Battle Lines

The Journal has an important editorial today on the Democrats’ “public option” for health care coverage. This would be a government-run program, like Medicare, open to folks of all ages who don’t have health insurance. The public option is a cornerstone of the Obama administration’s health care reform. But Republicans are leery since it’s also the first step toward a government-run health care system. New York Democratic senator Charles Schumer recently outlined some possible compromises – he wants the plan to pay claims through co-pays and premiums – in order to attract Republican support. The Journal says he can’t be trusted, and they have a point. Some history:

When Medicare was created in 1965, benefits were relatively limited and retirees paid a substantial percentage of the costs of their own care. But the clout of retirees has always led to expanding benefits for seniors while raising taxes on younger workers. In 1965, Congressional actuaries expected Medicare to cost $3.1 billion by 1970. In 1969, that estimate was revised to $5 billion, and it actually came in at $6.8 billion. That same year, the Senate Finance Committee declared a Medicare cost emergency. In 1979, Jimmy Carter proposed limiting benefits, only to have the bill killed by fellow Democrats. Things have gotten worse since, and Medicare today costs $455 billion and rising. Medicaid was intended as a last resort for the poor but now covers one-third of all long-term care expenses in the U.S. — that is, it has become a middle-class subsidy for aging parents of the Baby Boomers. Its annual bill is $227 billion, and so far this fiscal year is rising by 17%. Schip was pitched a decade ago as a safety net for poor kids, and some Republicans helped sell it as a free-market reform. But Schip is now open to families that earn up to 300% of the poverty level, or $63,081 for a family of four. In New York, you can qualify at 400% of poverty.

The tendency of government is to grow, and if the public option is implemented the forces of inertia and politics will expand it to the point where it crowds out the private insurance market. That’s what Yuval Levin and James Capretta argue in our editorial this week. The costs such a plan would impose on government, whether tempered by rationing or not, would be huge and despoiling even if the United States wasn’t already running almost $2 trillion deficits. Spending on this scale is unsustainable, and to finance it the government will have to impose growth-squelching taxes or middle-class-squeezing inflations. Not good. A coalition of conservative Democrats and Republicans has thrown wrenches into Obama’s cap-and-trade plan. The question this fall: can a similar coalition stop the public option? Does a similar coalition even exist?

Battle Lines

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