Daily Read - 2/23/10

Obama released health-care reform proposal yesterday, the first plan that can realistically be called "Obamacare", in advance of Thursday's meeting with Republicans.  Does anyone else think it's odd that Obama isn't taking his proposal to the Democrats first? What if they don't support it? ABC News reports "Congressional Democrats cautiously embraced President Barack Obama's new health care plan as their last hope for enacting a comprehensive overhaul." They feel the need to pass something, even if they don't like it, because "the chance won't come around again anytime soon."  "Cautiously embraced" does not sound like a ringing endorsement.

The Washington Post reports that his "proposal's most notable feature, he scales back the Senate bill's main revenue source, a tax on high-cost insurance that he has strongly supported. Instead, he would impose a new tax on the unearned income of the wealthy."  Economist Greg Mankiw thinks this is a mistake - higher taxes on expensive health plans would be an incentive to use less health care (and therefore reduce costs), while but the "unearned income" tax reduces the incentives for saving and investment.  In Mankiw's words, "the new proposal would do less to bend the curve of rising healthcare costs and more to impede long-run economic growth."

The Post also notes: "White House officials touted as the proposal's signature addition a new nationwide authority to review insurance rate increases," but that the "proposed authority is slightly less than meets the eye."  The authority basically amounts to price controls for health care, and Mankiw reminds us of the less-than-impressive history of price controls, citing this article.  The Cato Institute also weighs in against "Clintonesque" price controls, and even quotes Obama’s top economic advisor Larry Summers as saying "price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time."

While claiming repeatedly that Republicans had no ideas and no plan for health care, the White House web site now says: "Throughout the debate on health insurance reform, Republican concepts and proposals have been included in legislation."  It will be interesting to see how Obama uses this in Thursday's televised meeting with Republicans.  In Cato's podcast on the price controls, Michael Cannon claims Obama hand-picked the Republican proposals that would get the least support from independents and libertarians and will use them to make Republicans look as "big-government" as possible.

Obama's plan also closes the so-called "doughnut hole" in Medicare's prescription drug coverage, making a Bush-era program that the President and Democrats repeatedly include among their "inherited" problems even more expensive.  Also, does Obama include this among his Republican ideas he is including?
The WSJ's editorial "ObamaCare at Ramming Speed" also says the proposal "purports to fix the special-interest favors in the Senate bill not by eliminating them—but by expanding them to everyone."  For example, "the White House claims to eliminate the 'Cornhusker Kickback,' the Medicaid bribe that bought Nebraska Senator Ben Nelson's vote, political appearances are deceiving.  As with the union payoff, what the White House really does is broaden the same to all states, with all new Medicaid spending through 2017 and 90% after 2020 transferred to the federal balance sheet. Governors will love this ruse, but national taxpayers will pay more."

In summary, the President's new health care plan contains little more than a mash-up of the existing House and Senate plans, plus a feature that makes them worse, and other feature that is politcally popular, but likely to do more harm than good. Or, as the Wall Street Journal puts it: "It manages to take the worst of both the House and Senate bills and combine them into something more destructive"
Keith Hennessey ponders  whether the President's proposal is a set-up for his exit strategy from healthcare reform.  "The President proposes a “compromise” and blames Republicans for being unreasonable and unconstructive. Legislative failure is the Republicans’ fault, not the President’s."  If this is true, it might explain why the President is so set on the event being televised.

In spite of all the opposition, Eugene Robinson of the Washington Post says Democrats should "Find your spines and pass health reform," then spends most of the article blaming Obama and the Republicans for the failure to not pass something already - contradicting the headline, which implicitly blames the Democratic super-majority that failed to pass anything.  He argues the last year of negotiating could have been a lot easier if Obama had been more clear about what he wanted (Side note to Robinson: Obama is not the boss of Congress).  Then Robinson says Obama's proposal is very similar to the Senate bill, and he is doing Republicans a favor by providing it as a "starting point" for discussions.  If Republicans refuse to back this bill, which only passed the Senate due to massive kickbacks to the health care industry, and huge bribes for the last few Senate votes, Robinson says "observers will be able to draw conclusions about who is being constructive and who isn't."  On the other hand, Robinson could have argued that it is very unlikely Republicans would support something that Democrats only barely support, but that would not have suited his political purposes.