Mr. Obama on Health Care

In an interview, the president offers his ways around some potential fiscal pitfalls.

Wednesday, July 22, 2009; 8:33 PM

FOR THOSE who worry about the government's plunge into a sea of red ink -- and every American should worry -- there are at least three reasons that the health-care reform bills working their way through Congress add to the concern.

The first is that Congress might approve a costly new entitlement, guaranteeing health care for all or most Americans, without paying for it, or by paying for it in gimmicky ways that over time do not meet the cost. The second is that Congress will fail to seize this opportunity to reduce the rate of growth in health-care spending, which is a chief driver of America's slide toward bankruptcy. The third is that Congress will pay for reform with revenue from tax hikes that might have been used to reduce the fiscal deficit, making deficit reduction that much harder.

From the start, President Obama has been firm on the first concern: Any reform, he has said, must be "deficit-neutral" -- paid for through tax increases, spending reductions or a combination of the two. In a telephone interview Wednesday he offered reassurance on the second concern, as well. He told us flatly that he won't accept a bill that doesn't "bend the curve" on rising health-care costs, even if it is deficit-neutral. For controlling costs, he stressed the idea of an independent board that could make decisions about what Medicare will and won't cover without regard for politics, and he said he is confident now that Congress will support such a board. Its decisions could ripple powerfully through the health-care system.

Most economists say that the best other lever to control costs would be a tax on employer-provided health benefits, which are now provided tax-free. This would both generate revenue and provide incentives to hold down costs. Mr. Obama, who criticized the idea when Sen. John McCain (R-Ariz.) championed it during the presidential campaign, said he would be open to taxing benefits of plans whose costs continue to grow too fast -- a kind of future cap that could help restrain health-care inflation. In our view, this isn't enough, but it's a valuable step in the right direction.

As to the third concern -- using up tax hikes he'll need later -- Mr. Obama's answer was that "health-care reform is fiscal reform." Failure at health-care reform, Mr. Obama argued, would doom any hope of further deficit reduction; success will propel entitlement and tax reform. He said he would get serious about the latter "at the end of this year or early next year."

That's promising news -- as was the president's statement that the best way to get serious would be "some sort of commission or mechanism that reports back with the prospect of maybe locking in a pledge for action, post election. . . . I think everything is going to have to be on table."

Presidents have made promises of fiscal sanity before, of course. This time, Mr. Obama said, "I actually think that, sadly, decisions are going to be forced upon us." We only hope the political system can act before those outside pressures, from financial markets or foreign governments, become too damaging.

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