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Hillarycare, Anyone?

February 15, 2005

The grand debate on the United States' most serious moral and fiscal problem has begun. Congress, the White House and state governments are fixated on healthcare, on its spiraling costs (consuming one-quarter of the nation's economic growth since 2000) and on the shame of 45 million people being without health insurance.

Oh, sorry. Wrong universe. Maybe privatizing Social Security and banning gay marriage really are more important. If so, there's a lot we have to concentrate on ignoring.

As a Boston University study released last week shows, healthcare costs, which are rising far faster than inflation, are beginning to cripple the ability of companies to compete globally and threatening to bankrupt counties that care for the poor. Per-person costs in the U.S. are two times higher than those of Canada, France, Germany and Britain -- which, by the way, provide healthcare to all their citizens.

President Bush isn't without proposals for healthcare, but they're not big enough or even in the right direction. He's asking for expansions of tax breaks for individuals to buy their own healthcare and for new insurance purchasing pools for small employers, to be financed by slashing Medicaid payments to states. It's like trying to pull in Moby Dick with a fly rod. The tax breaks are too small to allow low-income families to buy a real policy. The purchasing pools would let insurers pick and choose, offering low rates only to industries with young, healthy populations.

Some of the Bush plan is guaranteed to make the situation worse, a fact that is slowly dawning on Congress. A number of Republicans are openly angry over the administration's announcement last week that the Medicare drug benefit that it sold to Congress in 2003 as costing $400 billion over a decade will instead cost at least $720 billion. The chief beneficiary of this? Pharmaceutical companies, because the benefit specifically bans the federal government from negotiating with them for lower prices.

Selling the latest free-market fix is the new secretary of Health and Human Services, Michael Leavitt, who claims that he will be able, with tax credits and private plans, to insure 12 million to 14 million low-income Americans more cost-effectively than by enrolling them in Medicaid.

That claim mystifies most healthcare economists. In recent years, Medicaid's costs have risen by 9% a year -- too much, but below the 11% average rise in employer-paid premiums. Medicaid in the last few years has been the safety net preventing a wobbling economy from creating even more millions of uninsured people.

Like any government program, Medicaid could be more efficient. There's nothing wrong with the president's goal of reducing its costs or of giving states discretion over how to make many of the cuts, to let them experiment. But failure to set a minimum level of benefits could trigger a free-for-all moving toward the bottom.

California's Legislature is trying to institute an earnest Democratic plan to cover the state's 6 million uninsured. It's doomed for now by the state's fiscal crisis. But Social Security fear-mongering won't take our minds off healthcare until 2008. If the White House declines to grapple with wider reforms, the well-trashed 1992 Hillarycare plan might end up the nostalgic favorite.

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