time is already going to be hard enough, right?

So we’re thinking about changing the funding for health care reform to avoid hard decisions and needed structural reform, tie it to equally difficult energy legislation, and depriving a comprehensive energy strategy of some of its funds?  Sounds like a plan only the Senate could love…

(Photo credit:  kartografia on Flickr.)