This column was written by Jonathan Cohn.
Will she flinch? For months now, that's been the big question about Senator Hillary Clinton and health care. Nobody questioned her command of the issue or her interest in the subject. She'd proven all of that in 1993 and 1994, when she headed up her husband's health care task force and then became chief spokesperson for his ill-fated plan. But precisely because she "has the scars" from that experience, as she likes to say, many people wondered whether she'd be up for trying all over again. Would she be vague, figuring she had the least to prove on the matter and that details could only come back to haunt her? Would she settle on something less than universal coverage, figuring the political support for it was too weak? Would she kowtow to the insurance and pharmaceutical lobbies, which had started donating to her campaigns?
The answer seems to be no, no, and no. In a speech before an Iowa audience Monday, Clinton unveiled a plan that, if enacted and implemented, would provide every single American with generous, but affordable, health insurance. It would do so by forcing both the insurance industry and drug-makers to change the way they do business, and requiring large employers to pay part of the nation's health care bill. It would also come with a serious price tag -- for which she's identified serious sources of funding.
Broadly speaking, the Clinton plan is as ambitious as any plan touted by a major presidential candidate right now. Indeed, the basic structure of the plan -- starting with a requirement that all Americans buy health insurance -- is strikingly similar to the structure first proposed by former Senator John Edwards, which has rightly won him considerable praise.
That's not to say Clinton is trying anything like the plan she tried to sell 14 years ago. That scheme tried to do two things simultaneously: It tried to give everybody health insurance and to reengineer the entire medical care delivery system, so that it would deliver higher quality, more cost-effective care. It was a fine idea -- a lot better, in fact, than its historical reputation suggests. But, in retrospect, it was more than the political environment would accommodate. This time around, Clinton is focusing first and foremost on getting coverage to everybody. While she hasn't given up on making our famously inefficient health system work better, she's nudging it towards more efficiency rather than shoving it.
The centerpiece of Clinton's health plan is what's come to be known as an individual mandate, although the term is a bit misleading in that it's really a two-way bargain between government and its citizens. The government starts by requiring every individual to secure insurance coverage of some kind. (That's the individual mandate part.) But government then promises to make insurance available to everybody -- and at prices everybody can afford.
How would the government accomplish this second part? In Clinton's case, it would do so by creating a new purchasing pool through which any individual could buy insurance. Insurers who wanted to sell to this pool couldn't discriminate against people with preexisting medical conditions, by denying them coverage or charging them higher premiums.
Doing this would give pretty much everybody a chance to purchase insurance at the same kind of rates employees of large companies now can. Of course, these days, those premiums are still more expensive than many Americans can afford. That's why Clinton spent all that time in the last few months introducing proposals to reduce the cost of medical care, by -- among other things -- promoting the use of preventative medicine and chronic disease management. That's also why -- under Clinton's scheme, the government would offer subsidies to low-income Americans -- while still making the existing safety net programs, namely Medicaid and the State Children's Insurance Program, available to those who need it.
That, naturally, is where the cost comes in. Clinton has pegged her plan at costing around $110 billion a year -- a figure that, while not to be taken as too precise an estimate, nevertheless seems in the general realm of reality, if other recent universal coverage proposals are to be taken seriously. To pay for this, Clinton would tap a number of funding sources. She'd rescind part of the Bush tax cuts, ask large employers to contribute money if they don't provide their workers with insurance, and wring some savings from modernization and improved efficiency. She'd also yank back some of the unnecessary subsidies government now throws at private insurers through the Medicare drug benefit -- while letting the government use its bargaining leverage to get better prices for Medicare beneficiaries.
The political appeal of this sort of plan is that it doesn't require anybody who has insurance to change coverage against their will. If you are like most working Americans, you still have insurance and generally like your coverage. Under the Clinton plan, you'd get to keep it. But if you don't have insurance -- or if you simply don't like the insurance you're being offered -- you could opt into the new purchasing pool and pick one of the options it offers. It's not by coincidence that Clinton has called her plan the "American Health Choices Plan." Although it sounds more like a long distance calling plan than a scheme to get everybody health insurance, it emphasizes a quality -- "choice" -- that most conservatives have long insisted (wrongly) is impossible with universal coverage.
(One key unanswered question: If your employer offers insurance but you'd prefer the Choices Plan, does your employer still have to contribute money towards your health coverage? The plan doesn't say -- and I haven't yet gotten an answer on that from the campaign. But New America Foundation economist Len Nichols, who's a chief promoter of the individual mandate concept, says he assumes that your employer would have to contribute the same amount either way.)
Of course, individual mandate schemes carry political risks of their own, even among supporters of the Democratic Party. A major worry is that government won't succeed in bringing down premiums to affordable levels: If you don't have a lot of money, you could find yourself in a situation where the only way to obey the law is to buy insurance that you can't really afford. Obama's advisers, in particular, cited this concern as a big reason why he didn't opt for an individual mandate in his plan -- although he has indicated he would embrace one, later if not immediately, if it became necessary for achieving universal coverage. (He also -- very smartly -- included proposals for automatic enrollment into health insurance at the workplace, which would help insure those who can afford coverage to in fact buy it.)
Perhaps in response to these concerns, Clinton has tweaked the design of her subsidies to make health insurance more affordable. Rather than simply offer tax credits to help people pay for their insurance, she's proposing to cap the individual liability for health insurance premiums. What does that mean in English? Well, it means that no family would have to pay more than a certain percentage of its income to health insurance premiums. (It's not clear if the cap also applies to individuals.) The Clinton team hasn't said what percentage they have in mind, nor have they offered specifics on how they'd make this work. (And they don't need to do so right now. This plan is plenty detailed already; it makes sense to let Congress work out those sorts of details.) But the principle seems like a good hedge against precisely the issue that (legitimately) worries Obama and others.
What else is unique about Clinton's plan? One is the financing. Unlike Edwards and Obama, she does not ask of small employers what she's asking of large employers: that they contribute to health insurance costs either by providing employees with coverage or paying a tax to help defray the cost of all those subsidies. Instead, she offers them a tax credit.
This turns a potential revenue source into an expenditure -- which might not seem like such a hot idea at first blush. But campaign advisors put forward a plausible policy rationale. It goes like this: Many small employers really would struggle to bear the costs of such a mandate, even if they were adjusted to reflect firm size or income. But while a lot of individual small businesses would struggle with this, cumulatively the mandate wouldn't generate that much money -- so it's a lot of pain for not a lot of gain. With a tax credit, which likewise wouldn't cost much in the aggregate, those small employers who already offer coverage would have an easier time maintaining it -- in keeping, again, with the idea of preserving coverage for those people who already have it.
The other rationale for this move is political -- and it reflects pretty clearly memories of what happened to the last Clinton health care plan. Few interest groups tried harder to defeat that plan -- and, quite possibly, few were more effective at it -- than the small-business community. Some of this opposition was ideological, particularly for groups like the deeply conservative National Federation of Independent Businesses. But the mandates are a particularly irksome feature for small business. And it's possible that, by leaving out those mandates, small business might not be quite the committed adversary it was last time. (Then again, it's also possible they'll still fight it anyway. Business lobbies have been known to do that.)
The other interesting wrinkle in the plan will affect very few people in the short-term, but opens the door to a bigger, more important change down the road. Under existing law, there is a tax break for employer-provided health insurance. This break, which played no small role in shaping the system we have today, goes up with the value of insurance -- no matter how much that insurance costs. At the margins, this is bad health care economics, since the most generous health policies out there probably encourage too much wasteful medical care (since they give neither patients nor providers much incentives to economize). It's also bad on distributional grounds, since, overall, higher-income Americans get the most lucrative tax breaks from these plans. One Clinton campaign official told me that, in their research on the subject, they stumbled across health insurance policies for executives worth more than $25,000 a year.
But limiting this deduction raises its own problems, as both policy and politics. According to the campaign, some of the people with the most expensive health plans are people who simply live in areas that have very high medical costs or have serious medical conditions that make such coverage particularly attractive; they need the generous insurance to keep up with their bills. Others are blue-collar workers who accepted these higher benefits in lieu of pay increases -- and whose unions have more than a little clout in this fight. And that's not to mention the fact that reducing the deductibility of benefits will be demagogued as a tax increase (even though President Bush and many other conservatives have put forth similar ideas).
Clinton decided to go after the deductibility anyway, but with a tweak. Under her plan, only the very wealthiest American households -- that is, those earning over $250,000 a year -- could no longer take a full tax deduction if their plans were worth more than the median federal employee plan. Or, to put it more simply, under the Clinton plan, tax dollars would no longer subsidize exceptionally generous insurance for people with exceptionally large bank accounts.
Doing this doesn't generate a huge amount of revenue (just $2 billion a year). But it would establish a principle that tax dollars shouldn't subsidize overly generous insurance -- something essential to rationalizing the whole health care system in the long term.
So how does Clintoncare, the sequel, stack up? Precisely because she is committed to letting people with insurance keep what they have -- and avoiding immediate disruption if it's not absolutely necessary -- her plan is less sweeping than, say, a true single-payer scheme or the close cousin favored by Representative Pete Stark. (Under Stark's plan, all of the uninsured, and eventually most Americans, would get coverage directly from a government-run program like Medicare.) Clinton's plan is also less ambitious than the plan that Senator Ron Wyden has been circulating on Capitol Hill. Although Wyden's plan also envisions most Americans getting insurance through private carriers, it would sever the link between jobs and coverage right away. Everybody, in his scheme, would start buying insurance on their own.
But if it's a little disappointing that not one of the major Democratic candidates offered anything quite that bold, it's also heartening to see how far the debate has come since just a few years ago. All three of the leading Democratic candidates have put forward serious and smart plans that would get insurance coverage to most, if not all Americans -- and, in the process, eliminate a great deal of human misery.
The hard part, really, is figuring out which candidate has the most to offer on health care. And, given the overall similarity of the three plans, that really depends on what qualities you value most. Edwards is arguably the candidate whose commitment to universal coverage runs strongest right now. It's not coincidence that he was the first to lay out a plan, setting a high standard for policy ambition that no other serious candidate has exceeded. Obama quite possibly has the greatest potential to inspire the public. Enacting universal coverage will inevitably require making hitherto radical ideas seem like the mainstream concepts that they are. And that is Obama's strength.
But you need a third quality as well: The ability to navigate the legislative process. Everything about the Clinton plan -- from its thorough details to its well-orchestrated roll-out to its deft efforts at blunting interest-group opposition -- are a reminder that this is her strength. And not a minor one to consider.
By Jonathan Cohn
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