Health-Care Reform Gets a Booster Shot

President Obama's speech to Congress on health care Wednesday evening succeeded at several levels. Beforehand, observers said that he needed to explain to a confused public what he is proposing and why it makes sense, and the speech did that. Analysts also said that the president needed to shift the momentum from August, to confront the ugly distortions of the opposition, and to mobilize support in his own party. In those respects as well, the speech did all that might have been expected of it.

But Obama also undertook several things that were unexpected -- at least, I didn't expect him to do them. He introduced an important new element into the policy discussion. He signaled his support for what is now the likely resolution of the most contentious issue -- the public option. And after paying respect to Republicans for their ideas, he used the coda of his speech to make the larger case for liberalism more eloquently than any president has in decades.

The new element in the policy discussion has to do with a little-discussed but serious political vulnerability of the proposals being considered in Congress--the timetable of reform. Under the current proposals, most of the uninsured wouldn't get coverage until the new insurance exchanges are set up in 2013. The law would move more quickly in improving prescription-drug coverage for the elderly and curbing some of the worst insurance abuses. But before the non-elderly would see results firsthand from the new system for buying, subsidizing, and regulating insurance, Republicans would have two elections to arouse public anxiety and overturn reform.

Obama said that it would indeed take four years to set up the exchanges in order to "do it right." But then he added, "In the meantime, for those Americans who can't get insurance today because they have pre-existing medical conditions, we will immediately offer low-cost coverage that will protect you against financial ruin if you become seriously ill."

Making catastrophic health insurance "immediately" available would provide a bridge to more substantial reforms in 2013. Some may worry about the measure's potential effects. Given the overall budgetary expenditure that Obama endorsed ($900 billion over 10 years), will the cost of short-term catastrophic coverage force Congress to adopt lower subsidies for the more comprehensive coverage beginning in 2013? And because temporary programs often have a way of becoming permanent, might catastrophic insurance become entrenched by 2013 as the level supported by the federal government?

These are real risks, but it would be far worse if there were no tangible results for most of the uninsured by the time Obama runs for re-election. The entire program -- and more -- might be lost.

Obama gave a bravura defense of the public option in his speech, but the real news was the way he framed it and his clear signal that he could accept Sen. Olympia Snowe's proposal for a "trigger"--that is, holding the public option in abeyance unless private insurers in a state fail to offer affordable coverage.

There have been two chief theories of the public option among those who have endorsed it. One is a theory of "countervailing power." In this conception, the public plan would enroll a vast number of subscribers and because of that financial leverage, be able to save money, as Medicare does, by paying doctors and hospitals at lower rates than private insurers pay.

The second theory is "yardstick competition," the traditional justification for public utilities like the Tennessee Valley Authority. According to this notion, a government enterprise serves as a useful benchmark, or yardstick, for the performance of private firms. But as a yardstick competitor, the public insurance plan would operate on the same basis as private insurers, without any subsidy from the taxpayers--and very likely without the advantage of paying lower reimbursement rates.

By emphasizing that the public option would enroll only a small proportion of the population and that it would serve mainly as a way of holding private insurers accountable, Obama clearly framed the public option as a yardstick competitor. And he indicated he was open to the "trigger" proposal, which is likely to be the only way a public option will get through the Senate.

In fact, the trigger has some attractive features, though much will depend on how it is set up. Because private insurers would be anxious to keep rates below the threshold that sets off the trigger, they would have a strong incentive to keep down their premiums. Moreover, they would have that incentive without the government actually establishing a public plan and risking that it would become a magnet for high-cost subscribers and thereby fail to achieve its objective. (See my article, "Perils of the Public Plan.")

In other words, the threat of the public option might be better than the reality, which is why Democrats ought to embrace the trigger.

Some liberals who have blown the significance of the public option out of proportion may be disappointed by Obama's concession, but they had to be thrilled with the concluding moments of the speech.

Invoking the memory of Ted Kennedy and explicitly referring to his "liberalism," Obama raised the case for health reform to a higher moral level. Yes, he said, our predecessors understood that government couldn't solve every problem:

But they also understood that the danger of too much government is matched by the perils of too little; that without the leavening hand of wise policy, markets can crash, monopolies can stifle competition, and the vulnerable can be exploited. And they knew that when any government measure, no matter how carefully crafted or beneficial, is subject to scorn; when any efforts to help people in need are attacked as un-American; when facts and reason are thrown overboard and only timidity passes for wisdom, and we can no longer even engage in a civil conversation with each other over the things that truly matter ? that at that point we don't merely lose our capacity to solve big challenges. We lose something essential about ourselves.

As he finished, Obama seemed to strike the posture of a general leading his troops into battle. He would hear nothing of those who counsel retreat. Shrinking from the fight, he said, was not what he and others came to Washington to do. "We did not come to fear the future. We came here to shape it." He appealed not just to our sense of justice but to a liberal vision of our national character. There have been elements of this appeal in his earlier speeches, but they were pitch perfect Wednesday night.

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