What Should Obama Do First? Health Care Reform

Wed, 05 Nov 2008 21:24:39 +0000

I read with some interest this piece by Jeff Sachs in Slate, "What Obama Needs To Do." I think there will be a lot of columns like this, so let me add to their number. The thrust of Sachs' advice is this:

In sum, the recipes since 1981 of small government and small-bore solutions are passé and dangerous for our very survival in the United States and on this planet. While Reagan was crudely ideological, Clinton mildly reformist, and Bush simply crude in the application of these small-government doctrines, none of the recent approaches will do. It's time to stop talking about who can give away more to the public in rebates and start talking about investing in our future in a way that can save the poor, sustain the rest, and build a decent world for our children. Those are the real family values.

I can appreciate his desire to get the government quickly to the size where it can address the problems he thinks are most important. But I was surprised to see health care reform not mentioned in the article. I would suggest a different approach -- make some improvements in health care that would build momentum toward the biggest challenges.

Looking again at Obama's health care plan, I think there are some aspects he could implement immediately that would do just that. I am pleased to see the first bullet point is this:

Insurance plans that exclude pre-existing conditions are not really insurance plans. There is no particular reason why they should be subsidized through the tax code. It would cost more money for everyone (including the federal government through lower taxable income), as premiums rise to now cover those conditions. This removes the biggest distortion in the labor market from the way we do health insurance through employment.

Having done that, the next big objective should be to get rid of the biggest distortion in the health insurance market from the way we do health insurance through employment: universal coverage. The rest of his proposals don't necessarily wrap up universal coverage. The one that comes closest is:

That seems like a process that starts out too ambitiously and that could go awry in a number of places. The government does not need to get involved like this in the design of new plans -- it needs to make sure that insurance is available outside of the employment relationship. I think that taking on too big a health care reform project so early is one of the things that doomed the Clinton effort years ago.

So all the government needs to do is establish a premium schedule for Medicaid and require proof of insurance on the tax form to be exempt from paying that premium. The premiums should rise with income to the point where any middle class working family with employer-provided coverage would likely prefer the employer coverage. The premium levels should be high enough so that the taxpayer isn't paying through the nose for someone else's premiums. That's universal coverage in two straightforward steps, without a lot of disruption to the way health insurance is currently provided or an enormous infusion of government funds.

It doesn't preclude a more comprehensive reform, including Obama's other objectives of price and quality. In fact, it generates the momentum for it based on some initial success. In this case, the small-bore solution may be just the right medicine.