Brad DeLong: Obama Can Remedy Ailing Healthcare System

Brad DeLong says Barack Obama's "attractive" healtcare reform plan may fall victim to the "iron law of American politics":

Obama can remedy ailing healthcare system, by Brad DeLong, Commentary, Financial Times [Update: longer version at Brad's]: It is an iron law of American politics that Democratic party politicians who propose relatively detailed healthcare reform plans – as Barack Obama did last Tuesday – get trashed. If they propose a plan that might actually pass, ... they will be trashed for having abandoned their base and their own principles. If they propose a plan that corresponds to the world that they wish they could attain, they will be trashed as having no practical sense. In either case, they lose. ...

This is too bad, as the US needs to have a debate on its healthcare system. It spends twice as much as western Europe for little clear benefit... If the US could get the same value for its healthcare dollars as western Europe, it would have an extra $800bn a year to spend... There is an extraordinary opportunity for the US to spend the $1,700bn a year it spends on healthcare better. The most visible and damaging ... failure ... is that 45m Americans lack health insurance. ..

Mr Obama’s advisers hope, [his plan] will please those party activists who want a vision of utopia and those who want a successful legislative road map. The ... plan begins with a tax on employers who do not offer their workers employer-sponsored health insurance – “pay or play”, it is called. If this tax induces them to do so, then the number of uninsured falls to a small and manageable number that can be covered by public hospitals:.. If employers do not respond, then the government collects the tax and has money for expanded public health programmes or to subsidise affordable healthcare coverage for the uninsured working poor.

In the US, however, there is an additional problem. If you are a single individual without employer sponsorship it is very hard to buy affordable health coverage. ... Thus the second part of the ... plan: offer the Federal Employee Health Benefit Program to everybody. It works for federal employees. It should work for everyone – especially with subsidies to cover the cost for the working poor. If the take-up is high, ... uninsurance is reduced to a minor nuisance. If people do not find FEHBP attractive, then move on to the third stage of the ... plan: health exchanges to serve small companies and individuals the way that benefits departments currently serve the workers of large corporations, collecting bids and assuring quality from insurance companies, and so offering families choices.

Mr Obama’s people are betting that at least one of these three [options] will flourish ... and that the problem of covering the 45m uninsured will disappear. If not – if, say, young, healthy and rich people become free riders in large numbers – then they move on to mandating coverage and levying taxes. But all four roads lead to the same place: a US that no longer has a massive uninsurance problem.

In a country with rational politics, such a plan ought to be attractive. ... The right should embrace it for its market elements – allowing people to vote with their feet... The centre should embrace it because ... it is politically viable. And the left should embrace it because it promises the utopia of ending the problems of the uninsured. Unfortunately, however, judging by the brickbats the plan has already received, Mr Obama is set to be another victim of the iron law of American politics.