Baucuscare: The Good, The Bad, and The Ugly

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Sen. Max Baucus’ health care reform proposal doesn’t have any friends on the right or left, and most of the support it does have comes from industry, and industry-backed House Blue Dogs. But though the skepticism of the Baucus plan is borne out of a number of flawed policy proposals, there are some genuinely good aspects to it, too. Herewith, the good, the bad, and the ugly sides of Baucuscare:

THE GOOD:

Fiscal responsibility: Yes, calls for “fiscal responsibility” seem to rear their ugly heads only when conservatives and conservative Democrats oppose the policy changes at stake. But liberal experts also agree: it’s crucial that the costs of health care reform be covered, and that the reforms themselves address the problem of health care inflation. Baucus’ bill succeeds on both scores. The Center for Budget and Policy Priorities concludes “The proposed offsets in the Baucus plan are sound policies that would use resources in the health care system more efficiently…. [W]eakening or eliminating these offsets would not only result in a less efficient health care system but also make it more difficult to provide low- and moderate-income Americans with sufficient subsidies to afford health coverage.” And the CBO finds that, via it’s main financing mechanism and other measures, Baucus care would be a deficit reducer over both 10 and 20 year windows.The exchanges: Both right away, and then increasingly over time, the Baucus bill would actually allow more people to participate in health insurance exchanges than would House legislation–a feature that would lower premium prices and save the government money. The Baucus bill allows businesses with up to 50 employees to buy into the exchanges from the start–compared to 20 in the House–and that’s just a floor. States can rope larger businesses in if they choose. And then eventually, employees at firms of all sizes will be allowed to enter the market place. According to Ezra Klein, this is “a huge deal…the first place where I’ve seen the Baucus bill go substantially further than the other bills.”

Medicaid expansion: The bill expands Medicaid to cover people up to 133 percent of the poverty line. This is an extremely progressive redistribution of money from wealthy and middle-class people to some of the poorest people in the country. And though other proposals on Capitol Hill do the same thing, Baucus didn’t choose to scrimp and save by scaling back that expansion.

THE BAD

Subsidies: Baucuscare comes at a lower price tag than do proposals out of the House and the Senate HELP committee. But though that may address the political reality of sticker shock, it essentially means that a sliver of the population–a few million middle class people without insurance–will suddenly be forced to buy expensive insurance that covers relatively little in the way of medical expenses. And though Baucuscare places a cap on out of pocket spending, that cap is high enough that middle class families could still be liable for tens of thousands of dollars in the event of serious illness or accident. In other words, this bill will not end medical bankruptcies, and it could prove politically damaging in the long term. According to James Kwak, “One reason the Baucus bill is “cheaper” than the House bill is that it has lower subsidies”:

For illustration, let’s assume that the whole $140 billion difference is due to lower subsidies. Relative to the House bill, then, the Baucus bill costs the government $140 billion less; but it costs middle-income people exactly $140 billion more, since they have to buy health insurance. The difference is that in the House bill, the money comes from taxes on the very rich; in the Baucus bill, it comes out of the pockets of the middle-class people who are getting smaller subsidies. Put another way, the Baucus bill is the House bill, plus a $140 billion tax on people making around $40-80,000 per year. That’ s not only stupid policy; it’s stupid politics.

Illegal immigrants: In the wake of the Joe Wilson flap, Baucus and his ally Kent Conrad changed the legislation to, basically, install a checkpoint outside of the exchanges, to prevent illegal immigrants from receiving subsidies when buying insurance. That’s already a wasteful way to achieve a questionable goal, but if the White House gets its way, illegal immigrants won’t be able to buy any insurance at all within the exchanges. That keeps a relatively healthy portion of the population out of the risk pools, making insurance more expensive for the rest of us, and is bad public health policy to boot. More on this later today.

THE UGLY

The public option: Or lack thereof. The Baucus bill doesn’t have a robust public option. It doesn’t have a weak public option. It doesn’t have a triggered public option. It doesn’t even create a private co-operative system that could mimic a public option and inject sizable, non-profit competition into the system. According to the CBO, “[t]he proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments.” In other words, as Sen. Jay Rockefeller pointed out yesterday, they’re a sham.

The employer mandate: TPMDC outlined the basic problem with this policy last week, and it’s still a problem. The specifics are somewhat complicated, but the basic incentive structure is this: In competing legislation, employers who don’t provide health care for their employees are assessed a fee based on the size of their businesses (how many people they employ, or how large their payrolls are). Under Baucuscare, businesses can get away with only paying a fee for those employees who, by virtue of not having employer-provided insurance, require government subsidies. That means employers will have an incentive not to hire poor people. Or, as Ezra Klein puts it, “the policy makes it profitable for employers to discriminate against hiring low-income workers.” But unfortunately, this particular feature (if you can call it that) seems to have the support of one Olympia Snowe….

ABOUT THE AUTHOR

Brian Beutler is TPM's senior congressional reporter. Since 2009, he's led coverage of health care reform, Wall Street reform, taxes, the GOP budget, the government shutdown fight and the debt limit fight. He can be reached at brian@talkingpointsmemo.com
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