Affordability And Open Exchanges

I've read a lot of the more skeptical commentary about the President's speech last night, but the person who seems to have crystallized my thoughts about it is Ron Wyden, who sits on the Senate Finance Committee. He agrees, as everyone should, that the President gave the cause of reform a big boost last night by making an exceptional case for why we need to do this. But he hones in on the two areas, in terms of the specific policy, where the bills on offer clearly need to improve:

Wyden believes the proposal wouldn't allow nearly as many people as it should to choose to enter so-called health insurance exchanges, if they're unhappy with the insurance their employers provide.

"Only people who are unemployed and uninsured and work at very small businesses would be allowed choice and competition in the exchanges," Wyden noted "Anybody who works at a mid-size business who doesn't like what they have, a government bureaucrat steps in and says you don't have choices.

Separately, Wyden is concerned that the proposal--which Obama said would cost $900 billion--might not be able to provide generous enough subsidies for middle class uninsured people who will, under the terms of the plan, be required to buy health insurance.

"If you have a family making $65,000 a year and they're paying $8300, $8400 for their premiums and copayments and deductibles...that's going to be another area that you're going to have to hone in on," Wyden added.

Wyden was also critical of the funding mechanism of taxing insurance companies, which he thinks wouldn't hit them at all, but hit consumers. I agree that it will not hit insurers, because it's not designed to do that. It's designed to essentially limit the employer deduction by encouraging insurers not to hand out policies that cost more than $21,000 a year for the individual. Wyden ought to know this, since his Wyden-Bennett proposal attacks the employer deduction directly by phasing it out. If the work-around insurance tax is the best we can do to get at that employer deduction, I'll take it.

On the other two points, Wyden is on the money. Affordability is a major problem in the bill, with or without a public option. $900 billion is not likely to cover it, especially considering that some of that money will have to fund these high-risk pools that have now been included. It's not just that people don't want to tithe 10-20% of their income to private companies - they don't want to tithe that to anyone. So the coverage subsidies have to be strengthened, and revenue raised to pay for it. This is problematic because of all the deals and sacred cows protecting various pots of money. But a bill that passes but doesn't work will be a political nightmare.

The other point is that Obama is telling a white lie when he says "Everyone should have the same choice as members of Congress have." If you get insurance through an employer, you simply don't have that choice, and this protects a busted, inefficient insurance delivery system. Wyden's Free Choice Act would break the firewall on the exchanges and allow employees the option of using them. His framing of a "government bureaucrat" keeping you from accessing the exchange plays to right-wing arguments, but it's undeniably effective.

Plenty of people are focused on the public option (although opening the exchanges would be the only thing that could make the public option viable), so these will be my main concerns over the next several weeks - making the subsidies affordable, opening the exchanges, and making sure the regulatory apparatus for insurance companies is actually workable. The provision encouraging employers to only hire people with rich families has got to go as well. Basically, the less of the Baucus document and the more of HR 3200, along with the additional tweaks mentioned above, the better.