What's Really Killing Health Care

Nobody thought the health-care summit would accomplish anything. The GOP is dead set against any tax hikes, and the Democrats can’t pay for new benefits without them.

Today’s bipartisan health-care summit was preceded by a great deal of eye-rolling on the part of progressive Washington, and I’m sure the feeling in the conservative camp was much the same. The whole thing was, transparently, a fraud. Neither the White House nor the leadership in the House or the Senate had any intention of taking the Republican Party’s point of view seriously. And rightly so. The fact of the matter is that the president wants to comprehensively reform the American health-care system and create a framework in which all Americans will have coverage and we can transition, over the long haul, out of the current dysfunctional employer-based system. Republicans, by contrast, don’t want that.

Health care is complicated but everything except the tax issue is a quibble or a red herring.

Tunku Varadarajan: What Was Obama Thinking?Watch the Top Moments of the Health-Care SummitOff the record, administration officials were happy to concede that they didn’t expect anything to be accomplished at the summit. Their hope, however, was to dramatize the idea that the failure of bipartisanship is the GOP’s fault. On that score, I’m not sure they got the job done. The problem is that the Democrats were so eager to highlight the moderate nature of their own proposals that they couldn’t really drive the point home about the radical nature of the GOP’s approach.

Max Baucus (D-MT), one of the key substantive architects of the plan, was also one of the key exemplars of this communications strategy. Baucus knows perfectly well that he’s a centrist who neither loves liberals nor is loved by them. He seems, as a result, to be a bit genuinely puzzled by the Republicans’ failure to embrace his ideas. “We’re not that far apart,” he insisted, before joining Barack Obama in arguing that the exchanges at the heart of their plan “are a Republican idea.”

This is silly. The creation of exchanges was at the core of the Senate Finance Committee draft done largely by Baucus. They were at the core of the House Democrats’ bill. They were at the core of Chris Dodd’s Senate Health Committee bill. They were at the core of Harry Reid’s merged Senate bill that passed on Christmas Eve, and they’re at the heart of the administration’s proposal today. These guys are all Democrats. If you have an idea that Democrats keep putting on the table and Republicans keep saying no to, you have something that is, by definition, a Democratic idea.

What Baucus and Obama should have said was that exchanges are a good idea and that Republicans, by rejecting them, are leaving Democrats as the ones possessing the good ideas. And understanding why Republicans reject this idea is key to understanding why bipartisan compromise is impossible.

The core idea of a health-insurance exchange is that in the long run, rather than being stuck with whatever health plan your HR department wants to give you, you should get to shop for a plan you like. That way, if your plan treats you badly, you can switch to another one, bringing some market discipline to the quality of service provided by insurance companies. Rather than disrupting people’s existing care, however, the Democrats’ plan initially sets exchanges up just for people who don’t currently get insurance from their employers. Over time, if this system works better than the employer-based system (and there’s very good reason to believe that it will), then more and more people will shift into them.

But for the exchanges to work, they need to be regulated. Absent regulation, insurers make money by refusing to insure people who are likely to need medical care. That’s basic business sense, but it doesn’t work as the basis of a health-care system. So plans that want to be offered on the exchange will need to agree to charge premiums based broadly on age, rather than on detailed discrimination. But for that to work, you need to mandate universal participation. Otherwise, you can just go uninsured until the day before your big surgery, and then sign up for a plan. But to mandate the purchase of insurance, you need to offer subsidies for people who can’t afford it. And to offer higher subsidies, you need to raise taxes.

And here’s where bipartisan agreement breaks down. Nobody in Washington quite seems to notice it, but ever since the conservative rebellion against George H.W. Bush’s 1990 budget agreement, Republicans won’t vote for bills that increase taxes. Health care is complicated and there are a lot of ins and outs to the bill that can be talked about, but everything except the tax issue is a quibble or a red herring. When George W. Bush was president, Republicans decided it was fine to increase spending and cut taxes simultaneously and it was therefore possible to achieve a great deal of bipartisanship on increasing education spending (No Child Left Behind) and boosting foreign-aid spending, and a modicum of bipartisanship on adding a prescription-drug benefit to Medicare and a pair of tax cuts mostly for wealthy Americans. But once Obama took over, the GOP decided that deficit spending was bad and centrist Democrats agreed. Consequently, to do anything, you need to raise taxes; Republicans won’t raise taxes, so nothing can be bipartisan.

This shouldn’t be too hard to understand, but the press is oddly reluctant to acknowledge it. Consequently, the myth persists that Obama might get bipartisan support for his plan if only he made some kind of concession on malpractice reform, even though he already made this offer and was rebuffed.

All the quibbling from Republicans at the meeting about wellness or fraud or torts or whatever else is basically just a distraction from their main point, which is that taxes can never be raised for any reason, so it’s impossible to act so as to give people any new benefits. Democrats, conversely, can drone on all they want about the presence of “Republican ideas” in their bill but it doesn’t change the fact that paying for new benefits with tax increases is at the heart of their plan, and it’s a total deal-breaker for the GOP. Fortunately, Democrats don’t actually need Republican votes to pass their plan. They can—and should—simply proceed with a reconciliation approach and defend their ideas on the merits.

Matthew Yglesias is a fellow at the Center for American Progress Action Fund. He is the author of Heads in the Sand: How the Republicans Screw Up Foreign Policy and Foreign Policy Screws Up the Democrats.