Because the program would begin taking in premiums immediately
but would not start paying benefits until 2016, congressional budget
analysts have forecast that it would generate a nearly $60 billion
surplus over the next 10 years, cash that would help the larger
measure's balance on paper.

Not long ago I filed this under "Department of Uh-Oh."  In the longer run it is very bad for the budget and it is simply an accounting trick.  It's a sign that fiscal responsibility will never come to U.S. health care.  And yes there is a long-term care provision in the Senate bill.  Although I have not read through its current incarnation of 2000-some pages, I am willing to bet we are getting the cost back-loaded version of the idea.

A lot of people think you have no right to criticize a bill unless you propose a better bill.  I don't agree (if the aforementioned bill is bad on net), but in any case I will give this a try.  These are not my first best reforms or even my second best reforms.  They're my "attempt to work with some of the same moving pieces which are currently on the table" set of reforms.  I would trade away the Obama bill for these in a heart beat.  Keep in mind people, with a "no insurance" penalty of only $750, the current bill isn't going to work (and that's ignoring the massive implicit marginal tax rates on many individuals and families, or the "crowding out" of current low-reimbursement-rate Medicaid patients), so we do need to look for alternatives.

Here goes:

1. Construct a path for federalizing Medicaid and put it on a sounder financial footing; call that the "second stimulus" while you're at it.  It's better and more incentive-compatible than bailing out state governments directly and the program never should have been done at the state level in the first place.

2. Take some of the money spent on subsidizing the mandate and put it in Medicaid, to produce a greater net increase in Medicaid than the current bill will do, while still saving money on net.  Do you people like the idea of a public plan?  We already have one! 

2b. Make any "Medicare to Medicaid" $$ trade-offs you can, while recognizing this may end up being zero for political reasons.

3. Boost subsidies to medical R&D by more than the Obama plan will do.  Establish lucrative prizes for major breakthroughs and if need be consider patent auctions to liberate beneficial ideas from P > MC.

4. Make an all-out attempt to limit deaths by hospital infection and the simple failure of doctors to wash their hands and perform other medically obvious procedures.

5. Make an all-out attempt, working with state and local governments (recall, since the Feds are picking up the Medicaid tab they have temporary leverage here), to ease the spread of low-cost, walk-in health care clinics, run on a WalMart sort of basis.  Stepping into the realm of the less feasible, weaken medical licensing and greatly expand the roles of nurses, paramedics, and pharmacists.

6. Make an all-out attempt, comparable to the moon landing effort if need be, to introduce price transparency for medical services.  This can be done.

7. Preserve current HSAs.  The Obama plan will tank them, yet HSAs, while sometimes overrated, do boost spending discipline.  They also keep open some path of getting to the Singapore system in the future.

8. Invest more in pandemic preparation.  By now it should be obvious how critical this is.  It's fine to say "Obama is already working on this issue" but the fiscal constraint apparently binds and at the margin this should get more attention than jerry rigging all the subsidies and mandates and the like.

9. Establish the principle that future extensions of coverage, as done through government, will be for catastrophic care only.

10. Enforce current laws against fraudulent rescission.  If these cases are so clear cut and so obviously in the wrong, let's act on it.  We can strengthen the legal penalties if need be.

11. Realize that you cannot tack "universal coverage" (which by the way it isn't) onto the current sprawling mess of a system, so look for all other means of saving lives in other, more cost-effective ways.  If you wish, as a kind of default position, opt for universal coverage if the elderly agree to give up Medicare, moving us to a version of the Swiss system and a truly unified method of coverage.  But don't bet on that ever happening.

Separate issues:

12. If you can tax health insurance benefits and cut a Pareto-improving deal overall, fine, but I am considering this to be too politically utopian and it's not clear what the rest of that deal looks like.  The original tax break makes no economic sense but you don't want to end up with a big tax increase and a lot more people on the public books with little in return.

13. If the current bill were voted down, you can imagine some version of the above happening, although not necessarily all at once in one big bill.

14. Commission a study of how much the Obama plan is spending per QALY saved.  I agree that more health insurance saves lives, but a) the study should adjust appropriately for the superior demographics of those who hold or buy insurance, and b) the study should adjust for the income that would be lost through mandates and the safety that income would purchase.  I worry greatly that we have never, ever seen this number presented and that if we did it would not be pretty.  In any case, do the study, scream the number from the rooftops, and reread points 1-11.  Enact.

That's my recipe.  It's better than what we are doing now.  You don't have to adhere to any extreme form of economistic or free market ideology to buy it.  It might even be politically easier than the current path, as it "sounds less socialistic."