Spread the pain of paying for healthcare reform

Lawmakers have pushed their efforts to overhaul the U.S. healthcare system into a higher gear, with a Senate panel approving one Democratic proposal and a House committee starting to debate another. The 1,018-page House bill (HR 3200), which the Democratic chairmen of three committees introduced Tuesday, is a decidedly mixed bag, reflecting the difficulty of making large-scale repairs while preserving the healthcare options people have today. The measure would make some important changes in the way healthcare is delivered and financed, yet it falls short of some goals and overshoots others.

The bill seeks to slow the increase in costs, but it doesn't move as aggressively as it should to reduce the incentives for wasteful, inefficient or unnecessary procedures. It would promote primary care, preventive medicine and other ways to improve quality, but puts little pressure on providers to use best practices. And it would extend coverage to millions of the uninsured but would pay for that expansion in too narrow a way. Part would be covered by a hefty tax on employers that don't provide insurance, a burden that would fall hardest on businesses with thin profits and low-wage workers. And part would be borne just by the wealthiest 2 million Americans, even though the benefits of the program would be spread broadly.

The high cost of covering the millions of Americans who can't afford insurance -- $1 trillion or more over 10 years -- may be the biggest obstacle to comprehensive healthcare reform, especially when the federal budget deficit is at an all-time high. Yet if the healthcare system continues on its present course, its ever-rising cost will eventually drag down the economy. That's why it's worth making changes that slow the increase in spending down the road.

Ideally, lawmakers would finance those changes in ways that would increase consumers' sensitivity to healthcare costs without eliminating jobs and slowing economic growth. The House bill fails that test for a couple of reasons: It suggests to most Americans that they're getting a better healthcare system for free, and it makes one small group pay for improvements that benefit everyone. Taxes on the wealthy and businesses can help, but the middle class should contribute too, not only because it's the right thing to do but also to make the funding less vulnerable to economic downturns.

For starters, lawmakers should consider rolling back the tax exemption for employee healthcare benefits. The exemption is worth $3.5 trillion over 10 years, so even a modest reduction could raise a significant amount. Trimming the exemption would also discourage gold-plated insurance plans that promote excessive consumption of healthcare services. Such a move would face stiff resistance from unions and President Obama, who promised not to raise taxes on the middle class. But it would send the valuable message that everyone pays for this reform because everyone benefits.