Passing a health reform bill is just a start

My new column for the FT asks: suppose a plan like the Senate finance committee's bill passes, then what?

One thing this bill or any other would not do, though, is end the controversy over US healthcare. The battle would move to new ground. The argument over access to health insurance would subside - this would be Mr Obama's lasting success - but the argument over paying for it would become even more intense. The committee's bill conforms to Mr Obama's demand that it be "deficit-neutral", but for the most part only pretends to deal with the costs...

[T]he bill, if it passes, is unfinished business with a vengeance. The implication is clear: here is one more reason why US taxes will have to rise. If Medicare recipients resist cuts in their services, as they will, higher taxes will be needed to pay for the subsidies. Reducing the subsidies is not the answer, because this will worsen the insurers' risk pool, raise health-cost inflation, and roll back gains in coverage.

In the end it should come as no surprise that providing wider access to health insurance is going to cost taxpayers money, but the advocates of this change - to repeat, a desirable and long overdue reform - are doing nothing to prepare the country for this unavoidable result.

This column by Ross Douthat is on the same page so far as financial consequences are concerned. He advocates a more limited form of universal access--to coverage with a very high, income-related deductible, or so-called catastrophic insurance. As he says, this has been proposed by Martin Feldstein and Brad DeLong, conservative and liberal respectively, so the idea has cross-party appeal.

There's certainly a lot to be said for this approach. Feldstein and DeLong differ in important ways (DeLong wants to shut down private health insurance altogether) but they agree that the taxpayer should pay for healthcare expenses above a high threshold, and that the tax deduction for employer-provided insurance (which costs more than $200 billion a year) should be abolished to pay for it. Either of their plans would strengthen the individual incentives to economise up to the threshold. I only wonder if a deductible as high as they envisage (15% of gross income; DeLong favors an income-tax increase of 5 percentage points on top of that) could be made to stick.