In July, House Democratic leaders were insistent that they had the votes to pass a bill with a new, aggressively managed government-run insurance option for the under-65 population, total federal costs approaching $1.5 trillion over a decade, and a new surtax on upper income taxpayers to pay for about one-third of it.

Where is that bill now?

It never came up for a vote, and there’s no plan to bring it up in coming days, even though Congress has now been back for two weeks from its summer recess. What’s the holdup? Well, it turns out the President of the United States — who was telling House members in July that it was critical to pass their bill before the August recess — doesn’t really like the House version after all. In his speech to Congress just after Labor Day, President Obama spelled out several key objectives for a bill that the current House version does not come close to meeting. The president said he wanted a bill that costs no more than $900 billion over a decade (the House bill’s price tag is at least $1 trillion, but it’s really far higher than that when properly assessed); doesn’t increase the deficit by “one dime” over ten years, or ever (the House bill would increase the government’s unfunded liabilities by about $10 trillion over seventy-five years); and is financed with Medicare and Medicaid cuts and a new tax on higher-cost insurance plans (the House bill imposes new taxes on higher income households, which the president essentially killed by never mentioning). He also all but said that dropping the government-run insurance option would be fine with him — letting even more air out of that particular, sinking balloon.

So much for the inevitability of the House plan.

But what about the Baucus plan, released last week?

Again, the White House and Senate Democratic leaders are hoping its introduction and the scheduling of a markup in the Senate Finance Committee will create a sense of irresistible political momentum that will feed on itself. “Closer than we’ve ever been before.” “Doing nothing is not an option.” “Now is the time for action, not debate.” Etc. Etc.

But the Baucus plan suffers from the same problem that derailed the House bill: the more the public hears and learns about it, the less they like it.

In particular, there are three key provisions in the Baucus plan that are on very shaky ground politically, so much so that it’s hard to see how they survive intact.

First, there’s the so-called “individual mandate.” This is the key provision of Obamacare. It turns out that the grand plan to finally bring civilized, “universal coverage” to America amounts to nothing more than a hefty, regressive tax on low and moderate wage working Americans. They must either buy government-approved health insurance — the cost of which is driven up by excessive government regulation — or they must pay a $3,800 per household tax to the IRS. Sunday, President Obama tried to argue that this kind of overt government coercion doesn’t amount to a tax. Good luck with that argument.

Second, there are the cuts in Medicare Advantage (MA) payment rates, which Democrats have targeted for nearly three years now. President Obama keeps trying to sell these cuts as nothing more than reductions in profits for insurance companies, but senior citizens know better. Today, about 20 percent of the Medicare population is in MA plans (the private insurance option in Medicare), and most of them get coverage that goes well beyond what’s offered by traditional Medicare. If $120 billion is taken out of MA payment rates, as suggested by Senator Baucus, there will be large cuts in benefits for many millions of seniors and many will also be forced out of their current MA plans. So much for the promise that Americans can “keep the insurance they have today.” In the coming weeks, the Medicare population is likely to turn even more decisively against Obamacare as they hear and learn more about these cuts.

Third, there’s the new tax on high-cost insurance plans. Here especially, the president has no one to blame but himself for the fix Democrats are in. Many conservatives actually favor reforming the tax treatment of health insurance to foster cost-conscious consumption in a competitive marketplace. But President Obama won the election last November in part because he attacked his Republican opponent, Senator John McCain, for endorsing a proposal to convert the job-based tax preference into individual tax credits. In scores of ads, the Obama-Biden campaign warned that the McCain plan would tax workplace health benefits “for the first time in history.” Now, the president and Senator Baucus want to do exactly that — without admitting that’s what they are doing. It won’t work, though, as this story in the New York Times demonstrates, because it is obvious to all that the Baucus tax on insurers and employers will get passed on to workers and individual insurance enrollees, including many middle income households and union members.

The White House and their allies in Congress could avoid the political fallout associated with these highly controversial provisions if they worked with Republicans on a sensible, measured, bipartisan bill that covered more people with voluntary enrollment in a reformed marketplace, not heavy-handed government coercion. But Democrats are bound and determined to try and pass something akin to the Great Society, despite clear signals from the public that they aren’t interested in any such thing. Much hangs in the balance.


September 22, 2009