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    Division on the Right

    BY Ramesh Ponnuru
    11/21/2003

    No conservative can be happy about giving at least $400 billion in additional taxpayer funding to an entitlement program. Many conservatives would have been willing to go along with the expansion of Medicare if they thought that the program would simultaneously be reformed in a major way. Most conservatives outside Congress don't believe that the current Medicare bill offers nearly enough reform. Accordingly, it is being opposed by the Heritage Foundation, the Cato Institute, Citizens for a Sound Economy, the Wall Street Journal, National Review, and other conservative organizations. A few brave Republican congressmen, notably Reps. Pat Toomey of Pennsylvania and Mike Pence of Indiana, have also declared their opposition.

    There are, however, a few unelected conservatives, and many elected ones, who are either supporting the bill or are undecided about it. Some of them support it because it includes Health Savings Accounts, which (under the name of medical savings accounts, or MSAs) have long been a goal of conservatives. Others believe that the Medicare reforms included in the bill are meaningful. Most of them worry that the real-world alternative to passing the bill is passing a worse bill next year.

    Newt Gingrich is probably the most prominent conservative supporter of the bill. He had an op-ed in yesterday's Journal making his case, which he has also made in meetings with Beltway conservatives and Republican congressmen. The most vocal supporter is Dan Perrin, who runs the Archer MSA Coalition, an organization set up by former Ways and Means chairman Bill Archer to promote medical savings accounts. Even before the bill had reached its final form, Perrin was lobbying conservatives to support it if it included the accounts.

    Perrin's argument runs as follows: The government's existing health-care policies will, if not changed, over time generate increasing pressure for a governmental takeover of the field. For decades, federal tax policy has bribed people to finance their health care through their employers. That policy has caused rampant inflation. It has meant that losing your job, and sometimes just changing jobs, entailed losing your insurance. It has called into being rationing devices such as HMOs so that employers could control costs when the market was disabled from doing so. Medical savings accounts, by extending tax breaks to individuals who pay out of pocket for their own routine health-care needs, would transform the health-care marketplace. Consumers will be empowered, more people will have catastrophic coverage, a rational pricing structure will emerge, and costs will fall. Moreover, conservatives have been making the argument for the radical potential of MSAs for a decade now. We were never — Perrin continues — going to get MSAs without giving something to liberals in return. The expansion of Medicare to cover prescription drug benefits is that something. If conservatives defeat this bill, they are likely to end up with that expansion anyway. But, he says, there is no guarantee that they will be able to get MSAs in some other vehicle.

    That's the basis on which Joe Wilson, a conservative representative from South Carolina, supports the bill. It's also a large part of Gingrich's argument. Gingrich also believes in the bill's provisions for competition within Medicare. A conservative Senate staffer who has worked on health care for years — he played a part in defeating the Clintons' health plan in 1994 — tells me that Gingrich is right: "People who say [that the bill is] not reform don't understand how bad the current system is. [They don't see] the absolute insanity of our current Gosplan system."

    Grace-Marie Turner, the head of the Galen Institute and an important player in conservative health-care debates, has swung into the reluctantly pro-bill camp. On Tuesday night, she says, she stayed up late conducting her own analysis of the bill. She identified 12 important criteria by which to judge it. The result: 6 of them argued for the bill, 6 against. The savings accounts were a big plus. The "fallback" provision, which allows for the federal government to impose de facto price controls if competition does not materialize, were on the other side of the ledger. Her conclusion: "As bad as it is, there are some good things in here. If we come back next year, it will be worse."

    Conservative congressman Paul Ryan of Wisconsin says he is on the fence. "The [health accounts] are pure and that matters," he says. He is calling around to see if the pro-competition provisions will actually entice many companies to participate. He knows that conservative opponents of the bill want Congress to come back next year and pass a stripped-down bill that helps only those in real need. But he thinks that hope is unrealistic. It is more likely, he thinks, that the Republican leadership on the Hill and in the White House will be so desperate for a bill that they will consent to something worse.

    What do the antis make of these arguments? Conservatives in the anti-bill camp concede that the bill's medical savings accounts provisions are solid. But, they say, $400 billion is an awfully high price to pay for them. That was the Journal's editorial line yesterday. John Hood, among the sagest of the libertarian think tankers, says of the Gingrich-Perrin argument: "That's a very, very optimistic spin." Conservatives on the Hill say that savings accounts can be won another day, another way.

    Steve Moore, president of the Club for the Growth, had been receptive to the argument that medical savings accounts warranted support for the Medicare bill. This week, he told me that his group was going to oppose the bill: "Our members just hate this bill. They really do. . . . We can't in good conscience support the largest entitlement expansion in decades." Moore also thinks that the bill may hurt Republicans more than it helps them. The club released a poll yesterday that showed that seniors were not happy to hear they might have to pay more for drugs under the bill.

    The debate has gotten a little touchy at times. Gingrich will not win many converts by insisting that Republicans who do not share his views are "obstructionist conservatives" who will bring their party to a deserved minority status if they prevail. (It doesn't help, either, that Gingrich was an architect of a 1997 Medicare plan that was supposed to result in competition but didn't.) Perrin is similarly scathing. "Nobody's scared of Heritage. They can't produce 35 million members. . . . They're hurting the cause of reform, they're hurting themselves, they're hurting the president, they're hurting the ability to transform Medicare."

    The argument that is most likely to convince wavering conservative congressmen is the one to which Rep. Ryan alluded: that defeating the bill will result in even worse policy. Republican senator Jon Kyl of Arizona, who was on the House-Senate committee that produced the final bill, says that many of his colleagues are talking themselves into supporting it for that reason. "It's not a good bill. It's a huge lost opportunity," he says. "I don't think we'll write a better bill if we defeat this. I don't think the no-action alternative is realistic. I don't think that the alternative of helping only those who need the help is likely to occur. There's too much momentum for a universal benefit for that to be the situation. Given the close nature of the House and Senate we may have the best that we can do under the circumstances with this bill. If it appears that I'm damning with faint praise, that's true. But if you look at the alternatives, they're no better."

    The bill splits Democrats as well as Republicans, and the intra-Democratic debate has been the louder one. John Kerry, Dick Gephardt, and the rest are blasting AARP for supporting the bill. Al Hunt wrote a column on Senator Max Baucus, a Democratic supporter of the bill, that was as nasty as though it had been about a Republican. The White House has pulled off something of a coup in splitting AARP from Ted Kennedy (at least for the time being). Some conservative congressmen may decide that any bill that Kennedy opposes has to have something good in it. If enough of them do, the bill will pass — and conservatives will have to hope that Gingrich's optimistic spin proves prescient.

    by Ramesh Ponnuru on 11/21/03.