reforms to the current health care proposal ctd.

Tyler Cowen wades through the Baucus proposal.  Several points:

1. CBO scoring is a very useful institution, for purposes of fiscal discipline, but you shouldn’t confuse it with true cost estimates.  Often a negative CBO score isn’t as bad as it sounds and a positive CBO score isn’t as good as it sounds.  The deadweight cost of taxation matters, and we should fear future government insolvency, but at the margin a revenue transfer is simply that — a revenue transfer and not a social cost per se.

For instance a “cheaper” bill often just means that the insurance mandate carries a higher implicit tax.  For some families — I believe in the range of 60,000 for a family of four — the mandate will consume 13% of income as it currently stands.  That’s a big tax increase — yes I will call it that — and it’s not on the super-rich.

This has been one of my concerns as well – and here’s a graph  via Yglesias which illustrates the costs for the middle and lower-middle class of the proposed plan and some comparisons:

reforms to the current health care proposal ctd.

Cowen describes this cost on the middle class as a sort of tax, and he’s right.  The argument against higher taxes on the rich is that the higher taxes will lead to a downturn in the economy, loss of jobs, and so forth.  But the same applies to a tax on the middle class – even this sort of hidden or indirect tax which shifts money out of other areas of spending and into health care via a mandate.  $690 a month for a family of four making $60,600 a year is a lot of money, especially if where you live has a high cost of living.  And so the question becomes also who can bear the brunt of the tax hike the best – and the answer is undeniably the wealthy much more so than the middle class, which is why the progressive tax system makes more sense in general, and why health reform shouldn’t come disproportionally at the expense of the middle class.  It simply won’t work if people can’t afford it, and we’ll be left in much the same predicament we’re in already.

In Cowen’s point #7 he asks, “What if, in a distant future, “roughly equal health care access” means the mandate consumes forty percent of middle class income and thus proves unworkable?”

This is important because if the reform doesn’t check the rise in health care costs, then it will be no great surprise if we reach those levels.

And here’s the kicker:

9. My best guess is that the Baucus bill will cement a dysfunctional health care system into place at the provider level.  Of course it is reasonable to believe we wouldn’t have scrapped our dysfunctional system in any case, but still the case for the bill blends into the case for many aspects of the status quo more than many bill advocates would like.

Exactly.  My only hope is that the recent outspokenness of Senator Ron Wyden (and Jay Rockefeller) will bring some sense to the final bill.  Here’s Ezra Klein:

Sen. Jay Rockefeller and Sen. Ron Wyden are members of the Finance Committee. Both of them are unhappy. And both of them matter. They matter enough that on Wednesday, the day Baucus’s bill was released, they were both invited for private, highly-publicized meetings with the president.

Rockefeller chairs the Finance Committee’s Health Care Subcommittee. That gives him solid procedural power over the outcome. But his long history of work on this issue, and his long relationships with other Democrats on the committee, also gives him a certain amount of influence. His announcement that he couldn’t vote for Baucus’s bill in its initial form made changes a sure thing rather than a long shot, and opened the door for other angry Democrats to stand against the legislation.

Wyden’s influence comes by virtue of the Healthy Americans Act, his universal health-care proposal that attracted, at various points, 11 Senate Republicans as co-sponsors, and received the best CBO score of any bill thus far. Wyden’s bill is also a particular favorite among the chattering class. “When Ron Wyden balks at a Democratic health-care reform proposal,” wrote Ruth Marcus on Wednesday, “people should definitely listen.” Wyden thus has both bipartisan and elite credibility. His presence on the bill signals something positive about the quality and thoughtfulness of the proposal. His absence does much the same.

See also Klein’s interviews with Wyden and Rockefeller.  There’s a chance still that sensible, fiscally sound yet affordable health care bill could pass through Congress, however slim.

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