The one executable healthcare reform plan put forward by a presidential candidate

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If I may cannibalize my Twitter thread, a reaction to last night's debate in four tweets:

Healthcare in last night's debate: More blah blah blah about public option vs. M4A and nary a word about Republican intentions to void the ACA, gut Medicaid, bring back medical underwriting, uninsure tens of millions and cut at least $1 trillion in HC spending in first decade.

You have to have goals, yes. But they remind me of old-time communists arguing about who'll clean the toilets when the state withers away.

"Everyone must have access to Medicare-plus, but you can keep your wonderful employer plan if you prefer!" "No, everyone must have free access to everything!" Meanwhile...

It'll be a minor miracle if we're not living in authoritarian austerity state and if a Dem president can wring Medicare drug negotiation, balance billing ban and improvements to ACA subsidies/access through a 51-49 senate.

Triage: A moderate healthcare reform proposal

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Prescript (8/7/19): it occurs to me that this rather kludgy patch to our current system boils down to a simple rule: no one pays more than 8% of income for less than 80% AV insurance.  Paid for in part by expanding the footprint of Medicare payment rates.

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I want to float here a path to healthcare system reform that starts a gear shift or two below the Medicare for America bill, which creates a strong public option that anyone can buy into at an income-adjusted price. I am mindful of David Anderson's warning that a Democratic president who goes for sweeping healthcare reform (assuming at best a narrow Senate majority and abolishment of the filibuster) will have bandwidth for little else -- and I think other imperatives, like attacking global warming, should come first.

First, a set of working assumptions (and background on current bills) that undergird where I land (skip to the subhead, where the proposal starts, if you're so inclined).

1. The U.S. healthcare system is outrageously expensive, unjust, and inefficient, distorted by two related structural flaws:

What if a candidate took voters' stated healthcare priorities literally?

In its low-key way, the Kaiser Family Foundation has been warning Democrats for some time that the electorate is not strongly demanding Medicare for All, or sweeping healthcare system change generally.

With about 90% of the population insured (and perhaps a third underinsured), Drew Altman noted a month ago that voters' main overall healthcare priority is lowering their own out-of-pocket costs. The latest Kaiser tracking poll, conducted this month, fleshes this out:

Drug costs. Surprise bills. Access to affordable insurance if you get sick (e.g., if you lose your job). Underlying these concerns, Altman pointed out, is the poll finding that half of people who are sick have trouble paying their medical bills. With deductibles soaring, 43% said it was hard to pay their medical bills before the deductible kicks in.

Secondarily, there is broad support for expanding financial help to more people who need to buy health insurance in the individual market. There's majority support, in theory, for Medicare for All, but Kaiser's January tracking poll found that that support collapses collapses from 56% to 37% when people are asked if they would support a program that raises most people's taxes or eliminates private health insurance companies.

Meeting voters where they are on healthcare

These responses raise the question: what would a healthcare platform that aims to give voters what they say they want look like?  Addressing voters' stated wishes piecemeal may not be optimal policy: systemic change might be needed to address core concerns. Most fundamentally, reducing individuals' out-of-pocket costs requires bringing down the underlying cost of care, if the cost is not simply to be shifted to the tax burden.

At the same time, a candidate who floats a plan that would leave the current core elements of our health insurance sources intact -- preserving employer-sponsored insurance, existing Medicare, Medicaid and the ACA marketplace -- might have some running room to impose reforms that pinch healthcare industry revenues.

Providers would fight a strong balance billing ban and a strong public option in the ACA marketplace -- but they might ultimately  settle for these reforms that don't radically shrink the employer insurance cash cow. Ditto for insurers. They will fight a public option in the ACA marketplace -- but it's less of a threat than Medicare for All, or a public option that's affordably open to pretty much anyone. As for pharma...let's assume for the sake of argument here that it's possible to take on one healthcare industry head-on if you're not taking on all at once.

So, here's the hypothetical platform:

Strong balance billing protection. Balance billing is the one form of abuse in the U.S. healthcare system that's so egregious, even Americans may not stand for it much longer -- hence the bipartisan draft legislation introduced in the Senate to provide relief. Vox and Kaiser Health News have been doing God's work exposing shocking-but-routine instances of price-gouging. As cited in a Brookings analysis, some 20% of emergency room episodes, 9% of scheduled procedures and 50% of ambulance services result in out-of-network bills for patients

A strong solution would ban balance billing for a) people brought to an out-of-network ED in an emergency, b) people who get emergency care at an in-network facility, and c) people who schedule a procedure with an in-network primary provider at an in-network facility. A viable solution should also not drive up the cost of care by requiring insurers to pay billed costs at huge multiples of Medicare rates, as do some proposals and state bills that mandate arbitration, or use billed costs as a benchmark..

A strong solution put forward in the Brookings analysis would a) cap all out-of-network billing at 125% Medicare and b)  ban independent billing for targeted specialties, e.g.,  emergency, ancillary clinician, hospitalist, and neonatology services delivered at an in-network facility.  That puts the onus on hospitals to negotiate rates acceptable to those specialists.

Prescription drug relief. Medicare should negotiate rates not only for Medicare Part D but for the whole nation -- joining virtually every other wealthy country in having the national government negotiate uniform rates for prescription drugs for all payers. Medicare should also be empowered to create a formulary, i.e. not cover every drug, i.e. have the power to walk away when there's a viable alternative.  This is not going to happen. But in the proposal phase, go big here to balance the moderation of the overall package. Fallbacks might include a) empowering Medicare to negotiate for Part D plans only; b) creation of a drug oversight board empowered to flag and punish or roll back price-gouging as defined by statute; and c) various current bipartisan initiatives to encourage generic production and competition.

Augmented ACA.  Improvements to the ACA should a) make individual market coverage affordable, including via affordable out-of-pocket costs, for anyone at any income level who lacks affordable access to other insurance (e.g., affordable employer insurance or Medicaid); and b) control underlying costs, so that the improved subsidies required by a) are affordable to the Treasury.

A bill that might fit the, um, bill would

a) Raise the benchmark plan in the ACA marketplace, for which enrollees pay a fixed/sliding percentage of income, from 70% actuarial value to 80% AV, i.e. from silver level to gold in the current marketplace scheme. 80% AV is near the average for employer-sponsored insurance.

b) Erase the current subsidy cliff, which renders coverage extremely expensive for many who are just beyond the income threshold for subsidies (400% of the Federal Poverty Level, or roughly $49,000 for an individual/$100,000 for a family of four). Cap premiums for the benchmark plan at 8.5% of income for anyone otherwise eligible with an income over 400% FPL.

c) Improve premium and cost sharing subsidies at incomes below 400% FPL, requiring a lower percentage of income to pay the benchmark premium and providing higher AV for benchmark plans.

d) Create a strong public option, paying Medicare rates to providers (with some adjustments for rural hospitals and primary care) and requiring providers who accept Medicare to accept the public plan. This would also push down the rates that commercial marketplace insurers pay providers, and remove providers' incentive to refuse to accept the commercial marketplace plans, most of which would probably pay more than the public option.

e) Enable people whose employers offer insurance to access subsidies for marketplace coverage if the employer plan a) costs more than 8.5% of income, including for family coverage if the employee has a family, and/or b) offers less than 80% AV coverage.

Point e) does not open the sluice gates to the public plan as wide as does the Medicare for America bill, soon to be reintroduced by Reps Rosa De Lauro and Jan Schakowsky, which allows anyone to buy into the public plan at no more than 10% of income (and much less at lower incomes, including $0 for people with incomes up to 200% FPL).  Because the public option in Medicare for America is free to people with incomes up  200% FPL (with zero out-of-pocket costs as well), it also entails folding Medicaid into the new public plan -- and existing Medicare, with long-term-care added. It also auto-enrolls newborns as of 2022 (or probably 2023 in the upcoming update).

Medicare for America opens a plausible path either to Medicare for All (albeit with out-of-pocket costs for most enrollees) or to a de facto all-payer system, since the bill stipulates that providers must accept the public plan's payment rates from commercial insurers (in employer insurance and Medicare Advantage). It's a coherent set of measures for major system transformation.

The plan above is much more limited. It's also a much lighter lift. But it does cram an awful lot of systemic reform into the Overton Window  opened by Medicare for All and Medicare for America -- while leaving a candidate like Elizabeth Warren free to propose spending trillions on education, childcare and other priorities .

Clinton avoids hard questions on healthcare reform in Ezra Klein convo (and Klein lets her)

Ezra Klein sat down with Hillary Clinton for an in-depth policy discussion. I find many of her responses frustratingly circumlocutory and vague. Let's take the exchange over healthcare reform, piece by piece.

Ezra Klein To ask about another interesting fissure from the primary: You often said that your preference was that we built on Obamacare to get to true universal coverage. And I’ve read your plan around Obamacare, and it doesn’t do that yet. So what would be your approach for taking that program from the roughly 90 percent covered that it’s at now to 100 percent?

Hillary Clinton Well, let’s celebrate that we’re at 90 percent coverage. And I think that is one of the differences: I see the glass at 90 percent full, not empty. And [I believe in not] starting over again — either by repealing it, as the Republicans advocate, or by coming up with a whole new plan.

Well yes, there's some cause for celebration. But given the starting point pre-ACA, the glass is far from 90% full.  According to Gallup's latest survey results, the uninsured rate has been cut from 17.1% since late 2013 to 11% now -- that is, reduced by about 35%.

Clinton continues:

What the ACA can't cure

I recently referred to Investor's Business Daily reporter Jed Graham's coverage of the ACA as "adversarial." He objected. I responded, "I don't ignore or minimize ACA flaws but would not object to a characterization of my writing on it as "sympathetic."

That set me thinking about everything that troubles me about the ACA -- or, more accurately, things that trouble me about the US healthcare system that the ACA is unlikely to fix -- though it may help catalyze reform on several of these fronts. Here's the list:

1. All private health insurance in the U.S. is inadequate -- thanks to the shameful out-of-network billing, balance billing, and creative billing by hospitals, physicians and other providers documented in sickening detail by Elisabeth Rosenthal in her Paying Till it Hurts series. We are in the grip of a depraved system in which hospitals often operate as free billing zones and payers' attempts to control costs just generate new loopholes.

2. For the unsubsidized and lightly subsidized, private insurance on the ACA exchanges is too expensive. Or rather, medical care obtained under the insurance is too expensive.  One of the law's strengths is the Cost Sharing Reduction (CSR) that reduces deductibles and out-of-pocket costs for buyers with incomes below 200% of the Federal Poverty Level to levels comparable to those offered in top-grade employer-sponsored insurance (much more modest CSR is offered to those between 200% and 250% FPL).  Those cost control come into play if low income buyers choose silver plans (fortunately, most do) and if  they are not hit by the kind of out-of-network and balance billing that Rosenthal documents. Those above 200% FPL, however, have to choose between high monthly premiums and often sky-high deductibles, average over $5,000 for bronze plans (which may be tempting to many at the upper range of subsidy eligibility).

By reframing national agenda, Obama hopes to "force a different result" in budget negotiations

When Obama came his speech urging a national refocus on jobs and the foundations of long-term economic growth last Wednesday, the first in a series on the economy, I suggested that he was positioning himself to win a budget showdown should the Republicans shut down the government or seriously threaten a debt ceiling default if he does not agree to radical new spending cuts or the defunding of Obamacare. He is trying preemptively to reframe the argument, to convince the public that jobs and investments that foster long-term economic growth should be the national priority -- not spending cuts,.

In a long interview with the Times' Jackie Calmes and Michael Shear, conducted while he was at Knox College in Galesburg, IL to deliver that speech, Obama continued his bid to shift the agenda:

NYT: [House Republicans] are still embracing sequestration and who are still willing to use the debt limit to go to the mat. 

MR. OBAMA: Well, this is what they say. On the other hand, we also have a number of very thoughtful and sensible Republicans over in the Senate who have said that we should not play brinksmanship, that we should come up with a long-term plan. I met with a couple of House Republicans over the last several weeks who would like to see that happen. They’re not the loudest voices in the room at the moment. 

And part of what I’d like to see over the next several weeks is, if we’re having a conversation that’s framed as how are we growing the economy, how are we strengthening the middle class, how are we putting people back to work, how are we making college more affordable, how are we bringing manufacturing back -- the answer to those questions I think force a different result than if we are constantly asking ourselves how can we cut the deficit more, faster, sooner.

Change I still believe in

As both sides gear up for tax-and-spending battles at the edge of the fiscal...slope, and as Obama quite noisily proclaims that public opinion is on his side with regard to raising taxes on the top 2%, I want to repost my best recent attempt to understand Obama's current stated theory of how 'change' gets done. Hint: it's not a matter of trying to sway public opinion -- Obama is as aware as Brendan Nyhan that that's a futile enterprise. It's a matter of deploying public opinion that's already on his side -- as he did with some modest success in 2012.  Here's the argument, engaged (one-sidedly, natch) with Ezra Klein six weeks ago.

Sept. 21, 2012

Ezra Klein, noting that Obama has recently revamped the way he talks about "change," attempts a massive debunk.  Obama is now claiming that he's learned, "you can't change Washington from the inside..you can only change it from the outside. That's how I got elected. That's how the big accomplishments like health care got done."

Nonsense, protests Ezra. All the change that Obama effected was the result of inside baseball -- buying off corporate interests, herding Democratic cats, striving (mostly unsuccessfully) to win opposition buy-in. Obama brought policy change, but not change in the way Washington works. The latter is an impossible goal for a president or any one person.

In my view, Klein is viewing this question too narrowly. Obama is well aware of the limitations of the bully pulpit, and he's got to know better than any person on the planet that presidential advocacy polarizes, entrenching the opposing party in implacable opposition to whatever the president proposes. Yet, in presenting a revamped theory of how the presidency works, he's not just feeding us a line of BS.  And if Obama wins reelection, I believe that we will look back five or ten or twenty years from now and recognize that yes, Obama did change the way Washington works. Or at the very least, he kept the US on a sane policy course in a time of extreme polarization and thus gave (will have given...) the system space to self-correct, as it has in the past.

Let's start with Klein's objection to Obama's characterization of how healthcare reform got done:

Ezra Klein's unconvincing theory that Obama misunderstands (or misrepresents) "change"

Ezra Klein, noting that Obama has recently revamped the way he talks about "change," attempts a massive debunk.  Obama is now claiming that he's learned, "you can't change Washington from the inside..you can only change it from the outside. That's how I got elected. That's how the big accomplishments like health care got done."

Nonsense, protests Ezra. All the change that Obama effected was the result of inside baseball -- buying off corporate interests, herding Democratic cats, striving (mostly unsuccessfully) to win opposition buy-in. Obama brought policy change, but not change in the way Washington works. The latter is an impossible goal for a president or any one person.

In my view, Klein is viewing this question too narrowly. Obama is well aware of the limitations of the bully pulpit, and he's got to know better than any person on the planet that presidential advocacy polarizes, entrenching the opposing party in implacable opposition to whatever the president proposes. Yet, in presenting a revamped theory of how the presidency works, he's not just feeding us a line of BS.  And if Obama wins reelection, I believe that we will look back five or ten or twenty years from now and recognize that yes, Obama did change the way Washington works. Or at the very least, he kept the US on a sane policy course in a time of extreme polarization and thus gave (will have given...) the system space to self-correct, as it has in the past.

Let's start with Klein's objection to Obama's characterization of how healthcare reform got done:

Don Taylor envisions a distant healthcare compromise; might Justice Kennedy impose something like it next month?

At present it would seem that there is no common ground between the parties on healthcare -- though the Democrats built the ACA on Republican ground, which the GOP fled (and rhetorically bombarded) as soon as the Dems set foot on it.

Nonetheless, looking down the road and seeking the contours of a future compromise, Don Taylor, in his new book Balancing the Budget is a Progressive Priority, identifies Democrats' top priority as universal coverage, and Republicans', insofar as they have one, as ensuring that everyone has "skin in the game," i.e. is on the hook for some of the medical expense they generate.  He therefore envisions this future deal:

• Universal catastrophic coverage implemented through Medicare, with gap insurance available to persons wanting it (no mandate!) via state based exchanges
• With a massive deductible (I suggest $10,000/persons; $15,000/family to maintain a key role for private insurance; far larger out of pocket exposure than Bronze level cover in the ACA)

While such further compromise might strike most progressives as equal parts unlikely and undesirable, it caught my eye because, as I have noted repeatedly, there's an outside chance that Justice Kennedy (as swing vote) may impose something akin to it in the Supreme Court's ruling on the constitutionality of the mandate.

Learning to love the individual mandate

A pivotal moment in Boston Globe reporter Brian C. Mooney's in-depth retrospective on Mitt Romney's role in passing healthcare reform in Massachusetts centers on a qualified acceptance of the plan's most politically fraught element:

“I’ve never been one for individual mandates in the past, but I do think that the way this has been proposed, in that everybody will do their part, that’s a compromise...I can buy into that.’’

That's Ted Kennedy speaking.  Romney's commitment to the mandate came earlier (it was Romney's plan that Kennedy responded to above) and was much less guarded when it came.  The mandate was far more in accord with Romney's principles (at that point in his career it still appeared that he had some) and with the interests of his support base than it was with Kennedy's. 

If I were king of the forest

To while away an hour, and not straining to increase my present level of knowledge before amusing myself, let me consider: how would I tackle the United States' budget problems if I could make policy by fiat?

My broad fiscal goals would be to reduce the rate of medical inflation while expanding coverage and improving outcomes, reduce defense spending without compromising U.S. security, make the tax code fairer and more efficient, create incentives to reduce fossil fuel consumption, increase government revenue without crimping sustainable economic growth, make social security solvent, and let discretionary domestic spending levels be determined on a cost/benefit basis, without arbitrary spending reduction targets.

First, I would find a way to give the government (probably federal but possibly state, or some hybrid) the sole power to set uniform prices for all medical procedures.  Every other wealthy nation on earth provides universal healthcare to its citizens, and virtually all of them accord sole pricing power to the government (provincial governments in Canada's case), whether or not they strain those payments through some form of private insurance. In the U.S., we pay far more per procedure than any other country, primarily because the government lacks this pricing power.  Our doctors -- specialists, in any case -- are overpaid, an advantage (to them) partly offset by the ridiculous administrative costs of dealing with multiple insurers, the outsized cost of malpractice insurance, and the huge financial burden of unsubsidized medical school. I would seek to ease those burdens while also reducing most specialists' profit margins and perverse incentives to provide expensive care whether or not it's warranted.

Second, I would empower the medical payment system's overseers to condition coverage for specific procedures on outcomes research. I would do this cautiously, since such research is often ambiguous, and one size does not fit all; expensive procedures that do not seem to be more effective than cheaper alternatives might be covered under certain circumstances, or less fully. But broadly, former U.K. health minister John Reid's watchword would be mine: we cover everybody, but not everything. Also, I would fully resource all of the cost containment measures in the Affordable Care Act.

A second White House Seder? Larry Summers sings Dayenu to Martin Wolf over health care reform

100-odd years ago, early in 2009, Obama and Peter Orzag were heavy on the mantra that "healthcare reform is entitlement reform"-- i.e. that "bending the cost curve"on healthcare would be the single most important step to erasing the country's structural deficit.  Here's how Peter Orzag put it in Obama's fiscal summit on Feb. 23, 2009:

Health care is the key to our fiscal future.

So to my fellow budget hawks in this room and in the rest of the country, let me be very clear: health care reform is entitlement reform.

The path of fiscal responsibility must run directly through health care.

We also must recognize that reforms to Medicare and Medicaid will only succeed in the context of slowing the spiraling growth of overall health care costs.

In an interview published in the online Financial Times today, Larry Summers, asked by Martin Wolf how other nations could have confidence that the U.S. will put its long-term fiscal house in order,  suggested that the Administration has already laid the most important cornerstone  -- again, that healthcare reform is entitlement reform, and that the cost controls in the Patient Protection Act have teeth.

Perhaps Summers was fresh from a Seder: his litany of the virtues of the Medicare Individual Payments Advisory Board (boldfaced below) swings with the repetitive glee of the Passover song  "Dayenu," which marvels at the extent of God's mercies in making the Exodus happen:

Chait's crucial warning to Democrats

Jonathan Chait offers up true wisdom as the Democrats stare at disaster in Massachusetts, pointing out that any party that's been in power for a year when there's 10% unemployment is going to get hammered; that in the face of major recession Obama's popularity has in fact proved remarkably durable; that commentators always underestimate structural factors moving popular opinion and find faux cause and effect in the parties' and politicians' strategic choices; that Republicans' political strength is their dogged willingness to "ignore establishment nostrums in the face of defeat" whereas Democrats tend to panic and stampede; and that Obama's supreme challenge now will be to play "George Bailey in the bank run" and calm his party's panic (a role, I would add, to which he's supremely suited and has played before).

The nub of Chait's insight is his critique of

Obama's healthcare priorities

Ezra Klein brings into sharp focus an aspect of Obama's approach to healthcare reform that he has repeatedly noted in its component parts:

This is one thing that the Obama administration doesn't get enough praise or criticism for. The only ideas they've introduced into the debate, and the only ideas they've really stood and fought for against serious opposition, are cost-control ideas. Namely, the excise tax, the Medicare Commission, the insistence on deficit neutrality and the $900 billion price tag, none of which have a natural majority on the Hill, and all of which the Obama administration has kept in the game through direct advocacy.

I see this focus as an instance of Obama's propensity for "the long game."  The Administration probably calculates that Congress will inevitably expand coverage and subsidies as the inadequacies of the initial allotments become obvious -- whereas the architecture for beginning to bend the cost curve has to be in place from the start or the whole package will swiftly become unaffordable. Atul Gawande's vision -- of a potpourri of cost control measures, pilots and demonstration projects out of which at least a few will have a dramatic impact -- is also Obama's.  Here is how Obama described the process to Fred Hiatt, focusing on one potential meta-enabler of such methods, the MedPAC commission:

At this point, I am confident that both the House and the Senate bills will contain what we've been calling MedPAC on steroids, the idea that you continually present new ideas to change incentives, change the delivery system, understanding that because this is such a complex system we're not always going to get it exactly right the first time, and that there have to be a series of modifications over the course of a series of years, and we have to take that out of politics and make sure that an independent board of medical experts and health economists are providing packages that are continually improving the system. So I think there's general consensus that that is one of two very powerful levers to bend the cost curve.

I can see two strong objections either to Obama's strategy or my understanding of it.

Future Perfect on health care reform

Eyes on the prize: I have little doubt that Kevin Drum is right about this:

Healthcare reform might be controversial right now, but if Obama gets a bill onto his desk and signs it, it will become a huge triumph almost overnight. Support for both the bill and for Obama will rise steadily, and Democrats of all kinds will reap the benefit of being seen as tough enough and savvy enough to get it passed. This is the fundamental reason that I'm optimistic about healthcare reform.

Popular approval may have a "donut hole": there may be bumps in perception, even over years, in a rocky implementation. And assuming that the final product is weaker in several particulars than it should be, a key question is whether it creates a scaffold that can be built on : fair requirements for minimum coverage in health plans, controls against insurer cherry-picking to protect the exchanges, MedPAC or some near equivalent to keep the ball moving on cost control initiatives. But assuming the final legislation is not wired for failure -- like, say, the Texas Insurance Purchasing Alliance of the mid-nineties -- then Drum's "future perfect" should be on target.

Matt Miller clarifies healthcare reform

Matt Miller, a former Clinton budget official, provides rare clarity on the broad outlines of emerging U.S. healthcare reform and concludes:

Of course, just because Obama is on a path to give America the Romney health plan with McCain-style financing does not mean the Republicans will embrace it, if it seems politically more attractive to scream “socialist”. But the rest of us do not have to listen to them. Mr Obama can fairly claim to have championed a bipartisan health policy, even with few Republican votes.

Within that broader irony Miller captures a narrower one: Massachusetts healthcare reform, repudiated by the slogan-spewing former governor who signed it into law, is working:

The central mechanism through which Mr Obama seeks to extend coverage and restrain costs is via new “exchanges”, insurance clearing-houses, modelled on the plan Mr Romney enacted in Massachusetts. The idea is to let individuals access group coverage from private insurers, with subsidies for low earners.

The approach is so sensible that Ted Kennedy urged Massachusetts Democrats to support then-Governor Romney in passing it in 2006. The results have been impressive. The ranks of the uninsured have been slashed; just 2.7 per cent of residents now lack coverage, the lowest of any state – against 15 per cent nationally. Costs, which overran as the programme was brought in more quickly than planned, are now on budget.

The exchange, according to Miller - not the public plan, which he's assuming Democrats will sacrifice -- is the core of reform:

A federal version of this exchange (or federal sponsorship of state versions) would for the first time give non-elderly, non-poor Americans whose employers don’t offer coverage, or offer it at premiums they can’t afford, access to group insurance rates. It’s difficult to overstate the breakthrough this would represent. The inability of millions of Americans to access group coverage outside the employment setting is one of the most damning features of US healthcare. It means individuals with pre-existing health conditions are often uninsurable, which in turn explains why medical bills are, shamefully, a leading cause of bankruptcy. It locks budding entrepreneurs into jobs they loathe because their families need the coverage. Structuring these exchanges so health plans have incentives to compete on value is exactly the role government should play.

Miller also offers a broad perspective on cost, and an argument that ending or capping the employer tax exemption for healthcare is the logical way to pay for it:

Start with cost. It’s easy for foes to feign shock at Obamacare’s $1,000bn 10-year price tag, but a trillion dollars ain’t what it used to be. That is just over 0.5 per cent of gross domestic product over the same period, and barely 3 per cent of the roughly $35,000bn total healthcare spending during that time. If Mr Obama’s approach is otherwise sensible, the idea that America can’t afford it is preposterous...

When it comes to financing expanded coverage there’s no way to get there without revisiting the current scheme, under which employees escape taxes on employer-provided health benefits. This subsidy is so massive, at $250bn a year, and regressive – reserving its biggest bounty for those with the most generous plans – that a phalanx of health economists from both political parties recently begged Congress to trim it.

Miller's breezy assumptions that unions will cave on the employer tax exemption, and Obama and the Dems on the public plan, will be challenged by many who are deeply committed on both issues. He also does not address the crucial issue of how the emerging bill will tackle runaway healthcare inflation, which, as Peter Orzag never tires of reminding us, is the central front in the war on future deficits. But his 30,000-foot view does bring into focus the likely outlines of reform, the core issue of expanding coverage, and the absurdity of the current terms of U.S. political debate.

Obama's doctrine of pre-emption

Want to see political power wielded the right way? Watch Obama's weekly address:

I realize that passing this budget won’t be easy. Because it represents real and dramatic change, it also represents a threat to the status quo in Washington. I know that the insurance industry won’t like the idea that they’ll have to bid competitively to continue offering Medicare coverage, but that’s how we’ll help preserve and protect Medicare and lower health care costs for American families. I know that banks and big student lenders won’t like the idea that we’re ending their huge taxpayer subsidies, but that’s how we’ll save taxpayers nearly $50 billion and make college more affordable. I know that oil and gas companies won’t like us ending nearly $30 billion in tax breaks, but that’s how we’ll help fund a renewable energy economy that will create new jobs and new industries. In other words, I know these steps won’t sit well with the special interests and lobbyists who are invested in the old way of doing business, and I know they’re gearing up for a fight as we speak. My message to them is this:

So am I.

The system we have now might work for the powerful and well-connected interests that have run Washington for far too long, but I don’t. I work for the American people. I didn’t come here to do the same thing we’ve been doing or to take small steps forward, I came to provide the sweeping change that this country demanded when it went to the polls in November. That is the change this budget starts to make, and that is the change I’ll be fighting for in the weeks ahead – change that will grow our economy, expand our middle-class, and keep the American Dream alive for all those men and women who have believed in this journey from the day it began.

That's a pre-emptive strike against business interests lining up against key elements in his budget. It's an extension of his campaign message against Rovian political attacks into the policy battles now looming: not this time. We won't get blind-sided, swiftboated, outlobbied, outspent and out-spun. And he's not alone in this. The Times has a story about how the whole liberal policy establishment is primed to pre-empt and counter Harry & Louise-style attacks on the health plan to come and other major policy initiatives to reverse the great risk shift and wealth shift of the past thirty years:

Mr. Podesta’s group [The Center for American Progress]is cooperating with two separate coalitions planning to fight for Mr. Obama’s health care plan with television advertisements, interview appearances on cable news talk shows and e-mail campaigns.

“This is no longer going to be Barack Obama standing by himself getting pilloried by the special interests with no one pushing back — if I can describe what it felt like in the White House in 1993,” Mr. Podesta said Friday.

The defeat of the Clinton health care plan was a hard learning experience for Democrats. They were caught flat-footed by an insurance industry-backed campaign to kill the proposal. It is best remembered for advertisements featuring a yuppie couple, Harry and Louise, worrying about limits on quality health care.

“The battle had been lost by the time the progressive community and its allies began rallying around the Clinton bill,” Mr. Neas said. “Now, people are prepared.”

Obama likes to exhort listeners to put their hands on the arc of history and bend it towards justice. Major progressive forces are gearing up to swing the pendulum back toward can-do government.

UPDATE: Al Giordano points out that the lobbies to whom Obama threw down the gauntlet have as much influence with Democrats as with Republicans -- and of course will be concentrating more on Democrats than on Republicans in this new era. Interesting in this context that Obama, who generally shuns speaking in the first person singular in favor of the nonroyal "we," personalized this challenge. "I know they're gearing up for a fight...So am I." As Giordano puts it: "They've [Congressional Democrats as well as Republicans] all just been put on notice: oppose the reforms he's pushing and be portrayed as siding with those corporate interests against the American people."

One relatively self-contained test of Obama vs. lobbyist influence on Democrats will be over the tax rates for hedge fund private equity managers, whose (formerly....) enormous incomes are taxed as capital gains, at 15%--a lower rate, as Warren Buffet points out, than his secretary pays. When this issue came up last year, Democrats caved quickly to industry pressure. Raising taxes on these management fees is in Obama's budget. We'll see if it happens this time.

Score one for Thomas Friedman

I usually don't have much use for Thomas Friedman's column: I often find him credulous, obvious, and tendentious. But "obvious" has its good side, and he's been hammering home the need to tax energy for a long time. His prescription for Obama today is dead-on:

Today’s financial crisis is Obama’s 9/11. The public is ready to be mobilized. Obama is coming in with enormous popularity. This is his best window of opportunity to impose a gas tax. And he could make it painless: offset the gas tax by lowering payroll taxes, or phase it in over two years at 10 cents a month. But if Obama, like Bush, wills the ends and not the means — wills a green economy without the price signals needed to change consumer behavior and drive innovation — he will fail.

The two most important rules about energy innovation are: 1) Price matters — when prices go up people change their habits. 2) You need a systemic approach. It makes no sense for Congress to pump $13.4 billion into bailing out Detroit — and demand that the auto companies use this cash to make more fuel-efficient cars — and then do nothing to shape consumer behavior with a gas tax so more Americans will want to buy those cars. As long as gas is cheap, people will go out and buy used S.U.V.’s and Hummers.

During the transition I've wondered: beyond the terrifying deficits that Obama clearly needs to run up in the next two years, how can he secure the long-term fiscal health of the Federal government? I see three broad focal points: 1) reform healthcare in a manner that, whatever the initial Federal outlay, slows the growth of medical costs by a) reducing the role of private insurance, b) changing doctors' incentives (payment per procedure) and disincentives (through a measure of tort reform), and c) rewards preventive care; 2) cut spending on big-ticket military hardware (but not on the kind of counterinsurgency capabilities that Gates wants to bolster); and 3) tax the hell out of energy consumption -- with the offsetting tax cuts (at first) that Friedman suggests.

Hacker urges Obama to shift risk back

Jacob S. Hacker, the economist who best described the erosion of economic security for the middle class over the past thirty years in The Great Risk Shift, makes a tightly argued case that an all-out push toward universal health insurance is at once the best short-term stimulus and the best long-term investment Obama can make right now.

First, the short-term argument: Hacker lays out the extent to which out-of-pocket healthcare costs are eating into the income of the middle class as well as the poor, the underinsured as well as the uninsured:

Today, however, the health care deduction is big and getting bigger. Despite widespread complaints about "overinsurance," the amount people pay for health care out of their own pocket has risen substantially as a share of personal income over the last generation, and especially in the last decade. The Commonwealth Fund recently completed two massive surveys showing that the proportion of adults younger than 65 with health insurance who spent more than 10 percent of their income on health care out of pocket (5 percent for low-income adults) skyrocketed from 13.8 million in 2003 to 21.8 million in 2007, as health plans hiked deductibles and co-payments, denied claims more aggressively, jacked up costs for out-of-network care, and so on. What's more, almost all of the increase occurred among families with higher incomes--meaning that high health care costs have become a standard deduction for the middle class.

The problem is, of course, far worse for those who lack health insurance. Indeed, if you add the ranks of the uninsured to those without adequate coverage, you have more than 40 percent of the working-age population in an immediate economic bind because of medical costs. About half these people--slightly more of the uninsured than the underinsured, but not much more--report severe problems paying their medical bills. These are the families accounting for the 40 percent to 50 percent of people in bankruptcy or foreclosure who say health care is the number one reason for their plight.

So fixing health care isn't just a recipe for better access to medical care. It's an immediate economic lifeline for working families, giving them back part of their income to use on other things. It's also a rescue package for state and local governments burdened by Medicaid and S-CHIP, for doctors and hospitals who treat the uninsured and inadequately insured, for community institutions that help people in distress--in short, for all the rapidly fraying threads of our health care safety net. Put simply, most of the money we spend upgrading coverage and spreading it to the uninsured is going to go directly into the pockets of people who need help now.

And then, the long-term: controlling healthcare costs is the most important known variable in the nation's long-term fiscal prospects:

The faster everyone is in the system, the faster money flows into people's pockets, and the sooner reformers start reaping the political rewards.

And the faster all that happens, the better situated we are to start the difficult but essential task of controlling long-term health spending. Without runaway health spending, as Henry Aaron of the Brookings Institution has shown, the future fiscal picture of the federal government looks surprisingly rosy, even if taxes stay right where they are as a share of the economy. With runaway health spending, it looks catastrophic. Plus, as bad as the federal picture looks, it's prettier than what businesses and workers are facing. According to Sarah Axeen and Elizabeth Carpenter of the New America Foundation, if employer-sponsored insurance premiums and family income rise at the same rate they have for the past decade, an average family health plan will cost more than 45 percent of a typical family's income by 2016.

Will Obama risk his huge store of political capital -- and the nation's long-term fiscal health -- on trying to effect an immediate major investment in healthcare? No question. As he put it in his Dec. 11 press conference introducing his healthcare team: “Some may ask how at this moment of economic challenge we can afford to invest in reforming our health care system. And I ask a different question. I ask, how can we afford not to?”

Indeed, Obama's long campaign was in large part an extended argument for a sustained national investment in rolling back the shift of risk from institutions to individuals that Hacker so thoroughly documented -- through higher taxes on the wealthy that would enable new investments in healthcare, alternative energy and education. To shift risk to the public sector is not to eliminate it. Obama's writings show that he is aware of the dangers -- of large deficits, of taxes raised to the point of crimping economic growth, of bloated and unaccountable government offering ineffective services.

In The Audacity of Hope, he acknowledges those underpinnnings of the Reagan revolution. His argument in the campaign was not that there is no legitimacy to conservative concerns about big government, but that the pendulum has swung too far the other way -- that tax cuts for wealthy have hollowed out programs that sustain opportunity and social insurance. As he put it in Janeville, Wisconsin last February:

when opportunity is uneven or unequal - it is our responsibility to restore balance, and fairness, and keep that promise alive for the next generation. That is the responsibility we face right now, and that is the responsibility I intend to meet as President of the United States.

The genius of his campaign was a bid to move the center back to the left - to cast new social investment as a restoration of balance, fairness, commitment to commonwealth. Now, he cannot afford not to.