The Dope On The Baucus Plan

I alluded to it before, but here's the draft framework for Max Baucus' plan from the Senate Finance Committee. If you don't have the time to read all 16 pages, Ezra Klein has posted a summary.

I'm trying to figure out who, if anyone, gets better health care coverage from this plan. So far I can only come up with one class: people making 100-133% of federal poverty level who can now qualify for Medicaid. For everybody else, the quality of coverage looks to my eye to be worse, though I could be missing something.

Folks in Medicare get 50% off of any prescription drugs that fall in the donut hole, but the grants of patents well beyond current law will cost them more for drugs they could be getting generically in the long run. We don't know the effects of making Medicare more efficient, but they're designed to be invisible, i.e. offering the same care at a lower cost to the government. So I'd call that a wash.

Those in the exchanges will get subsidies, of dubious affordability, up to 300%, and between 300-400% the cost of premiums will be capped. However, the coverage itself can be crappier than current law, and almost certainly will be. The out-of-pocket limits are good, but that only exists for "covered services" - for anything else you're on your own. Those covered services have to include the following:

...preventive and primary care, physician services, outpatient services, emergency services, hospitalization, day surgery and related anesthesia, diagnostic imaging/screenings (including X-rays), maternity and newborn care, pediatric services (including dental and vision), medical/surgical care, prescription drugs, radiation and chemotherapy, and mental health and substance abuse services that meet minimum standards set by federal and state laws.

They also would restrict caps on lifetime benefits. Which is fine. But there will now be a whole insurance industry sector in how to properly define what falls inside and outside primary care, surgical care, hospitalization, etc. And remember, the entire regulatory apparatus for these major insurance reforms, which will be fought in court by multi-billion dollar companies, is a state-level ombudsman's office. And even with those credits, the coverage doesn't appear to be affordable.

If you get insurance through an employer, your health care coverage is about to get a whole lot worse.

Employer Responsibility. Employers would not be required to offer health insurance coverage. However, employers with more than 50 full-time employees (30 hours and above) that do not offer health coverage must pay a fee for each employee who receives the tax credit for health insurance through an exchange. The assessment is based on the amount of the tax credit received by the employee(s), but would be capped at an amount equal to $400 multiplied by the total number of employees at the firm (regardless of how many receive a credit in the exchange). Employees participating in a welfare-to-work program, children in foster care and workers with a disability are exempted from this calculation.

As a general matter, if an employee is offered employer-provided health insurance coverage, the individual is ineligible for the tax credit for health insurance purchased through an exchange. An employee who is offered unaffordable coverage by their employer, however, can be eligible for the tax credit. Unaffordable is defined as 13% of the employee’s income. The employee would seek an affordability waiver from the exchange and would have to demonstrate family income and the premium of the lowest cost employer option offered to them. Employees would then present the waiver to the employer. The employer assessment would apply for any employee(s) receiving an affordability waiver. Within five years of implementation, the Secretary must conduct a study to determine if the definition of affordable could be lowered without significantly increasing costs or decreasing employer coverage.

A Medicaid-eligible individual can always choose to leave the employer’s coverage and enroll in Medicaid. In this circumstance, the employer is not required to pay a fee.

Coverage offered by an employer of any size, including fully insured and self insured plans, is not required to comply with the list of benefits required of plans in the non-group and small group markets. Employers must provide first dollar coverage for prevention services (except where value-based insurance design is used), however, and cannot have a maximum out-of-pocket limit greater than that provided by the standards established for Health Savings Accounts (HSAs).

So small businesses can opt out of giving their employees health insurance and pay a fraction of the cost, about $20,000 for 50 employees. That will become the chic thing to do. If the employees aren't paid more than the requirement for Medicaid, employers can scrap coverage and let their employees take Medicaid and pay no fee. They are incented not to give their employees a living wage, in other words. And if they make coverage available for those above 133% FPL, they are bound by no standards like that coverage on the exchange, and their employees couldn't reject that coverage for something half-decent. Assuming regression to the mean, virtually every employer will immediately move to offering the shittiest coverage imaginable. They could only get to the exchange if the employer coverage is unaffordable, or 13% of their total income. So an employer, "AlmartWay" in Marcy Wheeler's construction, could conceivably take 12.9% of an employer's income for offering a plan that probably wouldn't cost that much.

Hell, if I were a rapacious manager like AlmartWay's completely hypothetical managers were, I'd turn employee health care into a profit center because (if I read this right) you could require employees to pay back 12.9% of their income for health care, and the only thing you'd really have to promise in return is preventative care. So I predict, if this bill passes in anywhere near this form, that AlmartWay will start making its own employee health care a big profit center because they will be stuck.

By golly. This is even a health care plan Blanche Lincoln and Mark Pryor and their biggest constituent could love!! Though frankly, Bad Max's plan is even worse than Wal-Mart itself--with a call for part time mandates and no disability discrimination--called for (though maybe Wal-Mart was thinking of the free subsidy for its Medicaid eligible employees all along).

And... there is no employer mandate, but the "free rider" aspect of the coverage will, in all likelihood, incentivize employers not to hire anyone who doesn't have family money.

Under the proposal, employers who do not offer health coverage would have to pay the full cost of the subsidies provided to employees who purchase coverage through the new health insurance exchange and qualify for a subsidy because their family income is below 300 percent of the poverty line. [1] But employers would not have to contribute to the health insurance costs of employees with higher family incomes. The new requirement would apply to firms with 50 or fewer employees.

The proposal would make it considerably more expensive for employers to hire workers from lower-income families than workers from higher-income backgrounds to do the same job. As a result, it would distort hiring decisions. Employers would have strong incentives to tilt hiring toward people who have a spouse with a good income (or have health coverage through a family member), teenagers whose parents make a decent living, and people without children (since the eligibility limit for the subsidies in the new health insurance exchanges will increase with family size). Low-income women with children in one-earner families would be particularly disadvantaged [...]

While language could be included to try to ban such discriminatory effects, it would be virtually impossible to enforce effectively. It would be extremely difficult to prove in court that an employer has passed over one applicant and hired another because of the health surcharge that employers would face if they hired people receiving health insurance subsidies.

Moreover, most low-income job applicants who do not get hired could not afford to hire attorneys to initiate legal proceedings. For the tiny number that might be able to institute proceedings, the legal complaint likely would take months and, more likely, years to adjudicate. In short, the fact that low-income workers would cost an employer up to several thousand dollars more to perform the same job could not easily be overcome.

This differential treatment of workers based on their family income also would likely influence employer decisions about which of their employees to let go when they trim their workforces to cut costs, such as during a recession. Workers from low-income families would cost the firm significantly more to retain than other workers who are paid the same wage to do the same job.

Although this clearly is not intended, the proposal likely would have discriminatory racial effects on hiring and firing. As noted, it would discourage the hiring of lower-income people. And since minorities are more likely to have low family incomes than non-minorities, a larger share of prospective minority workers would likely be harmed.

This is essentially legalized class-based discrimination.

So, worse coverage for employers, arguably worse coverage for individuals and small businesses, same for Medicare patients, probably better for a sliver of Medicaid patients. And it criminalizes people for not giving 13% or so of their paycheck to private health insurers. The affordability credits are nice, but don't look sufficient. Here's a contrary view.

The legislation really would protect millions of Americans from medical bankruptcy. It really would insure tens of millions of people. It really will curb the worst practices of the private insurance industry. It really will expand Medicaid and transform it from a mish-mash of state regulation into a dependable benefit. It really will lay down out-of-pocket caps which are a lot better than anything people have today. It really will help primary care providers, and it really will make hospitals more transparent, and it really will be a step towards paying for quality rather than volume.

To put it more starkly, it really will be the most important progressive policy passed since Lyndon Johnson. The subsidies should probably sit at 400 percent of poverty, and the employer mandate should be reworked, but such failures are relatively easy to fix, and may well be patched over by the time the legislation arrives on the Senate floor. The fact that a bill of this size and scope can still be considered disappointing is evidence that the doors of the possible have been thrown wide open.

This ignores the reality that most insurers, like now, won't abide by the rules because there's no policeman to enforce them (an ombudsman? Really?). As well as the reality that the subsidies don't make health care affordable. And it will be hard to expand on this reform, considering that there's no public option, a weak insurance exchange and useless co-ops. In fact, considering that it cements in the broken system we already have and just fills in the cracks, it looks basically like it was written by the industry itself. That's because it was.