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Leaders need to sacrifice popularity to reform health care

There are moments in the life of any important policy debate when things hit a dead end. There aren't any easy answers, any options that don't involve real political risk. And it's at those moments when you discover who the real leaders are.

We are at just such a moment with health care reform. The roadblock right now is finding a way to pay for the short-run costs of reform before the benefits of longer-run cost containment begin to kick in.

Nearly all health experts agree about where to begin this search: the tax break for employer-paid health insurance. Unlike most other forms of compensation, health benefits are not subject either to income or the payroll taxes. Because people prefer untaxed compensation, there's been a natural tendency for health benefits to grow at the expense of cash wages. As a result, we've bought so much insurance that we've become cavalier not only about the price of health care, but the amount of it that we consume.

The other thing to say about this tax break is that it is incredibly unfair — a transfer of $250 billion each year from people who have no health insurance, or less-generous insurance, or who have to buy their own insurance with after-tax dollars, to workers with generous policies paid for by their employers. Even worse, because this tax break is worth twice as much to a person in the 35 percent tax bracket as someone with the same health insurance policy in the 15 percent bracket, it is profoundly regressive.

All of which explains why limiting the amount of health care benefits that anyone can receive tax-free is a no-brainer if you're looking to pay for health reform.

What's crazy is not to use some cap to raise $30 billion to $50 billion over the next decade in additional tax revenue to pay for health reform. That's why it was pushed so hard by Sens. Max Baucus and Charles Grassley, the chairman and ranking Republican on the Senate Finance Committee who together offer the best hope of fashioning a bipartisan consensus on reform. And that's why it was such a setback when the rug was pulled out from under them by Senate Majority Leader Harry Reid and then President Barack Obama.

Labor unions are the main culprit here. One reason organized labor is in such bad odor these days is that, while unions claim to represent the working class and the downtrodden, they are often about protecting wage and benefit packages that most nonunion workers can only dream about. Now they're at it again.

There is nothing surprising in a union position that hasn't changed since the last failed round of health reform. What is disappointing is that Obama and Democratic leaders have allowed themselves to be hemmed in by it even when they and their advisers know it is wrong.

Even good politicians can't sell comprehensive health care reform by trying to convince the public that it won't cost them a dime and nothing that they like about the current system will ever change. Republicans tried a similar approach with their wars and tax cuts, and it proved their undoing. Democrats risk the same fate if they try to convince Americans that they can have all the health care they want and tax only the rich to pay for it.

The country is hungry for a credible call to shared sacrifice and open to the idea that if everyone gives a little, we can all be better off. All it would take is a little leadership.

Leaders need to sacrifice popularity to reform health care 07/19/09 [Last modified: Sunday, July 19, 2009 4:30am]
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