Obama Gives Congress Some Health Care Marching Orders

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Until now, Barack Obama’s strategy on health care has been a conscious effort to avoid the mistakes of Bill and Hillary Clinton, who delivered a 1,000-plus-page bill to Congress and then watched it get dismantled. Though Obama produced a health care plan during his presidential campaign, he has signaled since his inauguration that he is pretty flexible on its details.

Not so much any more. Today, the White House released a letter from the President to Senate Finance Committee Chairman Max Baucus and Senate Health, Education, Labor and Pensions Committee Chairman Ted Kennedy. It gives us a somewhat better idea of what Obama would like to see in the legislation that those two committees will begin drafting later this month. Among its points:

• Cost control appears to be Obama’s top priority, even over expanding coverage. I want to stress that reform cannot mean focusing on expanded coverage alone. Indeed, without a serious, sustained effort to reduce the growth rate of health care costs, affordable health care coverage will remain out of reach.

• He wants a “a public health insurance option operating alongside private plans. This will give them a better range of choices, make the health care market more competitive, and keep insurance companies honest.” So he wants a government-financed plan to be part of the mix, and not just as a fallback if private insurance doesn’t do the job of providing affordable and accessible coverage. But what does that mean, exactly? Will it work like Medicare, or more like a private insurance company, having to finance its operations on what it collects in premiums? The former is what liberals say they want to see; the latter, the most the insurance industry says it will accept.

• He is now willing to consider a requirement that individuals have to buy insurance. This is a change from his campaign proposal, which had no such “individual mandate.” But there are exceptions, both to the individual mandate and to the requirement that employers provide insurance: If we do end up with a system where people are responsible for their own insurance, we need to provide a hardship waiver to exempt Americans who cannot afford it. In addition, while I believe that employers have a responsibility to support health insurance for their employees, small businesses face a number of special challenges in affording health benefits and should be exempted.

That could leave a lot of people without insurance.

Finally, there is one big question the letter doesn’t address: whether employer-provided health benefits should be taxed. Obama opposed that idea when John McCain put it forward, labor hates it, but lawmakers–including Baucus–now say it could be the only way they can find the money to pay for health care reform within 11 years, as required under the budget rules. Watch that one closely. Moving forward, it could prove to be an even bigger sticking point than the public plan.

UPDATE: Jonathan Cohn also sees more money on the table.