Why Squeezing Health Care Reform Down to $1 Trillion Is a Bad Idea

It's a completely arbitrary benchmark, one that's important only because some Senators think it is and because the mainstream media agrees.  Sen. Max Baucus and others, spooked by an incomplete CBO score on an incomplete Senate Health, Education, Labor and Pensions bill which Republican Senators jumped all over, are hell-bent on keeping the Senate Finance Committee bill to $1 trillion dollars.  It's certainly a big, round number.  The question is, does squeezing the cost out of health care reform so recklessly mean we're dooming the bill to failure?

Keep in mind the following as we muddle through towards an answer.  One, this has nothing to do with the public health insurance option.  The version we're most likely to get is a "self-sustaining" model which supports itself with premiums and avails itself of the same federal subsidies given to private insurance in the National Health Exchange.  That means none of the price-tag for health care reform is related to having a public health insurance option.  We're paying subsidies to private insurance alone in the Exchange if the public health insurance option doesn't exist [edited based on reader's comment].  Two, $1 trillion over 10 years is $100 billion a year - or about 6% of the health care spending in the country in 2008.  Three, health care follows the Pay-Go rules:  every last red cent has to be paid for in spending cuts or new revenue.  Fourth, $100 billion would be a bargain - Obama's campaign plan was estimated to cost between $75 billion and $125 billion.  What we get out of Congress will be more robust than that.  And finally, let's keep in mind that for all the conservative bellyaching right now about how we can't afford to spend so much during our current budget situation, keep in mind a conservative president and Congress pushed through Medicare Part D in 2003 for the price tag of just under a trillion dollars over that same 10 year period.  (Hey kettle, this is the pot.  You're black!)

(By the way, the real lesson from the CBO score of the HELP bill appears to be "If you leave out the public health insurance option and employer pay-or-play, as well as any ability to fund reform, it's going to be pretty ineffective."  There needs no ghost come from the grave, my lord, to tell us this!)

So with this in mind, why is $1 trillion the threshold for Baucus et al.?  Pretty much the same reason why the year 2000 seemed to freak all the non-computer geeks out:  to wit, absolutely no damn reason.

It's not based on results or what would actually get the job done.  It's not based on saving money down the road, that spending $1 on prevention and primary care now to save $10 down the road somehow magically stops working at $1 trillion.  It's not based on what it would cost to give every American access to comprehensive benefits, and it's not based on making sure health care reform is affordable.  How do I know?  Because that's what they've cut to get it to $1 trillion! The same Politico article that quoted Sen. Kent Conrad saying, "Everybody who heard these numbers this morning had smiles on their faces" on the day that the Finance Committee announced it had found $600 billion to cut from the bill also quotes him on where they're cutting from:  "$400 billion in savings... largely by reducing the amount of subsidies for low-income individuals to buy insurance" and "additional $200 billion in savings by further adjusting the level of subsidies. It is unclear, however, whether they would reduce the amount of each subsidy or lower the income level at which people become eligible."

The New York Times is even more explicit:  "Assistance would originally have been available to people with incomes up to 400 percent of the poverty level ($88,200 for a family of four). Democrats have lowered the ceiling to 300 percent of the poverty level ($66,150 for a family of four)."  For comparison, 300% is the subsidy level for the Massachusetts plan - the same Massachusetts plan that has to exempt 15% of families above 300% each year from the penalties of its health insurance mandate because there are literally no affordable options for them.

Let's make one thing clear - health care reform is about providing quality, affordable health care for all.  But if you're cutting the subsidies, you're cutting what makes the plan affordable.  And if you're cutting what makes the plan affordable, you are summarily giving up on even coming close to "all."  And if you're also cutting the expansion of Medicaid, as one of the proposals calls for, you're simultaneously squeezing from the top and the bottom.  That doesn't work for toothpaste.  It'd be even messier in health care reform.

(Photo credit:  Fuzzy Gerdes on Flickr.)