Wait until the voters figure out how Congress is proposing to pay for reform.
Now that the Senate Finance Committee has voted for the health-care bill drafted by Montana Democratic Sen. Max Baucus, negotiations over the real bill can begin in Senate Majority Leader Harry Reid’s cozy Capitol hideaway. It won’t be easy.
Democrats now face a central problem for any governing party: How to pass a major piece of legislation when there are a lot of sharply different ideas about what should be in it. Trying to reconcile what Democrats in the House prefer with what Democrats in the Senate want is already opening up divisions among the party’s supporters.
This week, for example, leaders of 30 labor unions called for Democrats to reject Mr. Baucus’s bill because it doesn’t include the government-run health insurance program better known as the public option. This only makes it more likely that Democrats will have a bloody fight over the public option.
Members of Congress have a tendency to take a hard stand on a particular portion of a controversial bill. That allows them to show a little independence and make a plausible claim to have influenced the eventual outcome.
The problem for Mr. Obama is that the Baucus bill is being sold on the strength of accounting tricks that make it appear that it won’t add to the deficit. (This is true for the other health-reform bills, too). If fiscally conservative Democrats sign on to the bill now after publicly saying they are doing so because it doesn’t add to the deficit, they may end up bailing once the tricks are revealed to the public.
One trick is easily explained. The bill imposes tax hikes and benefit cuts right away, including $121 billion of Medicare reductions between 2011 and 2015. But new spending really doesn’t start until five years out (2015) and isn’t fully operational until 2017. The bill uses 10 years worth of tax hikes and benefit cuts to fund a few years worth of benefits.
And that’s just the start. For example, the Congressional Budget Office (CBO) released a report last week claiming the bill won’t add to the deficit. But this assumes that employers who dump employee coverage under the Baucus bill will then increase worker paychecks by an amount equal to what they had spent on health care. This replaces a nontaxable event (providing health insurance) with a taxable one (increasing worker paychecks), magically producing $83 billion in revenues. Without this windfall, the Baucus bill adds billions of dollars to the federal deficit in the first decade.
Of course, why would a company drop employee coverage just so it could pay more (in fines, taxes and wages) than it did before?
The CBO report also estimates that receipts from the 40% excise tax the Baucus bill would levy on “Cadillac” insurance policies “would grow by roughly 10 percent to 15 percent” a year after 2019.
That’s nonsense. If you tax something heavily you’ll get less of it. If this tax is enacted, there will be fewer Cadillac plans—and hence less revenue.
Under questioning at a Senate hearing Tuesday, CBO Director Douglas Elmendorf admitted that the $500 billion in tax hikes in the Baucus bill would be passed onto consumers, jacking up insurance premiums. That undercuts the argument that Democratic reforms will make health care more affordable.
Some governors are also figuring out that the proposal in the Baucus bill to expand Medicaid will shift a big chunk of the federal health-care tab to states. States, after all, pick up an average of 47% of Medicaid’s costs—and expanding it will force states to spend more.
Then there are $400 billion in benefit cuts that are frightening seniors. Jeffrey A. Anderson of the Pacific Research Institute has pointed out that the Baucus bill cuts Medicare payments to physicians by 25% within two years and keeps payments at that level forever, without adjusting for inflation. If this becomes law, doctors who take Medicare patients will see their real income decline each year.
Democrats who support any final bill are at risk. They’ll be held responsible for the mess that quickly emerges as premiums rise, taxes balloon, deficits soar, mandates expand, and government power grows.
Mr. Obama’s problem is that his Magic Kingdom Health Care World is colliding with reality. There is a big cost to any large government expansion—and the ways to cover the cost of Mr. Obama’s plan are limited, unpopular, and sure to anger Americans once they are fully understood.
Ironically, the president who never stopped campaigning hasn’t made the sale to Americans because he’s forgotten a central rule of campaigning: Your arguments have to be clear and credible if voters are to believe them. His attempt to sell health care is neither. He still may win passage of a bill, but he’s lost the public’s enthusiastic backing.
Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.