Jacob Sullum

Still, restraining the growth of Medicare, which will swallow a bigger and bigger share of the federal budget as baby boomers retire, will be necessary to avoid crushing payroll taxes and/or sudden, drastic benefit cuts. That's one possible area of bipartisan agreement, although Republicans have dimmed the prospects by demagogically accusing the Democrats of trying to take away Grandma's health care.

But note that Obama's plan to restrain spending has nothing to do with his proposals to expand coverage, which would have the opposite effect, contributing to health care inflation by increasing subsidies. By contrast, market-based reforms that seek to expand coverage by making it more affordable also help to "bend the cost curve."

Obama has made gestures of support for a couple of these ideas. His proposed excise tax on especially expensive medical benefits is a roundabout, half-hearted attempt to address the tax incentive that encourages employers to offer health coverage in lieu of higher pay, which insulates consumers from prices and retards competition. At the same time, however, Obama would contribute to the problem by requiring employers to provide insurance.

Similarly, Obama says he is open to the idea of fostering interstate competition in the health insurance market. Yet he insists it cannot be allowed to happen without federal benefit mandates that would boost premiums and undermine the benefits of such competition.

Pressing Obama to confront the contradictions in his own proposals -- between spending restraint and huge new subsidies, between amplifying and blocking price signals, between promoting choice and impairing competition -- might not yield agreement. But it could produce a little clarity.


Jacob Sullum

Jacob Sullum is a senior editor at Reason magazine and a contributing columnist on Townhall.com.
 
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