Some Big Dots to Connect

Which could tell who really will pay for health reform

In the past week or so, the media—at least those outlets that still cover health reform somewhat regularly—offered up some reasonable journalism about Beltway health reform politics. There was just one problem: ordinary people outside the Beltway may have needed help understanding what it all meant. Stories tackled one part of the health reform story or another, but didn’t put it all together. A piece or two connecting all the dots would have come in handy.

A couple of weeks back, The Washington Post ran an illuminating story—one that Campaign Desk has long been urging the press to write—about Congress’s willingness to tax the value of employer-provided health insurance. Millions of workers who get insurance from their employers would have to pay income taxes on all or some of those benefits—a tax increase by any stretch of the phrase. Possibly some of those increases would be destined to fund insurance premiums for the uninsured.

Recall that, during the campaign, John McCain advocated such a tax, but Candidate Obama said in no uncertain terms that he opposed the idea. The Post reported that budget director Peter Orszag has said that taxing benefits “most firmly should remain on the table.” The paper noted that the Democrat-controlled Congress dismissed the idea when President Bush had proposed it. But now, according to the Post, some congressional Dems are signaling that Obama would now “accept a tax on employer benefits as long as he didn’t have to propose it himself.”

“It’s funny how this idea, so sharply attacked by Obama and the Democrats during the campaign, is somehow now considered perfectly appropriate with no discussion at all about the consequences,” Charles Idelson, communications director for the California Nurses Association, told me. One rationale for taxing benefits is to discourage employers from offering rich benefit packages to workers, which leads to the use of more medical services. Using more health care fuels inflation, some economists believe. About 25 million Americans are currently underinsured—a number that would certainly rise if workers get skimpier benefits that require them to pay a lot out-of-pocket. Here’s a good place to start connecting the dots.

Then last week the Los Angeles Times ran a similar story adding a few new voices to reflect the latest Congressional and advocacy group think. Michigan Sen. Debbie Stabenow said that while she didn’t want to penalize middle-income people who have good health care, she might nevertheless support what the paper called an income-based cap—aka a tax on employer-provided benefits. That’s a bit of jargon that every auto worker left in Detroit instantly understands, right? Len Nichols from the New America Foundation offered this: “Unless someone can write a really big check, there really is no other source of money that we can tap.”

That was the money quote that got my attention. What happened to Obama’s budget proposal of a $634 billion down payment that was to be funded in part by making wealthier people pay higher income taxes? Or the $175 billion that was to be saved by cutting the excess payments to Medicare Advantage plans over ten years? Ezra Klein’s blog gave a clue. The Senate draft budget doesn’t contain any actual money for health care. Instead, said Klein, there will be “space” for a health reform reserve fund. No taxing the rich—members of Congress beat up on that one. No trimming Medicare Advantage plans—insurers don’t like that.

The $634 billion figure was always too small to provide all the subsidies people will need if they are required to buy health insurance, which seems to be the direction the pols are going. But if Obama’s revenue source doesn’t survive the budget process, then where does the money come from? A savvy, interested reader might have to circle back to The Washington Post and the Los Angeles Times. Bingo! The money might just come from taxing the health insurance benefits of some of Debbie Stabenow’s auto workers—and everyone else who gets insurance from their boss.

The Wall Street Journal recently connected a few more dots, although they could have gone further. The Journal reported that the Senate’s five-year budget plan allowed the government ten years to cover the cost of reform, so it could spread out the costs while not adding to the deficit. This would also give the government time to generate savings from changes to the system, and “allow it to rely less on new taxes or other revenue increases.” The Journal’s interpretation: lawmakers are hoping they can make health care reform pay for itself, even though it’ll likely take years before they see any substantial savings. My question: where will the money come from to pay the costs of reform incurred today if the savings will only be realized years from now?

The Journal speculated that these future savings would come in various ways: reducing incentives to stop providers from performing unnecessary medical procedures; addressing regional cost differences; letting providers know about effective treatments; and promoting prevention. Will all this really yield the trillion or so dollars needed to subsidize health insurance?

Then I thought of a New York Times story from last week, which offered an ominous take on one way the future savings would be generated—using information technology to cut costs and improve quality and efficiency. The Times reported on two articles published in the New England Journal of Medicine that, according to the Times, “point to formidable obstacles to achieving the policy goal of not only installing electronic health records, but also using them to improve care and curb costs.”

Now I ask you, dear reader, what does this add up to? A president backtracking on a campaign promise? Taxing workers instead of wealthier people? Causing more people to be underinsured? Letting insurers off the hook? Budget games? Banking on future savings that may not materialize? What a good story this will be when the dots are connected!

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman.