Obama’s and Clinton’s Health-Care Plans

NOTE: For an update on Krugman’s column of February 4, 2008, see this post.

Paul Krugman, a New York Times columnist whose work I usually respect, seems to have an Obama bee in his bonnet. In two recent columns, he has harshly criticized Obama’s views on health care and social security. Both columns bear the stamp of Clinton partisanship, so much so that Krugman appears to have violated the Times’ rule against endorsing candidates.

Today the Clinton campaign took up Krugman’s cudgel. In a widely reported move, it criticized Obama for claiming that his health-care plan would cover everyone.

Unfortunately, Krugman is not as smart as Obama. Krugman and the Clinton campaign are missing the point. It’s true that Obama’s plan won’t cover people who don’t want health insurance. But that’s precisely why it’s politically wiser and economically fairer than Clinton’s plan.

The main difference between the two plans is what’s called a “mandate.” Clinton’s plan has one. It would cover everyone by forcing everyone to buy health insurance, whether wanted or not.

Obama’s plan has no mandate and forces no one to buy insurance. So Obama’s plan wouldn’t cover everyone. It would leave uncovered two groups of people: (1) those who don’t think they can afford insurance and (2) those who don’t think they need it. Obama would induce those in group (1) to buy insurance by making it affordable, mostly by repealing the Bush tax cuts for the wealthy and putting the money into health-insurance subsidies.

Clinton’s plan would try to cover both groups by forcing them to buy insurance. For those who don’t think they can afford insurance, it has to address the very same problem as Obama’s: making insurance affordable. But Clinton waffles on the best way of doing so, namely, repealing Bush’s unfair tax cuts. Clinton still wants to have it both ways; she wants to be perceived as a woman of the people and a tax cutter. As for people who think they’ll stay healthy and don’t want insurance, forcing them to buy it will just create political opposition to the plan and allow opponents to demagogue it to death once again.

Krugman and Clinton castigate the Obama plan for failing to “cover everyone.” The goal they say, is qualifying for that magic label “universal.”

But that’s not the goal at all. The goal is getting affordable health care for all those who want it, after several decades of trying. For ideological reasons, that simple, common-sense goal always encounters determined political opposition. Already Hillary has failed to reach that goal once—at a time when Democrats controlled both the White House and Congress.

Hillary Clinton’s 1993 proposal failed because she failed Politics 101. Her proposal neglected two important constituencies. It imposed a mandate for health insurance on small businesses, increasing their costs without providing means to pay them. It also ignored people who liked their current insurance and didn’t want to change it. For someone supposed above all to be a good politician—these were gross errors of judgment.

Now she’s made similar errors of judgment again. Her current proposal solves the second problem by letting people keep insurance they like. But it doesn’t solve the first. Instead of imposing a mandate on small business, it imposes a mandate on every employee and every citizen. You can bet that conservatives and lobbyists for the insurance and drug industries will make that mandate a rallying cry for opposition. Forcing people who don’t want insurance to buy it will make it harder politically to get it for those who do.

Rather than imposing mandates on people who don’t want insurance, Obama decided to tackle the pressing problem of millions of people who want it but can’t get it. That’s a reasonable political tradeoff. It makes Obama’s proposal much more palatable and resistant to demagoguery. Given our long history of entrenched political opposition to any effort to improve health care, Obama’s approach is more sensible and more likely to succeed.

Krugman also insists that Clinton’s plan makes more economic sense. He says that forcing young, healthy workers to buy insurance they don’t think they need will subsidize insurance for others, making “universal coverage” affordable.

But that analysis is hopelessly simplistic. Who are those young, healthy workers likely to be? White-collar and other highly paid workers won’t refuse to buy insurance; its cost amounts to a small portion of their pay. Nor will older workers and workers with families, who need insurance more and know it. So the people most likely to “self-insure” are young, single blue-collar workers (including the poor and near-poor), for whom the cost of insurance is a substantial part of their earnings.

Forcing these people to buy insurance they don’t want will have two adverse effects. Politically, it will drive young, single, healthy workers away from the Democratic party. It will put the so-called “Reagan Democrats” back in the arms of the Republicans, precisely when Democrats need them to consolidate their status as a majority party. For someone supposedly astute at politics, that’s a downright stupid thing to do.

Economically, Clinton’s mandate will turn the health-care system into a regressive tax. Imposing extra costs on young, single, healthy, low-paid workers in order to finance others’ health care will put part of the burden on those who can least afford it. That’s exactly the opposite of what European systems do. They are financed by progressive taxes on consumption (with exemptions for food and other necessities).

Obama’s plan is therefore smarter politically and fairer economically. It avoids political opposition from people who don’t want government telling them what to do. And it avoids the regressiveness of having healthy blue-collar workers pay for the care of sick people who are more highly paid.

Obama’s plan addresses the crying need of the moment: getting health care for people who want it but can’t get it or can’t afford it. Eventually, we should bring others into the system, too. We all pay for it when young people think they’ll be healthy but miscalculate and have no insurance. But we can handle that politically sensitive and much less pressing problem when—and if—we solve the pressing problem of insuring everyone who wants insurance.

Putting first things first may seem like common sense, but Clinton’s plan doesn’t do that. Obama’s ability to understand both politics and economics at this level is one of many reasons why his candidacy is more appealing that Clinton’s. His practical and politically sensitive approach will get things done while Clinton’s blind “triangulation” will fail, as it has in the past.

In health care as in so much else, Obama is smarter than both Clinton and Krugman. Brains matter, and that’s why Obama will win. The public wants good and workable policy, not clever campaign ads, more political misjudgments, and more Bush-style propaganda.

UPDATES

It is satisfying to have events confirm your analysis. On April 19, 2008, the Wall Street Journal reported [subscription required] that John McCain already had started pounding Hillary for her health-care mandates, although the general-election campaign had not even begun. For an earlier update to this post, discussing Krugman’s column of Friday, December 7, see “Krugman Redux.”