The debate over health care reform need not be an all-or-nothing affair. Lawmakers should take a deep breath and remind themselves that there’s a great deal of agreement on the major goals of reform. Both sides of the aisle want to restrain spiraling costs, give consumers more choices and improve quality of care.

Yes, liberals and conservatives disagree greatly over which policies would best achieve these objectives. But that doesn’t mean they must slug it out until one side wins at the other’s expense or—worse—everyone walks away without making any improvements at all.

There is another way. Congress must hit the re-set button.

That means abandoning the top-down effort to fix our health system should be viewed. That needn’t be a set back. Rather, it should be an opportunity to move forward.

The key to success: The president and members from both parties should reconsider the federal role in reaching agreed-upon policy goals. That role need not be all-encompassing and prescriptive.

Uncle Sam should concentrate on fixing those things that fall clearly within his wheelhouse, i.e., changing the federal tax code so that everyone receives the same tax benefit for buying health coverage, no matter how or where they purchase it. Then Uncle Sam should get out of the way, removing federal regulatory impediments that hinder the states and the private sector from solving the rest of the problem.

But, you say, Congress would never change the course of debate so dramatically. Why not? They’ve done it before.

In 1986 a tax bill languished before the Senate Finance Committee. It excited no one, was weighed down by a ton of special interest provisions, further complicated the tax code, and did nothing to achieve the policy goals of lawmakers at either end of the political spectrum.

The despondent chairman, Sen. Bob Packwood, R-Oregon, retreated to his favorite Capitol Hill watering hole, the Irish Times, to mull things over with his chief of staff. After the first pitcher, they determined all was not lost and debated the merits of starting from scratch. After the second pitcher, Packwood resolved to recruit committee Democrats to his big, bold idea.

By hitting the reset button, Packwood was able to outflank Washington’s special interests, appeal to ordinary Americans and wonky tax economists alike, and meet the very different but complementary goals of both Democrats and Republicans. The resultant tax reform wound up dramatically lowering both individual and corporate tax rates while abolishing most tax shelters. It ranks as one of the greatest domestic policy achievements of the post-World war II era.

What was the secret behind its success?

Both Democrats and Republicans defined their ultimate policy goals in a way that fostered, rather than precluded, compromise. For Democrats, the goal was to eliminate all those reprehensible tax loopholes that enabled wealthy individuals and many large corporations to avoid their “fair share” of taxes. To the GOP, the goal was to provide a tonic for entrepreneurs and job creation by clearing out all those tax deductions and special interest provisions that stood in the way of a second round of across-the-board tax rate reductions.
Packwood sensed the connection. At committee hearings he asked witnesses to estimate how low tax rates would have to drop so that the costs of tax shelters wouldn’t really be worth all the fuss. His Democratic partner, Sen. Bill Bradley of New Jersey, resisted the blandishments of fellow liberals to inject class warfare into the debate. Instead, he stayed focused on fashioning a cleaner, more equitable tax code. Lower, even dramatically lower, tax rates were perfectly acceptable, Bradley and other Democrats concluded, so long as everyone paid something.

The same approach could lead to real reform of three key components of our health system:

  • Fix the tax code: Surely liberal lawmakers can sign on to changes that limit the open-ended tax break wealthy individuals receive for their gold-plated health plans while extending tax relief to those further down the income scale who today receive nothing. Their conservative colleagues, meanwhile, can support such a reform because it guarantees millions of today’s uninsured will be buying private coverage they can take with them from job to job.
  • Free up the States for a central role: The successful welfare reform of the ‘90s showed that the best and most innovative ideas for change come out of the states. But these “laboratories of democracy” can’t devise, test and compare promising health reforms due to stultifying federal rules and program parameters. To unleash this pent-up creativity, Washington should just let go. Federal lawmakers should let state leaders experiment with different approaches to organizing insurance markets and revamping programs such as Medicaid, provided they embrace the widely shared goal of expanding and improving coverage at the least cost. Bipartisan legislation to accomplish this has already been introduced by liberal Wisconsin Rep. Tammy Baldwin, a Democrat, and conservative Republican Tom Price of Georgia. Comparable legislation has been introduced in the Senate.
  • Free consumers as well: To ensure that these reforms generate the greatest possible cost savings, lawmakers must also free consumers. Let them take full advantage of all this state innovation by shopping across state lines for the health plans that work best for them and their families. That’s not possible today. Yet this seemingly minor reform would enable consumers to choose plans in states with the most rational health insurance rules (i.e., those least influenced by special interest lobbying). Such plans would be dramatically less expensive than plans devised in states with onerous regulatory climates.

A far-reaching reform of our health system that furthers the deeply felt goals of both conservative and liberal lawmakers is there for the asking. Maybe a cold pitcher of beer at the Irish Times would give today’s solons the courage they need to push that re-set button.