Wonkbook: Romney embraces the public option

at 07:52 AM ET, 11/07/2011


Republican presidential candidate Mitt Romney. (Manuel Balce Ceneta - AP)
Rewind the tape two years to November 2009. Liberals had a very clear plan for the health-care system. The way to cut costs, they said, was to pit private insurers against a public insurer -- ideally, a public insurer that could use Medicare's bargaining power. Force the public and private options into the same system, they said, and the two would compete: private insurers would be forced to clean up their business practices and innovate aggressively or they would lose business to the public option. The public insurer would be forced to keep its costs low and its services smart or it would lose customers to the private options. Either way, competition between the two models would lead to better, cheaper health care. But Republicans and some conservative Democrats disagreed, and the public-option idea died in the Senate.

Now it's back. Only this time, it's Mitt Romney proposing it and Republicans enthusing over it.

Put simply, the public-option model is Romney's plan for Medicare. Taking his cue from the Medicare plan developed by the Bipartisan Policy Center's deficit commission, Romney's proposal would give seniors a lump-sum payment and let them choose between traditional fee-for-service Medicare and a slew of private plans. How big of a payment? Ah, that's the rub. Romney isn't saying. His campaign web site avers that he "continues to work on refining the details of his plan, and he is exploring different options for ensuring that future seniors receive the premium support they need while also ensuring that competitive pressures encourage providers to improve quality and control cost."

Whether a plan like this can work is almost entirely dependent on the size of the vouchers and the speed of their growth. So until Romney releases those details, little can be said about either the sort of health care Romney intends to provide for seniors or the sort of cost savings his plan will be able to ensure. But he's already winning some important supporters. In an interview with my colleague Jennifer Rubin, Paul Ryan was enthusiastic. "This is a great development!" he told her.

But it could, for Republicans, lead in an awkward direction. If Romney is elected and he manages to pass his plan and repeal the Affordable Care Act, the pressure to open the revamped, semi-privatized Medicare program up to younger and younger Americans will be immense. Romney forswears any intention of doing anything like this, of course. His plan actually calls for raising the Medicare retirement age. But with 50 million Americans uninsured and cost growth in private insurance options routinely outpacing cost growth in the Medicare program, something will eventually need to be done for the rest of the country. And Medicare will now look a lot like what Democrats originally wanted the Affordable Care Act to look like. Plus, it will have the GOP's stamp of approval on it, and there will be no questions about its constitutional legitimacy.

That's always been the great secret of the Ryan plan. In proposing that we could dramatically cut costs simply by forcing seniors to choose private options on competitive exchanges, it affirmed one of the ACA's central efforts at cost containment. Bowing to the unpopularity of that plan, Romney has now backed up to proposing we could dramatically cut costs by forcing seniors to choose between public and private insurance options on competitive exchanges -- an even more liberal approach to cost containment. This ideological overlap has always been tense for both sides. Liberals want to bring these ideas to the private-insurance system, not to Medicare, and conservatives want to bring their ideas to Medicare but not to the private-insurance system. But if either side succeeds in passing this model anywhere, and the model works, then the pressure will be overwhelming to implement it systemwide. Just as one possible outcome of the Affordable Care Act was that it would lead to Medicare reforms conservatives found congenial and liberals found upsetting, the irony of Romney's Medicare plan is that it could lead, in the private market, to the very system that Republicans spent almost all of 2009 attempting to kill.

Top stories

1) Mitt Romney has a Medicare plan, reports Philip Rucker:"Romney unveiled a blueprint to overhaul entitlement programs popular with seniors, saying he would gradually raise the retirement age for Medicare and Social Security. Under his plan, future retirees would have the option of staying on traditional Medicare or purchasing health insurance from private companies through 'premium supports,' or vouchers. Romney also said he would turn responsibility for Medicaid, the government health care program for the poor, over to state governments, and cut about $100 billion in Medicaid spending. He also would cap federal spending at 20 percent of gross domestic product by the end of his first term. To do so, he would cut about $500 billion in annual spending and lower non-defense discretionary spending to 2008 levels."

Read Romney's plan here:  http://mi.tt/vBgZZp

2) Greece is getting a new government, reports Michael Birnbaum: "Greece’s two main political parties reached an agreement late Sunday to form a unity government, giving Europe a steadier partner as it works to avert a larger financial crisis on the continent. Prime Minister George Papandreou will resign after the new government is formed, officials said, although the timing, and who will be his successor, remained unclear. The move brings Greece a step closer to stability after a political crisis last week threatened its future in the euro zone and raised the prospect that debt crises in other, larger countries could soon follow...Papandreou and the head of the main opposition New Democracy party, Antonis Samaras, met late Sunday and agreed to form a coalition government that is expected to push through the bailout plan."

3) Wall Street is thriving, reports Zachary Goldfarb: "During Obama’s tenure, Wall Street has roared back, even as the broader economy has struggled. The largest banks are larger than they were when Obama took office and are nearing the level of profits they were making before the depths of the financial crisis in 2008, according to government data. Wall Street firms -- independent companies and thesecurities-trading arms of banks -- are doing even better...'There’s a very popular conception out there that the bailout was done with a tremendous amount of firepower and focus on saving the largest Wall Street institutions but with very little regard for Main Street,' said Neil Barofsky, the former federal watchdog for the Troubled Assets Relief Program, or TARP, the $700 billion fund used to bail out banks. 'That’s actually a very accurate description of what happened.'"

1) Democrats are preparing yet another small jobs bill, reportsScott Wong: "Their jobs bills haven’t gone anywhere, so Senate Democrats are getting creative. Next week, they’ll seek to attach legislation giving businesses incentives to hire unemployed and disabled veterans to a House-passed bill that Republicans have been begging the Democratic-controlled Senate to pass. The bipartisan base bill, which along with the veterans bill is part of President Barack Obama’s failed $447 billion American Jobs Act, would repeal a rule requiring governments to withhold 3 percent of large contractor payments. That repeal bill faces a key procedural vote in the Senate on Monday. Democrats say it will be near impossible for Republicans to oppose their latest jobs bill -- the VOW to Hire Heroes Act -- just days before Veterans Day."

Top op-eds

1) A flat tax won't tackle inequality, writes Robert Frank: "A flat tax would reinforce the trends toward greater income inequality that have been seen over the last several decades. As documented by a recent Congressional Budget Office study, the top 1 percent of income recipients in the United States earned 275 percent more in 2007 than they did in 1979, adjusted for inflation, a period when the earnings of middle-income households grew by less than 40 percent. A flat tax would increase inequality by substantially reducing rates on the most prosperous households, while increasing them on low- and middle-income households...Countries and times with lower inequality fare better on virtually every published index of health, well-being and quality of life."

2) A new financial bubble is already starting, writes Steven Pearlstein: "The latest example is the market for commodities: corn, wheat, cotton, silver, copper, oil, natural gas. In the past decade, hundreds of billions of dollars have flooded into the market, largely through swaps contracts and commodities index funds, ETFs and mutual funds. These markets have long since outgrown their original function of providing producers and consumers of these commodities with a way to hedge their risks by guaranteeing supply and locking in prices. All futures markets require a certain number of “speculators” to take the other side of the contracts from commercial users and producers. Typically, these speculators would represent 30 percent of the participants in a healthy futures market...Instead of 30 percent of the market, these 'passive investors' typically account for 70 percent or more."

3) We need principal reduction, writes Joe Nocera: "Of the 55 million mortgages in America, more than 10 million are reasonably likely to default. That is a staggering number -- and it is, in large part, because so many homes are worth so much less than the mortgage the homeowners are holding. That is, they’re underwater. Her second calculation is that the supply of housing is going to drastically outstrip demand for the foreseeable future; she estimates that the glut of unneeded homes could get as high as 6.2 million over the next six years...What’s more, nearly 20 percent of current homeowners no longer qualify for a mortgage, as lending standards have tightened...The only way to stop the death spiral is through principal reduction."

4) There's plenty besides Wall Street for occupiers to target,writes Alec MacGillis: "Occupy Bill Clinton. Hold on, you might say. Didn’t President Clinton preside over our last stretch of solid economic growth? And didn’t his budget deal of 1993 raise income taxes on the wealthy? Yes, and yes, but Clinton also signed off on a giant windfall for affluent Americans -- the 1997 reduction in the capital gains rate, the tax paid on profits from the sale of assets such as stocks or real estate...Occupy Towers Watson Haven’t heard of Towers Watson? That’s fine with them, because Towers Watson doesn’t need your business. The company is the biggest player in the elite market of compensation consultants, who are hired by other firms’ compensation committees to help set executive pay."

Acoustic interlude: St. Vincent plays, discusses "Surgeon".

Got tips, additions, or comments?  E-mail me.

Still to come: State and local cuts are hurting job growth; health exchanges are leading to nonstop lobbying; the Pentagon could make unprecedented cuts; Keystone protests are heating up; and what happens when all the fireworks go off at once by accident.

Economy

State and local cuts are dragging down job growth, reports Neil Irwin: "In October, the public sector cut 24,000 jobs while private industry continued adding jobs at a steady clip, the Labor Department said Friday. The nation’s unemployment rate fell slightly to 9 percent -- but it would have been 8.7 percent had state and local governments not contracted the past two years. Amid lower tax revenue due to the recession, state and local governments have cut 455,000 jobs since the beginning of 2010, almost half of them in education. Overall, the proportion of government jobs fell to 16.7 percent in October, its lowest level in three years. The cuts are a victory for those who argue for a leaner public sector, but they have also weighed down the overall job market."

Alan Krueger has been confirmed as CEA chair, reports Corey Boles: "The Senate unanimously confirmed Alan Krueger Thursday night as chairman of President Barack Obama's Council of Economic Advisors. Mr. Krueger succeeds Austan Goolsbee, who has returned to the University of Chicago after nearly three years at the White House. Mr. Krueger served as assistant Treasury secretary for economic policy during the first two years of the Obama administration but left last year to return to Princeton University. His work at the Treasury Department included tax incentives to encourage employers to hire the unemployed and the 'cash for clunkers' program to spur auto purchases. When Mr. Obama nominated Mr. Krueger in August, the president said he hoped the latter's expertise as a labor-market economist would enable him to help solve the ongoing jobs crisis."

One of MF Global's regulators is tight with its leadership, reportDavid Hilzenrath and Peter Whoriskey: "Less than a year ago, federal markets regulator Gary Gensler could reflect fondly on his association with Wall Street mogul and former politician Jon S. Corzine. The two had known each other for years, working together at Goldman Sachs and then in Congress, where Corzine was a senator and Gensler was a Senate aide. Invited by Corzine last November to speak at Princeton University about financial regulation, Gensler reminisced about their days crafting legislation and got in a friendly jab about Corzine’s upcoming wedding...Now, the relationship has taken on an entirely different cast. Gensler, as chief of the Commodity Futures Trading Commission (CFTC), is one of the key regulators probing the brokerage firm MF Global that Corzine led into bankruptcy."

Italy looks to be the next shoe to drop, reports Graham Bowley:"European efforts to solve a growing sovereign debt crisis have failed to quell market unease on the Continent, and the skepticism over Greece points to continued volatility this week. Among fresh warning signs, Italy’s cost of borrowing has jumped to the highest rate since the country adopted the euro. Others signs include pressures building in the plumbing of Europe’s banking system. While those pressures are not yet at the levels experienced during the 2008 financial crisis, when some markets in the United States froze altogether, they are high enough to cause worry, analysts say...Investors are still demanding greater certainty on how Europe would pay for a rescue package aimed at stopping the Greek financial contagion from spreading to Italy or Spain."

Stand-up interlude: Louis CK visits "Conan".

Health Care

Health exchanges are spurring a spree of lobbying, reportsSarah Kliff: "From insurance companies to drug stores to doctors, just about any industry that touches the health care system has a different opinion on how the Obama administration should shape the new insurance markets at the heart of the health-care reform law. But they all agree on one thing: now is the time to weigh in. Health and Human Services has received thousands of comments on preliminary exchange regulations issued earlier this year, which laid some ground rules for what the new marketplace would look like...America’s Health Insurance Plans, which lobbies for the insurance industry, has pushed the Obama administration to leave much of the regulation to the states, which have traditionally overseen insurance market functions."

Many in the House want the health tax deduction off the table,reports Julian Pecquet: "Some 160 House members of both parties have signed onto a letter urging the deficit-cutting supercommittee to reject any proposals to tax employer-sponsored healthcare benefits. The letter says the idea amounts to an unacceptable tax on the middle class that would imperil coverage for almost 160 million people and make the deficit worse, not better. The two members who spearheaded the letter -- Reps. Joe Courtney (D-Conn.) and Tom Cole (R-Okla.) -- said during a press conference Friday that taxing health benefits would disproportionately harm people with high coverage costs...Taxing employer-sponsored benefits is popular with many healthcare experts who think it could lower healthcare costs by reducing overuse of medical services because people would bear the brunt of those costs more fully."

CHIP is opening up to state employees' children, reports Sarah Barr: "At least six states have opened their Children’s Health Insurance Program to the kids of low-income state employees, an option that was prohibited until the passage of the 2010 health-care law. This relatively small step has as its backdrop years of debate over the program, known as CHIP, including concerns that it encourages states -- and consumers -- to replace private insurance with taxpayer-subsidized coverage. Now, as a result of the policy change, families of lower-income state workers who have struggled to pay for family coverage can qualify for the program. CHIP, which is jointly financed by the states and the federal government, provides coverage to the uninsured children of families who earn too much to qualify for Medicaid but cannot afford private insurance."

Domestic Policy

The Defense Department is considering previously off-the-table cuts, report Thom Shanker and Elisabeth Bumiller: "Under orders to cut the Pentagon budget by more than $450 billion over the next decade, Defense Secretary Leon E. Panetta is considering reductions in spending categories once thought sacrosanct, especially in medical and retirement benefits, as well as further shrinking the number of troops and reducing new weapons purchases. Mr. Panetta, a former White House budget chief, acknowledged in an interview that he faced deep political pressures as he weighed cuts to Pentagon spending, which has doubled to $700 billion a year since the terrorist attacks of Sept. 11, 2001. He said that meeting deficit-reduction targets might require another round of base closings."

Federal workers are "underpaid" by 26.3 percent, reports Eric Yoder: "The federal government reported Friday that on average, its employees are underpaid by 26.3 percent compared with similar non-federal jobs, a 'pay gap' that increased by about 2 percentage points over last year while federal salary rates were frozen. The Bureau of Labor Statistics presented the figures to the Federal Salary Council, an advisory group of federal agency officials, union representatives and outside pay experts. Under a 2010 law, federal salary schedules were frozen for 2011 and will be frozen again in 2012, though 'within-grade' raises that are largely based on longevity still are allowed, as are raises after promotions...The comparison of federal versus non-federal pay long has been a controversial topic, with other studies, using different sets of data and different methods, producing widely varying figures."

Rick Perry's Social Security plan is risky, report Michael Cooper and Mary Williams Walsh: "Gov. Rick Perry of Texas, who has long been a vocal critic of Social Security, outlined a plan last month that he said would preserve the program “for all generations of Americans.” But one part of his plan -- to let state and local government workers opt out of Social Security -- could add risk to their retirements while sapping money from the system. The proposal runs counter to therecommendations made recently by a couple of high-profile, bipartisan debt reduction commissions -- which called for shoring up Social Security, in part, by enrolling the nearly seven million state and local government workers who are not in the program...Adding better-paid state and local workers like teachers and police officers, who make up most nonparticipants today, would give the federal system’s solvency a bigger boost than might be expected."

Officials have been defending an affordable housing program with fudged numbers, reports Debbie Cenziper: "HUD told Congress that its $32 billion HOME Investment Partnerships Program was doing just fine. Those findings followed reports by The Washington Post that HUD had routinely failed to track the progress of its affordable housing projects and that hundreds of deals involving hundreds of millions of dollars showed signs of delay or appeared to be in limbo. HUD officials defended the program, saying most projects are successfully completed. But HUD’s attempt to demonstrate that success to Congress resulted in reports to lawmakers that, to judge by federal records and interviews with dozens of local housing agencies in charge of the projects, contain discrepancies and contradictions that suggest continuing problems with the program."

Awesome mishap interlude: Oban, Scotland sets off all its fireworks at once.

Energy

Keystone protestors encircled the White House yesterday,reports Tim Craig: "Several thousand protesters from across the country encircled the White House on Sunday to demand that President Obama deny a permit for a proposed oil pipeline that would stretch from Alberta to the Texas coast. Chanting 'Hey, Obama, we don’t want your pipeline drama' and 'yes, we can, stop the pipeline,' demonstrators warned the president that he won’t be able to rely on their support in the 2012 election if the TransCanada pipeline gains administration approval...The State Department had been expected to decide by Dec. 31 whether the proposed pipeline may proceed, but in recent weeks there has been speculation that the decision could be delayed as the administration weighs economic and political implications."

The White House is batting back Republicans' Solyndra subpoena, reports Darren Samuelsohn: "President Barack Obama's top lawyer urged House Republicans on Friday to take another crack at writing their subpoenas for internal White House documents on Solyndra, saying their first attempt is still way too broad. White House Counsel Kathryn Ruemmler said in a letter to GOP leaders of the Energy and Commerce Committee that the information that they've demanded via subpoena appears focused on a 'general curiosity about internal White House communications.'...House Republicans sent their subpoenas to the White House late Thursday, addressing them to bothWhite House chief of staff Bill Daley and Joe Biden’s chief of staff Bruce Reed, or their designees. The White House has until Nov. 10 to reply with information on what is in the West Wing files, although not the documents themselves."

Solar energy is getting much, much cheaper, writes Paul Krugman: "Solyndra’s failure was actually caused by technological success: the price of solar panels is dropping fast, and Solyndra couldn’t keep up with the competition. In fact, progress in solar panels has been so dramatic and sustained that, as a blog post at Scientific American put it, 'there’s now frequent talk of a 'Moore’s law' in solar energy,' with prices adjusted for inflation falling around 7 percent a year. This has already led to rapid growth in solar installations, but even more change may be just around the corner. If the downward trend continues -- and if anything it seems to be accelerating -- we’re just a few years from the point at which electricity from solar panels becomes cheaper than electricity generated by burning coal."

Wonkbook is compiled and produced with help from Dylan Matthews and Sarah Halzack.

 
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