Worrying about long term deficits with official unemployment over 9 percent and treasury bonds rates at near-record lows is inherently an act of madness. It is the antithesis of both progressive policy and basic logic.  Left to their own devices, liberals would relegate reducing the deficit to a very low priority in this economic climate. Of course when you’re a billionaire like Pete Peterson and you’re willing to spend millions promoting deficit hysteria, your can convince “liberals”  to play into your deficit fetish at even the most illogical of times.  Hence the Peter G. Peterson Foundations 2011 Fiscal Summit.

I’ve berated all the so called “progressive” groups that took part in the Peter G. Peterson Foundation 2011 Fiscal Summit for including health care reform in their deficit reduction proposals, yet totally abandoning the traditional progressive solution: a single payer health care system.  If the United States simply adopted a system that was roughly as efficient as France, Finland, Norway, Australia, Denmark, England, or New Zealand, we wouldn’t have a deficit.  Yet the clear and demostrable global precedent set by these nations somehow managed to escape inclusion by these leading liberal economic lights.

The Roosevelt Institute’s deficit plan, however, deserves special attention.  Of the three plans, it is particularly bad on the issue of health care.   The organization that prides itself on “carrying forward the legacy of Franklin and Eleanor Roosevelt” apparently thinks that mission is best fulfilled by mainstreaming corporate-friendly right-wing policy recommendations.

Lucky for Peterson, the Roosevelt Institute is willing to put the FDR legacy into the service of his and other lobbyist-friendly objectives.  Let’s look at their proposal (PDF).

Many of the Roosevelt Institute ideas are either slightly harmful right-wing policies and/or will do effectively nothing to control health care costs:

[W]e propose the repeal of the monopoly exemption for health insurance companies.

The CBO looked at this and concluded any effect at cost from this policy would negligible.

[W]e propose allowing states to negotiate the sale of insurance across state lines. The left has argued that selling insurance across state lines would result in a regulatory race to the bottom, and the right has complained that insurers need economies of scale to sufficiently pool risk and lower premiums. We incorporate both concerns by giving authority to the states to create common markets for their health insurance through state partnerships.

This was the official position of the Republican Party during the health care debate, and the insurance industry put a lot of big lobbying money behind it.  While this could potentially cause a regulatory race to the bottom, in terms of the deficit it will do nothing to reduce overall health care costs.  This “economy of scale” argument is nonsense, and has never been substantiated by any real-world data. Small states don’t inherently have higher private insurance costs and if the economy of scale was important, you would expect large states with populations comparable to midsize countries like California, Texas and Florida to have much lower insurance premiums.  They don’t.

[W]e will require all doctors, nursing facilities, pharmaceutical companies, and hospitals to post prices for their procedures both in a central location in their offices and on a government-run website.

A thoughtful and consumer-friendly idea, but one that will have little impact on health care costs for many reasons. For example the costs are dependent on what your individual insurance company has negotiated with the hospital and the amount they pay under your policy, so publicly posted prices will mean next to nothing to most individuals. When you are being rushed to the hospital in the midst of a heart attack, you really don’t have the time to devote to online price bargain shopping.

Limit awards for medical malpractice torts:  The causes of medical cost inflation are varied, and Millennials do not believe that a single reform will be the silver bullet for the problems of the medical system. Nevertheless, tort reform will grant considerably more budgetary certainty for doctors and control some cost growth among medical professionals.

Even in its most extreme form, capping damages would produce roughly half a percent reduction in health care cost according to the CBO. It is truly disappointing that the Roosevelt Institute totally adopted this hard-right conservative plan, especially because there are other more progressive ways to deal with issue — to the extent that it even is an issue, and not just a smokescreen for corporate desire to escape any form of legal liability whatsoever.

If these systemic reforms fail to bring non-Medicare government health insurance costs under control by 2022, Roosevelt creates a robust, national public health insurance plan to compete with the private market.

To add insult to injury, while the Roosvelt Institute’s plan calls for immediately implementing bad right-wing ideas, the most progressive and effective element of their health care plan is left out for the next decade — and possibly forever. A truly robust public option open to everyone could reduce the deficit by hundreds of billion while dramatically reducing insurance costs for regular people. After acknowledging that this could play a huge role in fixing the deficit issue they claim is so urgent, they take the ridiculous position that we should first let the problem of high medical costs get worse for another 11 years. It is a massive and unjustifiable gift to the private insurance companies.

But most disturbing is their plan to eliminate the tax subsidy for insurance without explaining how it will effect exchange subsidies or be indexed:

Roosevelt recommends the replacement of the tax subsidy for employer-provided plans, with a tax credit of $2300 per adult, and $1700 per child, with a cap of $8,000 per family. The tax credit will be refundable up to $4,000. Removing the employer health insurance exclusion will enhance mobility—by allowing Americans to take their insurance with them from job to job—and wages—by incenting employers to offer workers better pay rather than better coverage as they age. Americans will be able to buy health insurance on the exchanges created by the Affordable Care Act, using their tax credit to subsidize this purchase and to help pay out-of-pocket expenses.

If this rebate isn’t indexed to medical inflation, it would slowly cover less and less care. The result would be that government “saves money” by transferring more and more of the burden of paying for rising health care costs onto middle class families.

While I hope Roosevelt Institute does understand that such a rebate would indeed need to be indexed, they failing to lay out if and how they plan to does that. I’m forced to assume the worst about the plan however because they claim the rebate is a major way they save the government money on health care. The only way the rebate would save the government large amounts of money is if they aren’t indexed probably.

Conclusion: Mission Accomplished for Pete Peterson

The health care section of the Roosevelt Institute’s plan also includes some traditional progressive policy ideas like funding cost effectiveness research, bundling Medicare payments and direct medicare drug price negotiation.  But the overall package is practically center-right.  It accepts the notion that reducing health care costs can best be achieved by encouraging individual personal shopping in the private market, which —  given the complexity involved — is almost impossible for most people to do effectively. It’s a plan you would expect to come out of Republican Senator Olympia Snowe’s office rather than a “liberal” think tank.

It doesn’t mention single payer at all, and delays for a decade a tip of the hat to the compromise of a public option. As a result, the Roosevelt Institute’s plan falls dramatically short of the deficit reduction potential that would merely be the byproduct of truly progressive health care reform.

Of course that is probably exactly what the Peterson Foundation hoped for when he got the Roosevelt Institute to agree to play the part of “liberals” in his latest deficit-hysteria extravaganza. The center-right nature of their plan helps move the Overton window of the debate on both health care and the deficit dramatically to the right. By choosing groups that would exclude the most obvious health care cost-cutting option available, the one that has proven an unqualified success at efficiently delivering health care coverage to the industrialized world, Peterson never risked accidentally proving that the progressive goal of “Medicare for all” also just happens to be the best deficit reduction plan available. And of course by submitting any plan at all, these organizations allow Peterson to pretend “even liberals” embrace the decidedly non-Keyesian notion that now is the right time to worry about long-term deficits.

Overall, it appears Peterson spent his money well.