James Pethokoukis

This exchange was not good for Team Obama:

Dr. Orrin Devinsky, a neurologist and researcher at the New York University Langone Medical Center, said that elites often propose health care solutions that limit options for the general public, secure in the knowledge that if they or their loves ones get sick, they will be able to afford the best care available, even if it’s not provided by insurance.

Devinsky asked the president pointedly if he would be willing to promise that he wouldn’t seek such extraordinary help for his wife or daughters if they became sick and the public plan he’s proposing limited the tests or treatment they can get.

The president refused to make such a pledge, though he allowed that if “it’s my family member, if it’s my wife, if it’s my children, if it’s my grandmother, I always want them to get the very best care.

“There’s a whole bunch of care that’s being provided that every study, that every bit of evidence that we have indicates may not be making us healthier,” he said.

Gibson interjected that often patients don’t know what will work until they get every test they can.

My spin: This raises a nasty populist element to the whole debate. Expect a closer focus on the health plan of Congress.

Just as a Congressional Budget Office estimate of the cost of healthcare reform ($1.6 trillion over ten years) threw a spanner into the works of that effort, a CBO study of cap-and-trade costs ($175 year in 2020) may have given some oomph to the energy plan which is coming to the floor fo the House. Still, the Senate is going to be a quagmire …

“I need a crash cart, stat!” The political prospects for major U.S. healthcare reform have taken a decided turn for the worse in recent days (at least from the point of view of many Democrats). And you don’t need to be some totally plugged-in Washington insider to understand that.

Just take a look-see at the stock market performance of industry players such as Aetna, Cigna, UnitedHealth Group, and WellPoint. Shares have been trending higher of late. What’s been slowly dawning on Wall Street is that the legislative process in Washington is unlikely to produce a national public health insurance option that could eventually squeeze out the private sector. Indeed, the betting markets give just a 43 percent chance of that happening, despite a Democrat president and Democrat control of Congress.
[See why Obama's big economic gamble is failing.]

Fact is, the prospects for any sort of bill that would produce major changes are in as much doubt as at any time since President Obama took office. Worried that the plan was growing too expensive, the critical Senate Finance Committee appears to have jettisoned any idea of a public plan option and is also cutting back on subsidies to help fully insure the nearly 50 million Americans who don’t have health insurance for one reason or another. On Sunday, Sen. Diane Feinstein, a California Democrat, said she doesn’t think Obama “has the votes right now,” to pass a bill, while Sen. Lindsey Graham, a South Carolina Republican, said spiraling cost estimates were “a death blow” to a public insurance option being included in the final legislation.

So what just happened? How is it possible that Democrats cruised to a huge victory on Election Day in November 2008 and are yet again unable to make good on their top legislative priority? Why are the ghosts of Bill Clinton’s 1994 healthcare reform debacle suddenly flitting about Capitol Hill? What happened was the Great Recession, the political impact of which the Obamacrats completely misunderstood. Oh, they knew the financial and economic crisis helped sweep them to office. That part they got just fine.

But they also assumed that the downturn would create such a sense of economic insecurity that time would be ripe for the sort of expansive, government-led healthcare changes that the party has been dreaming of for two generations. Instead, the Great Recession made healthcare less of a priority for voters than economic recovery — as fast as possible, please — and job creation. A recent spate of polls shows concern about healthcare (and climate change and pretty much everything else) lagging concern about unemployment. Healthcare lags concern about the shocking enlargement of the federal budget deficit, which has grown partly due to government actions — such as the $800 billion Obama stimulus package — to deal with the recession, as well as by the decline in tax revenue caused by the downturn itself.

And then last week, the Congressional Budget Office, the respected arbiter of what new government programs might cost, calculated that the Senate Finance Committee’s health reform bill would cost more than $1.6 trillion over 10 years. That was determined to be a political no-go by Senate Democrats– a smart conclusion given the recent polling — and the committee moved on to a still evolving plan B.

It is also ironic that the Obama administration, so aware of the latest research in behavioral economics, would forget about a phenomenon called “loss aversion”, which suggests people feel the pain of financial losses more acutely than comparable gains. Seems the whole healthcare plan was built up on the theory of losing something now — such as tax-free, employer-provided health benefits — for something later, like lower costs and a more sustainable government fiscal situation. (Polls show Americans reject that and don’t even want $500 in new taxes to pay for universal healthcare.) To recession-shocked voters, that probably doesn’t seem like a more economically secure situation at all.

I think this bit from First Read echoes what I have been saying:

So let’s get this straight: Barack Obama won last year’s presidential election by seven percentage points (53%-46%) campaigning, in part, for some form of universal health care; his party is about to have 60 votes in the Senate; polls show the country is receptive to overhauling health care; and the president’s approval rating is between 56-60%. But Senate Democrats, like Dianne Feinstein, now say that Obama might not have the votes to pass health care? “I think there’s a lot of concern in the Democratic caucus,” she said on Sunday, per the AP.

My spin:  What is going wrong: big deficits, too much all at once, voters who don’t see how reform wil benefit them but understand how higher taxes will hurt them.

At least as envisioned by the most gung-ho LibDem proponents. Ezra Klein gives it to them straight after viewing the latest Senate Finance Committee proposal:

Sources say that it’s a major scale-back of the outline they had before. Specifically, subsidies have dropped from 400 percent of the poverty line to 300 percent. Medicaid eligibility has been tightened to 133 percent of poverty for children and pregnant women and 100 percent of poverty for parents and childless adults. The plans being offered in the exchange have seen their actuarial values sharply lowered.

Beyond the changes, this is also the clearest look we’ve had at the specific policies being considered. There’s a fairly strong individual mandate, albeit with exemptions for those beneath the poverty line, those who would have to spend more than 15 percent of income for a plan, and undocumented workers. There are a variety of options for an employer mandate, or the absence of one. Sen. Kent Conrad’s co-op idea is up for discussion. There’s no public plan mentioned anywhere in the document.

Do you think my headline overstate things? Listen to the Daily Kos:

Without a public option, I’d rather we stop the absurd talk of “reform” and recognize that any bill passed would mainly be for show, but if we were to seriously consider a bill without such an option, I think the one healthcare reform that would make a difference is to cancel govt health insurance for all senators, representatives, cabinet members, etc.

I think this sums up the centrist-liberal divide on healthcare (via The Hill):

There is concern among centrists in the caucus that the draft bill, to be released Friday, will reflect some of the more liberal ideas in the caucus, although leadership has already rejected the idea of a single-payer system. It is being put together by the House Education and Labor, Energy and Commerce and Ways and Means committees.  “You have a bunch of crazy liberal chairs and their crazy liberal staffers, and they want to lay down a marker,” said a senior Democratic aide.

The always insightful Dan Clifton of Strategas Research gives his three cents:

1) $700 to $800 BN Healthcare Reform passes later this year with a major focus on Medicaid expansion and some cuts to providers;

2) Cap and trade dies of a slow death in the Senate and later replaced with a more moderate energy bill including a renewable portfolio standard and some transmission improvements;

3) A watered down financial regulation bill. However, if additional financial problems develop later this year, financial regulation could become more aggressive rather than less aggressive.

From ABC News:

This is not the Administration’s bill,” White House press secretary Robert Gibbs said in a statement following the Congressional Budget Office’s analysis of Sen. Ted Kennedy’s health care reform legislation, “and it’s not even the final Senate Committee bill.

My spin: Remember, this is the more liberal, robust approach to reform.

Here is another analysis of the Kennedy health plan, from consultancy HSI:

1) The plan lowers the uninsured significantly, to less than 1% of the population, but not without a cost of over four trillion dollars over 10 years.

2)There are no provisions in the legislation to offset this course. Even if the most generous estimate of the employer sponsored tax exclusion ($300 billion per year, including collecting FICA contributions from employers) where used and combined with fraud estimates and block granting all of Medicaid (acute and long term care), this would be a challenging proposal to finance with budget neutrality.

3) Finally, the public plans will be quite successful in recruiting large numbers of Americans.

4) They will also likely crowd out at 79 million individual contracts with existing private insurers.

My spin:  This analysis does not consider offsets such as taxes to pay for the program. But just how high would taxes have to go to pay for a $400 billion a year plan? Quite high. Even ending the employer tax exclusion still leave you with a deficit.

Ezra Klein notices that the value-added tax option to pay for healthcare reform is still floating around. Not a good idea, he says:

Levying a VAT to pay for coverage of the uninsured seems like a quick way to kill health-care reform. For the 85 percent of Americans with health insurance coverage, the VAT would be nothing but a charity tax. It wouldn’t buy them anything, as it does in the European systems. It wouldn’t free them from premiums, as it does in the Emmanuel/Fuchs voucher program. Republicans would view it as a major new tax. If Congress wants to rebuild American health care around a VAT, that’s probably a good idea. But simply slapping a new national sales tax atop the existing system? That doesn’t get you anything in terms of efficiency, and it’s going to scare the hell out of the middle class.