Obama's health care speech to Congress

Bottom line: great on rhetoric, but the substance was far less and far less appealing to progressives than it appeared.

First, the overarching structure of the speech: It was basically divided into three parts: making the case for health care reform; spelling out the plan; putting the political spin on the plan. On the first and third he did great. But he always does well on the first, and there was nothing new here. There were moments of brilliance on the third -- time when he subtly but unmistakably took it to the Republicans, rallying his own party while appearing to hold out the prospect of negotiation. All exactly what I would have wanted. But what about the middle section, the crucial spelling out of the plan? Here, not so much.

Again there were three parts, as he laid it out -- insurance reforms for those currently with insurance; measures to cover those without insurance; and costs. Again, as with previous addresses, on the first of these he was really strong -- gave explicit guarantees that from day one of signing the bill it would be illegal for insurance companies to exclude those with pre-existing conditions, drop people who fall sick while on insurance, or impose lifetime caps on benefits. All ironclad guarantees, immediately available, to improve the product for people who are already mostly satisfied with their coverage. What did he NOT mention? That all of these mandates on insurance companies would inevitably, ceteris paribus (or "all other things being equal") as the economists like to say, raise costs.

SO that brings us to point no. 2 -- covering people without insurance. How does he propose to do that. Well for the first time he has explicitly embraced the thing he ran against in the primaries and that all the bills contain -- a mandate on individuals to buy insurance. He also, it should be noted, mandates on employers to provide insurance, something the "moderate" Senate Finance Bill leaves out, probably the only really noteworthy point of the whole plan, if he sticks to it.

But, as he himself points out, putting mandates on individuals to buy insurance is unreasonable on the face of it since most people without insurance right now can't afford to buy it. How does he say he will make it affordable? In the speech he mentions insurance exchanges which are a mechanism to give individuals access to plans at rates comparable to large groups. But those large group plans are already too expensive for most people, at least those with families to buy on their own that is without the employer kicking in most of it. (Family plans at most group -- ie employer provided rates cost over $1000 a month as people discover when they have to pay the whole insurance if they want COBRA. Obama knows this, which is why he passed a generous COBRA subsidy in the stimulus package which is the only reason my family has insurance right now.) If nothing else changed, insurance exchanges still wouldn't make insurance affordable for most people. Then add the cost of the insurance reforms mentioned above (which no one seems to factor in -- except Congresswoman Maxine Waters tonight on The Ed Show) and the matter would be worse. Making insurance mandatory and increasing the size of the pool might help defray costs -- though if young people were given very low rates or cheap insurance to buy it probably wouldn't. And we still don't know how does one make mandates affordable?

The answer of course is subsidies. But Obama didn't even mention this in his speech -- which means he did not make a political case for them -- much less commit himself to any level of subsidies which is a very serious matter since there is a large gap between the (much less generous) proposal Baucus is circulating in the Senate Finance Committee and those agreed to in the House. And the reason for the gap? This -- subsidies -- is the main driver of the cost of the bill, which makes it really odd that he NEVER mentions them.

Neither, for that matter, did Obama now or ever before in any of his other appearances define or give any hint of what level of insurance he would consider "affordable" premiums (definitions in the bills go up to about 13% of pretax income). He did, though, mention a public option. Defended it, but chastised those who were wedded to it, but gave a ringing endorsement of providing SOME "choice" to people who cannot find "affordable" insurance. Hooray. The only thing of any significance there is the tone. The substance was meaningless.

But none of this may matter because none of these measures to expand coverage comes into being for four years. (Except mandates? unclear from David Axelrod's answer to Keith Olberman's question.) Four years during which the cost of insurance premiums will go up because of the reforms enacted immediately. Four years duing with the deficit will, predictably go up and during which the Republicans will have two election cycles to demagogue their way back into power to repeal or defer the subsidies and everything else. Which makes it significant that Obama went considerably further along the road to defining people without insurance as the "welfare queens" of health reform, ie as freeriders who are irresponsibly imposing costs on everyone else, a path predicted by my last post.

And why are they pushing it down the road four years? Because, as one of Keith Olberman's guests pointed out, this reduces the projected cost of the bill. Note, though, that it only reduces it over the ten year period that the law requires Congress project a bill's cost for. That means, the 900 billion dollar or trillion dollars over ten years is really the SIX year cost beginning in 2013. This is budgeting by smoke and mirrors.

Which brings us to the last item in Obama's "plan." How to pay for it? Two things need to be noted at the outset: first, Obama embraced a total price tag ($900 billion over ten years) that is closer to the Senate Finance Committee's number which makes it unlikely he will push for more generous subsidies. (And again, remember, that number is actually over six years.) Second the one line he drew in the sand is that not only should this be "deficit-neutral" (as scored by CBO, something he has said before, too) but if cost savings he proposes do not materialize the difference should be made up with spending cuts not taxes on the middle class. (This he has NOT said before.) This makes it very important that, even more than before, he insists most of the bill can be paid for through greater efficiencies. This is highly dubious, as I will argue at a future point, but more importantly it is something most people are already skeptical of. That means he has not really moved the debate in this area forward. Additionally he has embraced the Senate Finance Committee's just released plan to impose surcharges on insurers and pharmaceutical companies based on market share, which did not look like they would raise much money. All of this makes it much more likely that by the time it actually comes time to kick in the insurance exchanges and subsidies that subsidies will be trimmed even further.

So, bottom line, again: Obama is using the promise of health care for all to propose a bill which would primarily reform insurance for those with insurance but in ways that even most of those will only feel in higher premiums while settting up those without insurance to become the scapegoats of the plan, bearing the burden of costs they already cannot afford. Why? Probably because of a cynical calculation that by the time people figure this out he will have been reelected. Most likely outcome -- failure of the health care bill as people start to realize the problems and chip away at it. Or am I being optimistic? (And I support universal healthcare and supported the guy through primaries and elections. Geez.)