By Steven Pearlstein
Wednesday, September 19, 2007; D01

Hillary Clinton may or may not be the best candidate for president. But having read through her three thoughtful and meaty speeches on health-care reform, I can tell you one thing: She'd certainly make the best secretary of health.

Her reform agenda isn't perfect, but it sure beats anything else out there from candidates of either party in terms of addressing all the important issues and coming up with a policy framework that is internally consistent and realistic in both a financial sense and a political one.

She is specific enough so that voters can have a clear picture of how things would work without getting caught up in the kind of details that would provide special-interest groups the ammunition to kill the plan in its infancy.

While many other candidates make a good show of throwing around buzzwords like preventive care, disease management, automated records and paying for quality, Sen. Clinton talks about these in a way that makes clear she has read the literature, has talked with people who have run the successful programs and understands how profoundly these could change the way medicine is practiced and financed.

The knee-jerk response from Republicans was to smear her proposal as "socialized medicine," a fresh reminder of how illiterate, out-of-touch and irrelevant the Republicans have become on the most important domestic issue to voters. It was particularly odd coming from Mitt Romney, who should have seen in the Clinton proposal many of the same features found in the landmark Massachusetts reform plan that he helped to negotiate as governor only two years ago.

Much has already been made of the fact that the latest Clinton health plan incorporates the lessons learned from the failure to enact a more ambitious effort in 1993. But in several instances, the attempt to marry good policy with good politics falls flat.

Clinton is surely right that, in moving to universal coverage within an employer-based system, it is necessary to require all companies to participate financially, either by offering health insurance to their workers or paying into a pot of money to subsidize low-wage workers. And Clinton knows from experience that small business is likely to be bitterly opposed.

But her solution -- to tempt businesses with fewer than 15 employees to offer insurance by offering some tax credits -- is likely to be expensive and distort competition. More to the point, it is unnecessary.

After all, she is already proposing tax credits to low-wage workers to help them buy insurance. And she has a solid plan for reforming the insurance markets so that individuals and small businesses can get the same premiums as large corporations. If, after all that, a business of any size finds it cannot afford to make a modest contribution toward a basic health-insurance policy for its workers, just as it pays for Social Security taxes and unemployment insurance and a safe working environment, then perhaps it is not a viable business in a rich industrial economy.

At the other end of the spectrum are those businesses that provide health benefits to their workers that are so generous that they encourage them to consume too much health care. And to her credit, Clinton -- alone among the Democratic candidates -- has the courage to embrace the advice of nearly every health economist and propose a cap on how much of that benefit would be tax-free.

Too bad, then, that Clinton bowed to the pressure from the major industrial unions and now proposes to apply this cap to only people with incomes above $250,000. That's bad tax policy and bad health policy. It's also a lousy way to address the problem of rising income inequality, having $25,000-a-year retail workers subsidize the health benefits of $60,000-a-year auto workers.

My biggest criticism of Clinton Health Plan 2.0, however, isn't with any of its particular features, but with the way Clinton has presented it as the health-care equivalent of a free lunch: universal coverage, more choices, and better quality at a lower cost for everyone except the very rich. Who (other than the rich and selfish) could be against that?

In truth, there are lots of trade-offs implicit in version 2.0 of the Clinton Health Plan, and it would be better for the cause of health reform, and for Clinton's candidacy, if she began to educate the public about them.

Everyone agrees that automated health records are a great idea and will save a ton of money. But someone (the government) has to set the standards and require that doctors, hospitals, and labs invest the upfront money for software and equipment.

And while everyone can rally around paying for performance, shouldn't someone point out that, in practice, that will mean some providers will be paid less while others may be forced out of business?

Mandating that everyone have basic and affordable insurance is the easy part. Less easy is acknowledging that an affordable policy may not cover everything you'd like.

Certainly nobody is opposed to using objective medical evidence to manage the care given by various providers to patients with chronic disease or patients at the end of life. But what that means in practice is that a trained health professional hired by an insurance company is going to have to tell other doctors how to practice medicine and tell patients what drugs and tests and surgical procedures won't be covered by insurance. If that sounds a lot like managed care and rationing, it's only because it is.

The rap on Hillary Clinton -- the reason even Democrats haven't warmed to her -- is that everything she does seems driven by political calculation. Now with a well-crafted proposal on a signature issue, Clinton has the opportunity to prove that she can also be the leader who is willing to tell voters the hard truths they have suspected all along but don't want to confront.

Steven Pearlstein will host a Web discussion at 11 a.m. today at washingtonpost.com. He can be reached atpearlsteins@washpost.com.