The Baucus Plan

Montana Senator Max Baucus, the chairman of the Senate Finance Committee, has taken it upon himself to introduce a plan for universal health care. According to Paul Krugman, the plan is very similar to the one Barack Obama campaigned on but--like the Clinton and Edwards plans--contains a mandate requiring that people obtain coverage. Krugman sees this as a very good sign:

One of the key questions about the new Democratic majority was whether Congress would try to play it safe, backing down on big ideas about reform, especially on health care. You can view the whole chorus about how we’re still a “center-right nation” as an attempt by the usual suspects to scare Democrats into scaling back their ambitions.

But now Max Baucus — Max Baucus! — is leading the charge on a health care plan that, at least at first read, is more like Hillary Clinton’s than Barack Obama’s; that is, it looks like an attempt at full universality. (The word I hear, by the way, is that Obama’s opposition to mandates was tactical politics, not conviction — so he may well be prepared to do the right thing now that the election is won.)

So this looks very good for the reformers. There’s now a reasonable chance that universal health care will be enacted next year!

The only thing I'd quibble with in this analysis is the suggestion that Obama's opposition to mandates was purely tactical, at least in the sense Krugman implies. I think Obama would agree that a mandate makes sense from a pure policy perspective. But Obama's concern about the inclusion of a mandate was twofold. First, he rightly anticipated that if he included a mandate in his plan, his Republican opponent would have made a big issue of it in the general election. I am certain that John McCain would have done exactly that if Hillary Clinton had won the nomination.

But Obama's concern with mandates wasn't purely electoral. I sense that he was also worried that including a mandate in the plan would make it easy to demagogue and harder to get through Congress. If the fate of the Clinton Plan (which was a done in by Harry & Louise and other well-funded demagoguery) taught us anything, it's that good policy only matters if it can get passed.

Including a mandate in a plan opens the door to Republican charges that people who don't buy whatever coverage the plan offers will be subjected to large fines. Obviously, a well-crafted plan will contain subsidies to help those who can't afford the coverage to purchase it, but that aspect will surely be left out of the negative ads.

Moreover, even if a plan with a mandate passes, if the subsidies and incentives aren't calibrated exactly right, people may come to resent the plan before it has a chance to really establish itself. People always prefer options to orders. It would be unfortunate for a universal health care plan to get off on the wrong foot.

My sense has always been that Obama sees this as a two stage process. First you set up a system where anyone who wants coverage can opt-in and you encourage as many uninsured as possible to do so. Then, once the plan is fully functional, you look around and see who the remaining uninsured are. You then add a mandate--if necessary--and calibrate existing subsidies and incentives to make sure the mandate doesn't create an onerous burden on anyone.

We'll see how this all plays out. I'm very encouraged that something will get done this time around, but I think there's still a lot of merit to Obama's original plan.