Bottom Line

We’ve heard Glenn Beck’s rants on Fox and read Sarah Palin’s posts on Facebook. We’ve watched LaRouche supporters disrupt town hall meetings and seen teabaggers descend upon Washington. We’ve talked about immigrants, abortion, and death panels--and listened to a woman named Betsy McCaughey explain why reform will mean pulling the plug on grandma.   

But, at the end of the day, the central challenge in crafting health care reform remains exactly what it’s always been: Coming up with the money to pay for it. And this week, just maybe, we’ll learn whether the Democrats and their allies can do it.

This week is crucial because the Senate Finance Committee will be debating how to write reform legislation. Finance is one of five committees with a say over health care. The other four--three in the House, one in the Senate--have already passed their bills. But most observers consider Finance the most crucial committee politically. Thanks partly to the filibuster, the Senate is where reform bills will have the harder time passing. And unlike the Health, Education, Labor, and Pensions Committee--the other Senate panel with a piece of reform legislation--Finance has actual jurisdiction over methods of raising money.

That helps explain why Finance has taken so long. Health care reform is about making sure everybody has health insurance--and that the health insurance everybody has actually insures. Financially speaking, that requires the government to make two very large commitments. It must expand Medicaid, the federal-state program for the poor, so that it covers everybody under a certain income threshold (133 percent of the poverty line) and not just narrow categories like single women with children. And it must provide subsidies to higher-income people who struggle to pay the price of insurance.

It’s that second part, really, where the things get dicey--because those subsidies aren’t cheap for the government to finance. We just learned this week that the average health insurance policy for a family of four will cost more than $13,000 annually this year. For a family making $35,000 or even $55,000 that’s an awful lot of money--particularly if the family is still expected to shoulder large out-of-pocket costs in the forms of deductibles, co-payments, and non-covered services. That’s why the reform plans that President Obama and his allies originally proposed offered financial assistance to people making up to four times the poverty line--$88,000 a year for a family of four, with the subsidies phasing out with income. (A family making $85,000 would get almost nothing; a family making $35,000 would get a ton of help.) One reason to offer so much money was that these original plans set a reasonably high standard: Insurance plans couldn’t leave people saddled with huge out-of-pocket costs.  

But providing such comprehensive coverage makes the insurance itself a bit more expensive, at least for the first 10 years before other system reforms kick in (ideally, generating enough savings to offset the cost of the subsidies). The best estimates are that, at a very bare minimum, it takes close to $1 trillion over 10 years. And while a lot of that money can come from savings in other programs, there has to be some new revenue, as well. Congress, in other words, has to pass some kind of tax.