Medicare Post-Mortem Part I -- The Process

A commentor noted recently that I haven't delivered on the promise I made a couple weeks ago of some more detailed posts on economic policy, wondering whether it was just a teaser to keep people reading. Frankly, I don't think I have enough readers to get away with teasing them. It was really more of a way to remind myself and give myself a push to expand on some of the ideas that plainly need a lot more thought and research, such as the Grand
Bargain.
>Instead, I've been writing mostly about the minutiae of congressional politics. That's partly because I know something about it, but more because what's happened over the last few weeks, particularly on the Medicare bill, is an incredibly big deal, not only for its political implications such as its effect on Bush's reelection or the future of congressional government, but also for the future of social insurance and economic security. I've written about it a number of times, and I'll let it go, after a two-part post-mortem, with suggestions for the future.
The Democratic recriminations and accusations are well represented by E.J.
Dionne's typically superb column and David von Drehle's bird's-eye view of the circular firing squad (is that a mixed metaphor? Probably not.) The basic conclusion is that theRepublicans are disciplined, and the Democrats are not. True enough, as far as it goes. Breaux and Baucus should never have let themselves be used as bipartisan cover while their own party's elected leader was excluded, Kennedy – in retrospect -- shouldn't have let a bill get out of the Senate, Daschle should have knocked some heads together. (That's the von Drehle story in a nutshell.)

But there's a little more to it than that. The assumption seems to be that the Democrats underestimated the ideological cohesion of the Republicans. I don't think that's quite what it was. My view is that if the Democrats made one tactical mistake, it was in thinking they were dealing with ideological cohesion, when in fact they were dealing with something far more elusive and insidious: A party that derives its discipline and power from the fact that most of its members can be persuaded to sell out what they claim are their "convictions" at a moment's notice. (See Robert Novak for the very gory details.)

Take Senator Kennedy's judgment, for example. Most of the major press analysis concludes that Kennedy was naive in thinking that, by supporting a moderate bill in the Senate, he would increase the likelihood that a moderate bill would come back from conference. I don't know what's in Ted Kennedy's head, but I doubt he's that naive. (He's only been in the Senate since 1962!) I think he calculated that there were three possibilities: (a) the conference report might be acceptable, or (b), more likely, the Republicans would not be able to resolve their own differences or (c) the final bill would be so far to the right that he could lead a successful fight against it, hopefully without a filibuster. Any of the three options would at least do no harm, and, in the case of the latter two, the Democrats could not be blamed for blocking prescription drug coverage since they had supported a Senate bill.

In fact, Kennedy war right, and option (b) is what happend. The House Republicans were not able to resolve their own differences. The bill was defeated in the House. Only the astonishing move of the three-hour vote undid the defeat. And then it became clear that the Republicans' one and only objective was to push a bill through a pinhole that had the AARP and a few Democrats on one side, and Ted Kennedy on the other. And they managed to do it. Which is a tribute to something -- hard work, a mindless devotion to victory -- anything other than ideological cohesion.

With that being the only goal, it's unlikely that the resulting policy would be any good. And it's not. The drug coverage is more like a modest discount plan than real insurance that protects people from catastrophic costs. Nothing about the bill seems predictable: premiums, deductibles and coverage seems likely to vary based on the decisions of the private insurers participating in the program. The Health Savings Accounts not only create yet another tax-free vehicle for the well-off, they have the potential to destroy the private health insurance system by luring healthy people into very high-deductible policies. The private competition for Medicare, while not inherently offensive to me, requires massive subsidies to the private sector.

So far, the best readable analysis of the bill is still that of Brookings Institution economist Henry Aaron.

I'm confident that, for all the obvious reasons, there will be a backlash.
But I'm not ready to look forward to the backlash. First, unless Democrats are very aggressive about it, the
backlash may not come until 2006, when seniors find out that they're
premiums are not really $35, and that if they have above-average prescription costs of $4500, they still have to pay more than 70% of that amount. Or the backlash may even be postponed until the later years, when the premiums and deductibles skyrocket. Second, the usual result of a backlash is that politicians scurry away for another decade or so, as they did after the Catastrophic Care debacle of 1988 and the rejection of the Clinton plan in 1994. Third, the backlash may be against the better parts of the bill, such as the means-testing of Part B premiums, and not the worst. Fourth, this kind of backlash sometimes just feeds the perception that government can't do anything right, which is the Republican line, after all. So by creating horrible, flawed expensive government programs they feed the belief that government is horrible and expensive, which is exactly the problem they told you about!

But none of the analyses answer the question, what should opponents have done as the Medicare fraud rolled near? That's a hard one to answer. Yes, I'm furious at Baucus and Breaux. They shouldn't have supported the bill, but that goes for Wyden, Feinstein, and several others as well. And they definitely should not have allowed the Republicans to include them while excluding the other Democrats who had been named to the Finance Committee. Even the most off-the-reservation Republican, like Lincoln Chafee of Rhode Island, would walk out the door if a Democrat said to him, "we'll include you in our meetings, but we're keeping Frist out." But at the same time, I have to give them a certain amount of credit, along with Kenneday: they were elected to try to make policy and find ways to get things done. I can fault them for their judgment on the final result, but not for entering the discussion in the first place.

I do believe the Republican Party will ultimately pay a very high and ugly price, not just for Medicare, but for selling themselves out, for refusing to actually take a stand and negotiate in good faith from that position. Such discipline, in pursuit of nothing, has a cost, and I don't want to see Democrats pay the same cost by becoming that kind of party.

In the second part of this post-mortem, I'll take up the question of the opponent's message, and what it means for other economic and social policies.