In search of Plan C

Sunday, March 7, 2010

THE DILEMMA posed by President Obama's health-care proposal was aptly captured by Berkshire Hathaway chief executive Warren Buffett last week during an interview on CNBC. The status quo is unacceptable, the noted investor said; the proposal is deficient. "If it was a choice today between Plan A, which is what we've got, or Plan B, what is in front of -- the Senate bill, I would vote for the Senate bill," Mr. Buffett said. "But I would much rather see a Plan C that really attacks costs." (Disclosure: Mr. Buffett serves on the board of directors of The Washington Post Co. He had no input into this editorial.)

The United States is in trouble: Its federal debt, slated to grow year by year, could sap economic growth, endangering prosperity at home and leadership abroad. Rising health costs are one of two major causes of that projected debt (the other is the aging of the population). A year ago, Mr. Obama promised health-care reform that would expand access for the uninsured while reducing costs and not worsening the federal deficit.

He says he's delivered. But the proposal that he's asked Congress to approve raises serious questions. Why? One big reason is his decision to postpone until after his presidency, even if he serves two terms, the implementation of a "Cadillac tax" on expensive health plans -- "a key bipartisan measure to contain health-care costs over time," as two senior administration officials wrote in a Post opinion piece on Friday. That postponement, budget director Peter Orszag and health policy adviser Nancy-Ann DeParle acknowledged, has been taken by "skeptics" as "further evidence of the administration's wavering fiscal resolve."

Count us among the worriers. The tax is key for two reasons. It would raise revenue needed to pay subsidies to the currently uninsured; Mr. Obama chose the politically easier option of extending the Medicare tax to unearned income of the wealthy, thus making it more difficult down the road to prevent Medicare from going bankrupt. And, by discouraging expensive plans, such a tax would be the single most effective tool to reduce the cost growth that threatens the nation's well-being.

Mr. Obama's unwillingness to fight for the tax now, even at a reduced level, raises the danger that it will never be imposed. By 2018, an expensive new entitlement will be draining funds from the Treasury; there will be no turning back on that. Mr. Obama's top aides wrote that they are confident that Congress in 2018 will be willing to let happen what it won't allow now -- or what Mr. Obama chose not to fight for now. Senior officials also argue that the delay gives employers and insurance companies a "glide path" to begin adjusting to their plans with less disruption. We think that it is not asking too much, given the dire fiscal straits, for Washington to show that it can swallow distasteful medicine while, and not after, it passes out the candy.

"We have to have something that will end the constant increase in medical costs as a percentage of GDP," Mr. Buffett said. "I would try to get a unified effort, say this is a national emergency to do something about this. We need the Republicans, we need the Democrats . . . I believe in insuring more people. But I don't believe in insuring more people till you attack the cost aspect of this."

As Mr. Obama scrambles to assemble majorities in the House and Senate, some legislators continue to explore options for more fiscal soundness, including some kind of fail-safe mechanism that would push Congress to act if projected savings do not materialize. Those who care about both access and fiscal responsibility could even now insist on a Plan C.

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