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Health Care: The Elevator Pitch

I’ve written several thousand words about health care over the past 48 hours, and tens of thousands of words over the past six months. Some of those words have been a bit, uh, confrontational. So let’s try this approach instead. This is my summation — my elevator pitch for passing health care reform:

Ben Nelson and Blanche Lincoln are probably willing to sign off on $900 billion in public subsidies so that poor and sick people can have better access to health care. Is there really no way we can make this work for us?

To anticipate several of the objections to this:

But it’s not real reform! You’re right: the bill is not “real reform” in the sense of something that fundamentally alters the structure of the current, predominately private, predominately employer-based insurance system. The only solutions that I’m aware of that might do that are single payer and Wyden-Bennett, either of which I’d prefer to what’s on the table now — but neither of which are liable to be politically viable any time soon. By the way, I don’t think a bill with a public option would constitute fundamental reform either — it would be better, but it’s still tinkering around the edges of a flawed system.

But it doesn’t control costs! No, the bill is not particularly great, or even particularly good, when it comes to cost control — especially without the public option. But, it is liable to help at the margins. According to CMS, the Senate’s bill would increase total health care spending nominally — by about 0.7 percent. However, in so doing, it would cover about 10 percent more people than the status quo does — so this represents something like a 9 percent efficiency gain. Now, those estimates were made before the public option was removed, which was expected to reduce the bill’s tab by about $25 billion, or about 3 percent of the total outlay. Wipe out the public option, and you reduce the efficiency gain further, to somewhere in the mid-high single digits. It’s not great, but it’s something. It certainly doesn’t make the problem worse.

But it’s not efficiency that matters — it’s the total amount of spending! In the long run, you’re probably right. Eventually, Americans will need to be willing to do one of the following: (i) fundamentally restructure the health care system; (ii) tolerate worse health outcomes in exchange for less spending; (iii) tolerate material trade-offs in other areas of the economy; (iv) take potentially catastrophic risks with the national debt; (v) find a way to grow GDP at 5 percent per year for the foreseeable future. Given that (v) is unlikely, we’ll indeed need to make some tough choices — and to some extent, indeed, this bill just kicks that can down the road.

But in the medium term, I’m not sure how persuasive this side of the argument is, especially coming from liberals. If the concern were the total amount of health care spending, why not just wipe out Medicare and Medicaid, let poor and old people grow accustomed to shorter life expectancies, and call it a day?

But the subsidies aren’t generous enough! Now, here is where I have a great deal more sympathy — $900 billion in public subsidies might be nice, but that money might be distributed in the wrong way. In particular, there’s not quite enough assistance to people between roughly 150 and 300 percent of poverty, for whom health care will become much (!!) more affordable but perhaps not quite affordable enough.

This is a problem that should be fixed. And it’s one, I think, that probably can be fixed: if not on the Senate floor than in conference, and if not in conference than at some point between now and implementation in 2014. Perhaps, for example, the House’s structure for subsides should be adopted, which are slightly more generous to people making less than 250 percent of poverty but slightly less so to people making more than 250 percent. Perhaps people with children need to receive a bit more assistance as compared with childless couples. Perhaps, since the bill projects to realize some deficit savings, those savings can be shaved a little bit. These are disputes about numbers — and disputes over numbers are generally easier to resolve than debates over structures. And since these numbers impact people’s bottom lines, indeed, they’re something that all Democrats should be receptive to — it’s not like Ben Nelson wants lower-middle class families to be teed off because they’re forced to buy not-quite-affordable insurance any more than Chris Dodd does. So get it fixed — and pass the bill. The alternative, remember, is that these families have a choice between buying insurance at an absolutely back-breaking price point (in excess of $10,000 per year for the premiums alone), and going without health care coverage at all.

But that money isn’t really going to poor people — it’s going to Cigna! Then there’s an argument I have much less sympathy for: that the $900 billion is not ultimately going to disadvantaged people, but rather to insurance companies. Some of the money, indeed, will turn into insurance company profits. But how much? Probably not very much: most likely about $30 billion of the $900 billion, or about 3.3 percent, which is the average profit margin in the insurance industry. The insurance industry is actually not very profitable — it may be inefficient, but it is not especially profitable. The vast majority of that $900 billion goes to improve health outcomes for poor and sick people.

Keep in mind that, although the insurance companies would be allowed to add some highly profitable customers under this bill (young, healthy people for whom health insurance is a bad deal) it will also add some highly unprofitable ones — people with pre-existing conditions, whom they will now be required to accept. (You can’t really have one without the other: if you banned limitations on rescissions or pre-existing conditions but did not have an individual mandate, premiums would skyrocket.) Also, the insurance industry is taxed directly under this bill, and is also penalized indirectly through the excise tax, which will reduce insurance spending among a generally profitable set of customers.

The idea of calling this an insurance company “bailout” is not really credible. The bill would preserve the private, for-profit insurance system rather than kill it — but it’s not much of a bailout. Indeed, I’ve seen virtually no evidence that it would in fact improve insurance company profit margins, on either a percentage or an absolute basis.

A slightly longer version of the elevator pitch. So, we’ve talked a lot about what the bill is not. It’s not structural reform. What is it, then? At the end of the day, it’s a big bleeping social welfare program — the largest social welfare program to be implemented since the Great Society. And that’s really what it’s been all along: fundamental reform like single-payer or Wyden-Bennett was never really on the table. The bill comes very close, indeed, to establishing what might be thought of as a right to access to health care: once it’s been determined that people with pre-existing conditions cannot be denied health care coverage, and that working class people ought to receive assistance so that they can afford health care coverage, it will be very hard to remove those benefits. It’s the sort of opportunity that comes around rarely — and one that liberals will greatly regret if they turn down.

Nate Silver is the founder and editor in chief of FiveThirtyEight.