Democrats concerned about the costs of health care changes

Sen. Christopher Dodd, D-Conn (AP Photo/Charles Dharapak)

The New York Times is reporting Democrat Senators are wrangling over ways to reduce the expected cost of President Obama’s health care proposals. While it is too early in the process for anyone to gauge what the final legislation will look like; this does provide a window into which elements are of primary concern to the politicians.

One proposal gaining popularity is the establishment of an automatic procedure for reducing the growing cost of the Medicare program. The template being examined is similar to Base Realignment and Closure Commission (BRAC). Under BRAC a group is empaneled on a regular basis to review the Department of Defense’s facilities around the country and make recommendations for closure or consolidation. The benefit to congress of using BRAC is it takes the responsibility, and political liability, for base closings out of their hands. That this proposal is being considered suggests a similar desire on the part of congress to distance themselves from any potential political fallout from cost cutting moves in the Medicare program.

Another option being looked it is to have employers contribute to state Medicaid programs or some type of subsidized insurance for low income workers. Currently employers finance a portion of Medicare Part B through payroll taxes. Interestingly, both of these proposals involve the Centers for Medicare and Medicaid Services, (CMS) the Federal agency which administers the Medicare and Medicaid programs. This suggests CMS may also have a hand in any public option, should one be adopted. I recently posted an article here examining what some of the effects of a public option would be, clearly congress is also concerned. The growing debate outside of congress suggests they are not the only ones. A public option, set up alongside the current market, would potentially crowd out private insurance; making it less likely citizens would be able to keep their current insurance, as President Obama promised during the campaign.

The idea of taxing employer provided health benefits to finance health insurance for the uninsured comes up repeatedly, but it is very unpopular politically. Currently, a health care benefits package provided by one’s employer is not taxed as part of their salary, under this option it would be. This would amount to a tax increase, and a very significant one, for individuals whose compensation package includes a mix of salary and benefits; the vast majority of workers. The flip side of this proposal is akin to something John McCain proposed during the 2008 presidential election, removing the current tax break employers receive for providing health benefits, in exchange for providing a direct tax credit to individuals; allowing them to purchase their own insurance directly. Other potential options include expanding consumer choice through increased use of Health Savings Account and Medical Spending Accounts, as suggested by the National Association of Health Underwriters (NAHU).

Democrats know the public is sensitive to the final costs of any plan, particularly in this time of ballooning deficits. The public is also aware of the rationing government health plans in other countries engage in to control those costs. Republicans know the current mixed system of semi private and private plans drowning under increasingly uneconomical state mandates is an inefficient health care delivery mechanism. My concern is that in their desire to do "something”, politicians may actually make things worse.

Incidentally, my family uses a Flexible Spending Account alongside our regular insurance; it works really well, and helps us control how our health care dollars are spent. If congress enacted a health care tax credit to offset the cost of buying private insurance, and states removed the mandates driving up the cost of private insurance, it would be the best option for us. I suspect this would hold true for most Americans as well.