And the Rest Is Just Noise

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POLITICS DECEMBER 24, 2009

And the Rest Is Just Noise

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American liberals have a habit of withdrawing into cynicism and ennui at the most inopportune moments. The 2000 presidential election, and subsequent recount, was one such moment. The most die-hard reaches of the left, deeming the Democratic Party hopelessly corrupt, rallied to Ralph Nader’s fulsome populist denunciation of Al Gore’s subservience to the corporate agenda. Among more moderate quarters, an attitude of wry detachment prevailed. (“G.O.P.-lite, Democrat-lite,” sighed Frank Rich, “For the 95 percent of the country unwilling to go for Ralph Nader or Pat Buchanan, that is the choice, it always has been the choice, and it will still be the choice on Nov. 7.”) Those liberals who did see something large at stake took on an almost apologetic tone, conceding the lack of any inspired positive choice and focusing instead on the dangers of Bush.

The right, meanwhile, was engulfed in passion that occasionally flared into rage. Mobs of chanting conservatives harassed Gore at his residence day after day. Another such mob intimidated Miami canvassers into abandoning a recount then seen as potentially decisive. The left met all this with a shrug.

The denouement of the health care debate has brought about a similar moment in the political culture. The opponents of the bill are full of passionate intensity. The right, of course, is subsumed in rage and paranoia. Conservatives have been joined by fiery liberals like Howard Dean and a slew of left-wing blogs, denouncing the bill as a corporate giveaway and urging its defeat. The attitude closer to the center is more resignation and disappointment. (Frank Rich again: “Though the American left and right don’t agree on much, they are both now coalescing around the suspicion that Obama’s brilliant presidential campaign was as hollow as Tiger [Woods]’s public image.”) The endorsements invariably have a defensive tone—the bill “has some imperfections but is worthy of support,” concludes a New York Times editorial.

At some level, it is possible to understand the roots of liberal frustration. The machinery of Congress has ground away at the health care bill, as it does to almost any bill. But at a broader level, the liberal mood is insane. What has emerged from that machinery is not merely “better than nothing” or “a good start.” It is the most significant American legislative triumph in at least four decades. Why can so few people see that?

As the debate has dragged on, attention has increasingly focused on health reform in a vacuum, rather than in comparison with the status quo. And it is true, as the bill’s defenders have been forced to admit, that health care reform will not leave the United States with an especially great system. The salient fact, though, is that the United States currently has, among advanced countries, a uniquely horrible system—twice as costly as the OECD average while producing mediocre results and denying care to millions.

The massive waste of the system has made reform elusive. Every dollar of waste, reformers have long noted ruefully, is what somebody calls “income.” The interests that benefit from that waste are well-organized, while the people who pay for that waste, as well as the uninsured, are not.

The critics correctly note that reform will leave many Americans uninsured and much waste untouched. By definition, any reform that does not immediately slash the total cost of health care while insuring the entire population, all without impacting the quality of care is producing a wasteful system. After all, we know from the example of other countries that such a system could exist. And yet this reform goes remarkably far in remaking American health care, both in its efficiency and its humanity.

The opponents of reform have succeeded both when they have made the debate too narrow—a skeptical and often paranoid focus on small features of reform ripped out of all context—and when they have made the debate too vague—with broad-brush denunciations of corporatism and socialism. So instead, let us briefly step back and summarize the whole of the reform bill. Let’s use the Senate bill, since it offers the closest proxy to the final thing.

The first thing reform does is make insurance affordable for people who currently can’t buy it. Why can’t people afford insurance now? Well, either they don’t get it through work and can’t afford a regular insurance plan (say, a cashier at Wal Mart who doesn’t get insurance through her job) or they have a preexisting condition which means no insurer will sell them a regular insurance plan (say, a diabetic who can’t get insurance on the individual market.) Or sometimes both (a diabetic Wal Mart cashier, perhaps.)

Health reform solves the affordability problem by subsidizing insurance coverage, or expanding Medicaid, for low- and moderate-income families. And it solves the pre-existing condition problem by setting up a marketplace, called an exchange, where insurers must sell policies to anybody, at one price, and cover all basic services. In order to prevent people from going uninsured until they get sick, it also requires everybody to purchase insurance, except in limited hardship cases.

This requirement has caused screams of libertarian outrage, even from diehard liberals like Keith Olbermann and Markos Moulitsas, about the supposed unfairness of forcing people to buy insurance they don’t want. And it’s true: Young people will have to pay for insurance that is, actuarially speaking, a bad deal, so that older and sicker people can get a good deal. That’s how insurance works. Fire insurance is a terrific deal for anybody whose home burns down and a bad deal for anybody whose doesn’t. The healthy and young who must overpay can be consoled by the knowledge that one day they may become the sick and old free-riders.

Naturally, the money to subsidize insurance for people of moderate means has to come from somewhere. Obama has proposed spending cuts and tax increases to account for the entire cost of these new expenditures. Some of the savings come from a variety of Medicare trims, many of which were agreed to by the health care industry, as a trade-off for the financial benefits that will come from 30 million new subsidized customers. Another source of revenue is eliminating overpayments to Medicare Advantage, a Bush-era program that pays private insurers to cover people on Medicare, which costs the government 17 percent more per beneficiary.

The most important source of revenue is a 40 percent excise tax on insurance plans costing more than $8500 a year for an individual. This tax represents the partial fulfillment of a longtime goal of both the right and the left. Employer-sponsored health insurance is tax-deductible, while wages are, of course, taxed. This means an additional dollar of health care benefits costs less than an additional dollar in wages—an anomaly that has contributed to runaway health care costs. Taxing high cost plans, which do not produce better health outcomes, will give employers a strong incentive to shop for cheaper plans. Either way, the government would collect revenue—either directly through the excise tax, or (better still) indirectly when employees start getting less compensation in the form of tax-free health care, and more in the form of taxable wages.

According to the Congressional Budget Office, the Senate bill would reduce the deficit by more than one hundred billion dollars over the next decade. Some critics have asserted that the savings are an illusion produced by phasing in the higher taxes more quickly than the benefits, but this is incorrect. At no point do the costs exceed the savings. Indeed, the savings accelerate more quickly over the long run—CBO calculates that reform will save on the order of a trillion dollars in its second ten years.

But many health care economists believe reform could save far more money that that. These hopes rest upon the final component of the bill, a series of legislative experiments large and small intended to help transform health care. Small pockets of high-quality, low-cost care, like the Mayo Clinic, exist throughout the country, but most doctors and hospitals have not embraced the methods that produce this efficiency. Health reform contains a number of pilot programs to encourage more efficient care—such as penalizing hospitals with high infection rates, an easily-preventable failure that causes 20,000 deaths a year, or various provisions to reimburse Medicare providers based on results rather than the number of procedures used. Numerous other experiments abound in the bill.

The Medicare advisory commission holds the greatest potential to drive transformation of the system. Medicare has an advisory panel to proffer suggestions about more effective methods of delivering care. Say, research shows that $100,000 Medical Device X provides just as good results as $200,000 Medical Device Y. Right now, the commission will urge Medicare to only reimburse for the use of Device X, but the makers of Device Y will just go to Congress, campaign contribution in hand, and persuade them to ignore the advice. The Senate bill gives the commission far stronger powers. In any year when Medicare costs rise above a certain rate, the commission’s recommendations go to Congress for an up-or-down vote as a package.

In its official budget estimates, CBO credits these experiments with virtually no budget savings. This is because the budget scorekeeper, understandably, tries to use hard data and relies upon proven success in figuring out how much money a given reform will save. There’s no way to tell which of the transformative experiments will actually take hold or what sort of effect they may have. Probably some, even many, will fail. But the bill’s potential for overhauling American medicine, while impossible to quantify, offers one of its strongest selling points.

The sum total effect of this legislation is fairly simple. It would redirect a large chunk of the money sloshing around the health care system away from ineffective treatments and toward providing care for the uninsured. On top of that, it would prod the system, in dozens of ways large and small, to adopt cutting edge methods. It is not the kind of plan liberals would create if they could design it from scratch. Rather, it is a centrist compromise of the best variety, combining the ideas of the now nearly-extinct moderate wing of the Republican Party with the smartest bipartisan technocratic reforms.

What, then, is not to like? Conservatives have attacked reform with a potent combination of populist attacks against cost controls, aimed particularly at terrified elderly voters, along with more intellectually-respectable attacks protesting the lack of cost control, aimed at winning elite opinion. The first set of attacks whips up fears of Medicare cuts, death panels, or any provision that might cause anybody to lose his employer-sponsored health-insurance. Anything Democrats do to protect themselves against those attacks opens them up to the opposite charge of failing to sufficiently cut the health care budget, and vice versa.

The Republican charge of fiscal profligacy rests upon a handful of endlessly repeated data points. The first, and most commonly cited, is that health reform does not truly pay for itself because it is predicated on an unrealistic promise to slash physician pay by 20 percent. The accusation stems from a simple misunderstanding. In 1997, Congress enacted a series of cuts in Medicare, including a reduction in payments to doctors. The cut was poorly designed, and wound up slashing pay by far more than Congress intended. So, though the cut remains on the books, every year Congress provides for a one-year reprieve, in a ritual known to Hill insiders as the “doc fix.” However, since Congress has never permanently repealed the cut, it remains on the books for future years even though nobody expects it to ever happen.

Inexplicably, this fact has become exhibit A in the case against health care reform. (“There is nothing in the bill that will take care of the doctor fixes, $247 billion over the next 10 years,” charges Senator Lindsey Graham, citing this fact as evidence of the bill’s “Enron-accounting.”) This would be a persuasive argument if the health bill were introducing the physician payment cut as a way to offset the cost of health care reform. But it isn’t. The physician payment blunder is a hole in the budget that will be there regardless of whether or not health care reform passes.

Republicans often cite the “doc fix” to bolster a second charge: that cuts to Medicare never really stick. (Graham again: “And you know just as well as I do—you've been around a long time—no Congress is going to allow Medicare to be cut $470 billion.”) This, too, is false. Earlier this month, the Center on Budget and Policy Priorities released a paper carefully showing that historically, nearly all cuts in Medicare do, in fact, wind up taking effect. Congress has reduced spending on Medicare three times in the past two decades. Virtually 100 percent of the cuts in 1990 and 1993 took effect, along with 80 percent of the 1997 cuts.

Naturally, we can’t be certain what will happen in the future. Congress could easily decide to repeal those cuts if it chooses. Republican strategist Bill Kristol has urged his party to immediately propose repealing all Medicare spending reductions in the health reform bill—and, if Republicans take power, it could happen. This, however, does not make a strong case that the cause of fiscal discipline would best be advanced by letting the GOP win on health care reform.

Finally, Republicans have seized upon a study by Rick Foster, the chief federal health care actuary, which found that health reform would cause total health care spending to rise very slightly (one half of one percent.) Conservatives received this study as the smoking gun disproving the premises of health care reform. Health reform “bends the curve upward,” as too many Republicans to cite have argued.

This charge, too, is totally false. The purpose of health care reform is to reduce the rate of growth in health care spending over the long run. In the short run, it will increase total spending, by adding millions of uninsured people to the health care rolls. That addition is a one-time increase that impacts the level of spending, not the rate of growth. And the same analysis of the Senate bill finds that it would indeed reduce the rate of growth in health care spending over the long run—even discounting the possibility that any of the programs to transform medical care might actually succeed.

The persistence of these thoroughly debunked pseudo-factoids reveals a couple things about the state of the GOP. The first is that the party desperately lacks for genuine health care expertise. Being a member of a party long committed to defending American health care naturally makes one disinclined to study the horrifying reality of the system; likewise, a thorough understanding of the health care system makes one disinclined to support the party that has spent decades blocking its reform.

Second, conservative belief in the failure of health care reform is undergirded by deeper ideological values that are not amenable to data. Consider this typical salvo against reform in National Review, by Jeffrey Anderson, a Bush-era HHS speechwriter: “The motivation is simple and can be reduced to one word: power. And it doubtless has the American Founders, who dedicated their lives to securing liberty, spinning in their graves.” If we want to understand why a bill that embodies the best of moderate Republican ideas has attracted zero support from the Republican Party, it is because moderation has disappeared from the party. The takeover of ideological conservatives, implacably opposed to the expansion of government, has rendered impossible any bipartisan solution.

But what about the left? Why has the rhetoric from progressives increasingly come to mirror the uninformed ranting of the right?

One reason, obviously, lies in the slow, painful political death of the public option. The public plan did play an important role in the design of Obama’s health care plan. The plan relies upon regulated competition between private health insurance, but it’s not clear how effectively government can regulate insurers. The establishment of a public plan, which would not be tempted to mistreat customers in the pursuit of profit, would help provide a backstop in case regulation failed.

The defeat of the public plan, largely at the behest of insurance companies that don’t want competition, does weaken the reform plan. Yet liberals have responded out of all proportion to the scale of the setback. Left-of-center economists and policy wonks—including Yale political scientist Jacob Hacker, who created the public option—have endorsed the Senate bill. Liberal activists, bloggers, talk show hosts, and a few members of Congress, by contrast, have attacked it as, in Howard Dean’s words, a “bailout for the insurance industry.”

Right-wingers, oddly enough, have joined this critique. (Joe Scarborough: “And as Howard Dean said, and this is a devastating fact, insurance companies' stocks reached a 52-year high on Friday after this so-called reform bill got its 60th vote.”) Until not very long ago, the conservative line was that the health care industry was a bunch of dupes, collaborating with a reform that would crush them beneath the foot of big government. “They’re just negotiating with the cannibals over who gets eaten last,” complained one Republican in August. The Wall Street Journal editorial page ran a series of columns pleading with the industry to turn against reform for the sake of its own survival. The new right-wing line casts the industry as co-conspirators in Obama’s corporatist scheme to engorge their profits at the expense of the public’s freedom.

Reality lies in between the two mutually exclusive caricatures. First of all, the insurance industry has taken a decidedly mixed stance on health care reform. (Here’s a recent news story detailing industry complaints.) Second of all, most of us normally accept private profit accompanying public services. Liberals don’t call programs to reduce class size a “teacher’s union bailout.” (Nor do conservatives call Pentagon increases a “defense contractor’s bailout.” If you support the the policy being provided, nobody objects to somebody making a buck providing it.) Insurers may be getting a lot of new customers, but that comes with the trade-off of a lot of unwanted regulation. There is more at work in the progressive revolt than an irrational attachment to the public plan or an executive distrust of private industry. The bizarre convergence of left-wing and right-wing paranoia echoes the forces that brought down the moderate consensus of the postwar era. The GOP retreat into Palinism represents one half of this collapse. The left’s revolt against health care reform represents the other. What has re-emerged in recent weeks is the spirit of the New Left--distrustful of evolutionary change, compromise between business and labor, and the practical tools of progressive reform. It is the spirit that rejected Hubert Humphrey in 1968 and Al Gore in 2000.

The New Left rejection of “corporate liberalism” came at what we now regard as the historical apex of American liberalism. At the moment of another historical triumph, liberals are retreating from politics into languor, rage, and other incarnations of anti-politics. One day they may look back upon this time with longing.

Jonathan Chait is a senior editor of The New Republic.

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