Will an individual mandate "play in Peoria"? Maybe...maybe not. Americans seem to believe several things that are difficult to reconcile: Most Americans seem to believe that people suffering a serious illness or injury should not be denied medical care. Most Americans also seem to believe that people with serious illnesses should not be denied insurance coverage, or charged exorbitant rates for that coverage. (On other hand, many Americans seem to tolerate people being without coverage due to their economic circumstances; perhaps people with steady jobs can't imagine themselves in economic straits, but they do fear illness.) And, of course, Americans believe in "freedom," the right to be free from intrusion from an overbearing government, including intrusion in the form of high taxes. In the past, "freedom" has tended to trump equity and security, but that might change with the current economic crisis. There is now an unusual level of anxiety about job and economic security; people may be less inclined to take their current situation, however comfortable, for granted. More Americans than usual may be thinking, "There, but for the grace of God, go I." My hunch is that Peoria can be persuaded that some restriction of individual freedom is necessary to assure a stable health-care and insurance system, one they can depend upon if they were to become ill and/or economically distressed. Most Americans, after all, enthusiastically embrace Social Security and Medicare because they hope to benefit when they become old. With proper leadership, people are able to imagine themselves in different circumstances and support policies that may benefit them tomorrow, if not today. Of course, an individual mandate is not the only way to assure access to needed care and insurance. As Senator McCain proposed, we could provide large subsidies to high-risk insurance pools, either through taxes or by requiring private insurers to build the cost into their premiums for others. I suspect, however, that an increasingly anxious American public may come to favor an individual mandate (coupled with income-related subsidies, guaranteed issue, and some sort of community rating) over the prospect of being segregated into high-risk pools if illness were to strike. A key question, of course, is whether President Obama will choose to embrace an individual mandate and use his impressive skills to lead the debate.

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The most important thing we can salvage from “health reform plans of old” is President Clinton’s goal of covering all Americans while reducing spending throughout the health care system. Just because the Clintons were not able to do it doesn’t mean it can’t be done.

With the poor state of the economy and a staggering $1.0 trillion federal budget deficit on the horizon, it would appear that the federal government can not afford to implement a program of universal health insurance coverage at this time. However, comprehensive health reforms that assure immediate health insurance coverage for all Americans would cost less and could reduce the federal deficit. Comprehensive reforms reduce costs by targeting those fundamental elements of the system that contribute to inefficiency and uncontrolled cost growth, such as consumer incentives and excessively complex administration.

In the 2008 presidential campaign, President-elect Obama proposed an incremental expansion in coverage that we estimated would cover 26.6 million of the estimated 48.9 million people who will be uninsured by 2010. His plan includes cost control initiatives such as funding for health information technology (HIT), an institute for comparative effectiveness and improved preventive care for people with chronic conditions. Even with these cost containment initiatives, the program would increase the federal deficit by $1.17 trillion over the 2010 through 2019 period, while still leaving over 20 million people uninsured.

By comparison, the Healthy Americans Act (HAA) introduced by Senators Wyden and Bennett would cover nearly all of the uninsured while actually reducing the federal deficit by $343.1 billion over ten years. This is consistent with a Congressional Budget Office analysis of the proposal showing that the program would be fully funded in the first full year of operation, with savings growing in subsequent years. If implemented together with the cost containment initiatives proposed by Obama, we estimate that total health spending in the US would be reduced by about $588.3 billion over ten years.

The HAA does this with a market-based approach that creates new incentives for consumers to enroll in more efficient health plans, and by creating a greatly simplified approach to administering coverage and financing. But the HAA is not the only comprehensive reform proposal that can achieve this result. We provide a more detailed discussion.

The Clinton Administration started with the achievable goal of covering everyone while reducing what the nation spends on health care. Despite the spectacular failure of the Clinton plan this goal remains achievable today if we adopt fundamental reforms. Building upon the crumbling foundation of today’s health care system is perhaps the most costly and least satisfying of the options available to us.

Comment updated by poster on Dec. 29.

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Charles Duell, Commissioner of the United States Patent Office, is said to have remarked in 1899: “"Everything that can be invented - has already been invented."

This turned out to be patently untrue. But if I said, in 2008, that “Every idea that could possibly be had to reform the United States health system has already been put forth in writing somewhere,” I most probably would be proven correct, even 100 years from now.

Every health reform plan by necessity is either a new assembly of well established ideas or, more commonly, a mere recycling of a plan already put forth before, but with a new paint job.

I agree with my colleagues who argue that an individual mandate to have at least a catastrophic health insurance coverage, support by public subsidies where needed, lest they become freeloading parasites on the rest of us. And the simplest way to assess how large any public subsidies should be would be to reach some consensus on what fraction individuals or households of a certain income level should be asked to spend on health care out of their own pocket. I hope the Obama Administration will start the “national conversation” on health reform with that question.

As a longtime skeptic on the virtue of employment based health insurance, I do not favor mandates on employers to provide health insurance to their employees, or even a pay-or-play mandate. Both economic theory and research supports the idea that the cost of any mandate on employers to provide employees specified fringe benefits gets substantially shifted back to workers in the form of either lower take-home pay or unemployment. I recall an Urban Institute study (I think it was) that scored the Clinton health plan of the 1990s as highly regressive on that score.

A good substitute for a mandate on employers would be to put in place a Medicare-like health plan for Americans under age 65, as Obama’s plan would do. Such a plan would be portable and life cycle. Over time, such a plan, or private plans bought through the Health Insurance Exchange by President-elect Obama, would be a good catch basin for employees squeezed out of employment based insurance.

Finally, I believe reference pricing will come to America not only for drugs, but for a wider set of health care products and services. It is a nifty way to combine social solidarity for adequate care with pure market forces for care beyond that level. In other words, it is a way to tier the health-care experience somewhat by income class, and yet to provide everyone access to adequate health care and protection from the financial consequences of illness.

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There are elements of Sen. Clinton and Sen. McCain's proposals--and former governor Mitt Romney's experiences--that should be incorporated into the upcoming health reform plan. Most significantly, Sen. Clinton's proposal to require everyone to have health insurance coverage with affordable premiums through income-related provisions would go a long way toward ensuring coverage for all Americans--and ensuring healthy people participate.

Sen. McCain called for a number of sound prescription drug reforms to control costs, including the safe re-importation of drugs, a quicker process for introducing generic drugs, and the publication of drug prices. Other useful prescription drug policies we could try are at work in other countries. Denmark for example, has prescribing guidelines and reference pricing, paying at the price of the lowest cost effective drug in a given category. The U.K., Germany, and France all have systems for evaluating the comparative effectiveness of prescription drugs, devices, and procedures.

Although Mitt Romney did not endorse Massachusetts' health reform plan during his presidential candidacy, the state's plan--developed while Romney was governor--offers the federal government many lessons. It is a mixed private-public system of coverage for all that has been remarkably successful in reaching 97 percent of the population in a very short period of time. Massachusetts now has the lowest rate of uninsured of any state. The Commonwealth Connector provides choices among health plans, with premium assistance to everyone with incomes below 300 percent of the poverty level. Information on premiums, benefits, and other plan characteristics is readily available on its website. Other features of the Massachusetts health reforms such as the expansion of the State Children's Health Insurance Program to all children in families with incomes below 300 percent of the poverty level and coverage of all poor adults under Medicaid are important components of reform. Massachusetts has demonstrated that health insurance for all is an attainable goal, and is providing a service to the nation by giving this strategy a "road test." The nation's policy leaders will be following it closely as they design a national health reform proposal.

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In a few days time I am sure this thread will be chock full of experts lavishing praise on Hillary's individual mandate proposal and McCain's proposal to tax currently tax-exempt health benefits. These two ideas are very popular among talking heads, health policy wonks, and a lot of very smart people.

But don't assume they'll play in Peoria. At think tanks and in policy shops we can discuss ideas that would clearly be troubling to hundreds of millions of Americans - and yes, this includes forcing every man, woman, and child to purchase health insurance. It also includes raising taxes on the 160 million Americans who currently get health insurance through employer-sponsored plans - even if you promise to give them some of their money back later.

Elected officials are more considerate of Main Street when they think about changes like this - they risk being chased out of office with pitchforks and torches for even talking about this kind of broad policy change. Maybe we shouldn't be so quick to assume that what makes economic sense in policy shops and think tanks is the right direction for health reform.

However, there is one thing I think we would do well to remember about Governor Romney's actions during the Massachusetts health reform debates - he vetoed the pay-or-play mandate on businesses. He said, "I am vetoing this section because it is not necessary to implement or finance health care reform" (Boston Globe, 4/13). There are other ways to pay for health reform, and to increase coverage - ways that would not hurt America's job creators.

As we move forward with health reform, we should consider Main Street's opinions, not just our own views on what "the people" want and need. President-Elect Obama did - that's why he made it a campaign issue to denounce McCain's proposal to raise taxes on those who purchase health insurance through their employers. And Massachusetts is a unique place - I would be very surprised if the rest of America would stand by quietly as Congress passed a law forcing them to purchase insurance products.

Governor Romney knew that raising taxes on employers was bad business... and that was before the economic crisis blew into full swing. Health reform advocates should consider the Americans who will be laid off to pay for new mandates on business - will reform work for them?

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The individual requirement to purchase or enroll in health insurance, once the market has been made more efficient and fair with insurance market reforms and once subsidies make it affordable, is a policy that must be part of any final package. Without a mandate, insurers will fear adverse selection and sabotage coverage reforms by bidding extremely high premiums. Also, without a mandate, higher income free riders – and yes, they exist – will continue to get away with paying less than their fair share. So mandates make markets both more efficient and more fair. In the primary season, these ideas were shared by Clinton, Romney (and Edwards, Dodd, Richardson, etc). So I don’t know who should get credit. at this point, probably Senator Max Baucus, who put the idea back on the table after the campaign ended, in his white paper released in November.

The best idea from the McCain campaign was to replace the current income and payroll tax exclusion (of employer premium payments) with a tax credit. Of course, the campaign proposal in total was flawed, making the credit flat and not sliding scale/more generous for lower income, but even more deeply flawed by doing nothing to reform the individual insurance market into which millions would have been sent. But wisely changing the tax treatment of employer sponsored health insurance is not only more efficient and more fair (since it currently subsidizes Bill Gates but not the janitors who cart off our discarded papers every evening), Obama will need it for revenue, again, as Senator Baucus already realizes.

As for CBO, it is worth remembering that by custom and tradition it analyzes each single proposal in isolation. They really have no choice, if they are to stick to their mandate of evaluating policy choices for Congressional consideration, not making policy choices for Congress. BUT, this means the really interesting stuff, like, what would a combination of interoperable HIT, brilliant payment reforms, and strategically chosen comparative effectiveness information actually save the US health care system in lives and dollars over 10 years, is not in these reports. That will only come when specific legislation that has a decent chance of passage is constructed, as we sincerely hope and believe it will be in the next 6-18 months. The other point I would make about the CBO reports is that there is no silver bullet, otherwise the report on “budget options” would not run to 220 pages. It is going to take determined use of every arrow in our policy quiver to tame our health care cost growth beast and increase value while improving the quality and efficiency of patient care. We can do it, but it will take leadership: political, economic, and health system stakeholder as well. Thankfully, leadership on all fronts does appear to be emerging.

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What are the prospects for health reform? That depends on how flexible the new President turns out to be. Although Barack Obama was highly critical of John McCain’s health plan during the election, he actually needs key elements of the McCain plan. He also needs key elements of Mitt Romney’s health reform, about which he has already had complimentary things to say. He can also borrow an idea or two from Hillary Clinton. Here is how it might work.

What Obama Needs from Clinton: An Individual Mandate. Ultimately, the decision to insure is an individual decision. Obama’s mandate for children falls short. Clinton’s idea of freeing everyone to insure or pay a fine is far more consistent.

What Obama Needs from McCain: A Consistent Subsidy. The greatest weakness in Obama’s approach is two completely unrelated subsidy systems: the current tax exclusion subsidy for people who continue to get coverage through an employer and an income-based subsidy for people who buy coverage in the parallel market. Because the two subsidy systems are not integrated, they can cause unstable movement back and forth ― depending on their relative generosity. What McCain offers is a simple, seamless subsidy ― available to all people and all forms of insurance: a lump sum, refundable tax credit of $2,500 (individual) or $5,000 (family).

What Obama Needs from Romney: A Consistent Mandate. Another weakness in Obama’s approach is the idea of imposing a pay-or-play mandate on employees, but not on people who are not employees. As with the unintegrated subsidy, this distorts labor market choices. It also penalizes and discourages employment. Romney’s approach is better: treat everyone the same, whether employee, independent contractor or out of the labor market altogether. If you’re uninsured in Massachusetts, you pay a fine. Period.

What Obama Needs from McCain and Romney: Funding Sources. The most attractive feature of the Romney plan was that it (initially) cut the number of uninsured in half without new spending. Reasonable estimates suggest that McCain’s (originally revenue neutral) plan would also cut the number of uninsured in half. Romney relied on redistributing “free care” (DISPRO) funds. McCain would redistribute existing tax subsidies. By contrast, Barack Obama would leave the current tax and spending subsidies largely in place, relying instead on the repeal of “tax cuts for the rich.” Yet those tax breaks fall short of the resources he will need by at least a factor of three, and they are scheduled for automatic expiration anyway. Plus, even that revenue source is wilting. Obama economic advisors have assured Wall Street that the new dividends and capital gains tax rates will go no higher than 20%.

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