Save Flora And Fauna

This week's House health care repeal vote is little more than a political stunt--everyone knows the effort will die in the Senate.

But, when the day is done the only way for the Republicans to do anything with the new health law will be to work out a compromise—repeal before the 2012 elections is impossible and it isn’t very likely after the 2012 elections. Even if the Republicans sweep the White House and both houses of Congress in 2012, it is highly unlikely they will have the 60 Senate votes needed for a full repeal.

So, in the end, a compromise will be needed.

During the past week, more than one Democrat has indicated an interest in at least looking at compromise amendments to the health care bill—particularly on the individual mandate. But so far, Republicans are showing no signs of being interested in fixing what they say is a bill so bad it should only be repealed.

The House vote will take place against a backdrop of increasing debt and enormous fiscal challenge. In recent days, the national debt passed the $14 trillion mark—that is $45,300 for every person in the country!

Half of our national debt was added in just the last six years. The debt was “only” $7.6 trillion in January 2005 and $10.6 trillion the day President Obama was inaugurated just two years ago.

Last year the deficit was $1.7 trillion and the estimate is for the deficit to be $1.3 trillion this fiscal year—40% of this year’s budget is unpaid for.

The estimate is that the federal government will hit the statutory debt ceiling by the end of March or early May. Lots of newly elected conservatives want to use the required vote to increase it as their first salvo against deficit spending. The problem is that we are going to need to raise the ceiling or face default on our debt.

This debate will be a thorny one for both sides: “The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance the government's reckless fiscal policies.” That was a statement on the Senate floor by Senator Obama on a prior debt-ceiling vote (to $9 trillion) in 2006.

It is not possible to have a conversation about getting America’s fiscal house in order without talking about health care—the single largest driver of federal spending. How both sides get around to talking about health care cost containment having punted on that issue for the last two years will be interesting to watch.

And, neither side can deal with the national debt until they are willing to get serious about working together on the health care entitlements.

In a recent post, I listed a number of places both sides could compromise on improving the Affordability Act:

1. Eliminating the individual mandate and replacing it with freedom of choice with responsibility – The existing mandate gives many families the choice of paying a fine they can't afford or paying even higher and more unaffordable insurance premiums. Because the penalty doesn't apply when family premiums reach 8 percent of income, which will be the case for many, it isn't even a very effective individual mandate.

Instead, a compromise could make guarantee issue health insurance entirely voluntary. If it is purchased when the consumer is first eligible -- such as when the exchanges are first available or at the time of a new job -- the consumer would not be subjected to underwriting or preexisting condition rules. The compromise, though, should let consumers purchase and use their health insurance at any other time. But if they didn't purchase coverage when they were first eligible, any preexisting condition would be subject to a two-year waiting period.

2. Eliminating the benefit mandates in the new law and creating a free market of health insurance choices, but with a standardized baseline for ease of comparison – Eliminate all of the benefit mandates in the new law requiring individual market and exchange consumers to purchase only plans that are yet to be outlined in what will be hundreds of pages of regulations. Instead, a compromise could have only two new benefit requirements. One could be a standard plan, which would take the law's existing "silver plan" and use it as a baseline. Every insurer would have to offer this coverage on the exchange or in the individual market. But insurers could also offer consumers any other plan design, so long as they told consumers the relative actuarial value the other plans had to the standard plan. The second would be a health savings account. Every insurer would have to offer an HSA-style program and state its value relative to the standard plan. Consumers who would be eligible for premium subsidies would have any premium savings deposited in a health savings account.

3. Eliminating the "Cadillac" tax on high cost health insurance plans and introducing elements of a conservative defined contribution approach to the existing liberal defined benefit legislation – With exchange premium subsidies already based upon the value of the new law's silver plan (and they should continue to be), the compromise could limit the employer deduction for health insurance, as well as the individual income tax exemption for employer-provided health insurance, to the cost of the standard plan (currently the silver plan) in any year. Phase this limit in over a period of seven-years -- to 2018, when the "Cadillac" tax was to take effect. As a result, tax policy would continue to support comprehensive coverage but also provide real incentives for consumers to buy wisely.

4. Using the budget gains from limiting the existing health insurance tax preference to pay for such things as improving the now inadequate insurance subsidies for the middle-class, permanently fixing the Medicare physician payment issue, or for reducing the deficit. In 2008, the CBO calculated a 10-year savings of $450 billion by limiting health plan tax preferences to the 75th percentile of premiums then paid by employers.

5. Letting states have the flexibility to experiment with alternatives by enacting the proposal by Sen. Ron Wyden, D-Ore., and Sen. Scott Brown, R-Mass., that would move up to 2014 the year in which states can submit proposals to the Secretary of the Department of Health and Human Services to implement their version of health care reform. The law already allows states to petition the federal government to use the overhaul's money to enact their own plans so long as they cover as many people as the new law would have -- but not until 2017.