That All-Important CBO Score

The CBO score for the newest version of the Senate Finance Committee bill is in, and the word incrementalism comes to mind.

According to CBO and JCT’s assessment, enacting the Chairman’s mark, as amended, would result in a net reduction in federal budget deficits of $81 billion over the 2010–2019 period (see Table 1). The estimate includes a projected net cost of $518 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $829 billion in credits and subsidies provided through the exchanges, increased net outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $201 billion in revenues from the excise tax on high-premium insurance plans and $110 billion in net savings from other sources. The net cost of the coverage expansions would be more than offset by the combination of other spending changes that CBO estimates would save $404 billion over the 10 years and other provisions that JCT and CBO estimate would increase federal revenues by $196 billion over the same period [...]

By 2019, CBO and JCT estimate, the number of nonelderly people who are uninsured would be reduced by about 29 million, leaving about 25 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants). Under the proposal, the share of legal nonelderly residents with insurance coverage would rise from about 83 percent currently to about 94 percent.

We have an $829 billion dollar paid-for bill that lowers the deficit over time, but leaves 25 million residents uninsured, 2/3 of them American citizens. The bill doesn't cover as many people because Senate amendments reduced the penalties for non-compliance with the mandate and increased the hardship exemption. Without a public option, I actually agree with that, but it narrows the risk pool, and insurance companies don't want that because they'll be forced to cover a higher ratio of sick people, in their opinion. They could all handle this by increasing the subsidies, but Obama basically put a cap on the bill at $900 billion, and the more conservative Finance Committee went even lower than that. There's also a "trigger" of sorts that will reduce subsidies to people by a fairly large amount:

In the aggregate, the Senate finance bill reduces the deficit. But there are a couple individual years when it increases it. The CBO thus estimates that "the failsafe provisions would require a reduction in exchange subsidies averaging about 15 percent during the years 2015 through 2018." That's a very bad thing, particularly in the first years of the plan. It means that, with no warning, subsidies will be cut by 15 percent, and insurance that families were able to afford the year before will become totally unaffordable. That needs to be changed.

That's not the only problem with the exchanges. An amendment in the Finance Committee basically eliminated all policy benefits to them:

In the bills that passed three House committees and the Senate Health, Education, Labor, and Pensions (HELP) Committee, the exchange would be a "prudent purchaser." In other words, it would have a staff that bargained with insurers to bring down premiums--and that made sure all plans lived up to strict guidelines for coverage and customer service. In effect, any insurer that wants to offer coverage through the exchanges has to get the equivalent of a "Good Housekeeping Seal of Approval" from the administrators. This is precisely how it works in Massachusetts.

By contrast, the Senate Finance bill envisions much weaker exchanges. Instead of choosing which plans to make available, the exchange administrators would, by law, have to accept any plan that meets a relatively minimal set of standards.

Jon Kingsdale, who runs the Massachusetts exchange, calls that a recipe for "policy disaster," as consumers faced a dizzying array of more expensive, less regulated choices. "It would be like telling your grocery store they have to offer every single kind of bread baked by every single bakery. ... The exchanges would be nothing more than an automated Yellow Pages."

Cappy McGarr, who ran an exchange that failed in Texas, says that the exchanges will fail if they don't attract a considerable market share. Making them user-unfriendly like this is a sure way to have people just run in the other direction. And firewalling them from employees of bigger businesses is another. Insurers outside the exchanges will only need to use good marketing to entice consumers into their web, especially if the exchanges are not designed well.

If Congress now creates new exchanges, as seems increasingly likely, it must prevent this phenomenon by setting two national rules: Insurers have to accept everyone and have to charge everyone the same rates regardless of health status.

Such rules would force insurers to spread risk. But enforcement would also be difficult. Every aspect of health insurance — from the rules for underwriting and setting premiums to the marketing of policies — would need to be monitored stringently to prevent companies from steering all bad risks to the exchanges.

It would be smarter for Congress to revisit the idea of creating a public plan that could provide an attractive choice for consumers and real competition for private insurers, to give them the incentive to offer good coverage at affordable prices.

Max Baucus trashed Ron Wyden's effort to design the exchanges better (there's now documented proof of this), significantly weakening them.

Igor Volsky has more. To me, it's no wonder that Republicans are starting to concede on this health care bill. Aside from the fact that they can't stop it, they know that Baucus-care isn't all that likely to work, which will help them in the long run.

...is this a good starting place? Maybe. I'm worried about its survivability. We've seen a lot of exchanges die off over the years, and while there will be some default position toward making this viable in the short-term, if for example Obama loses in 2012 I could easily see a repeal, given that the exchanges wouldn't even be in place by then.

Finance Committee Follies

So how's that Finance Committee doing on health care?

Well, they did manage to beat back a requirement that people show a photo ID to use the exchanges or access subsidies, though the enforcement requirements in the bill still deny undocumented immigrants the ability to but insurance on the exchanges, which is pitiful, and restrict LEGAL immigrants from doing the same for five years. So it's a win without a victory.

In better news, Max Baucus continues to be pushed to the left on affordability.

In a push to lock down votes, Senator Max Baucus, the Montana Democrat and chairman of the Senate Finance Committee, is pulling together a last-minute package of changes to his health care legislation aimed at addressing the chief concern among his fellow Democrats: that health insurance be made as affordable as possible for moderate-income Americans.

“There’s an effort to solve people’s problems,” said Senator John D. Rockefeller IV, Democrat of West Virginia, who has been a critic of the bill. “How far that’ll go, we’ll see.”

Among the proposals under consideration is an amendment by Senator Maria Cantwell, Democrat of Washington, that would create a “basic health plan” for Americans earning less than 200 percent of the federal poverty level, or $44,100 for a family of four. The proposal would let states develop or expand various existing insurance programs that now typically cover people who qualify for Medicaid. Small states could develop plans jointly.

The Baucus bill would already expand Medicaid to Americans earning up to 133 percent of poverty, and Ms. Cantwell’s proposal would effectively expand it further. But because her plan is expected to be cheaper than providing subsidies to those low-income people to buy their own insurance, it could save money that could be used to make other provisions of the bill more generous.

The Cantwell Amendment sounds pretty good at first blush. While not a public option, it's a proven idea (Washington state has this) that would reduce costs up to 200% FPL that can be used to increase subsidies above that level. UPDATE: Ezra Klein has a good interview with Cantwell about her proposal. She claims it would hit 75% of the total uninsured.

But I really like what Jay Rockefeller's cooking up - a legitimate floor for what insurance companies must spend on treatment and care.

This is delectable politics. Fresh off a meeting with Ob-Rahma, Jay Rock has come back to the Senate and demanded 90% loss ratio for any coverage the subsidies pay for. "Loss ratio" is insurance-speak for what they actually have to spend providing actual health care. That means the insurance companies can't steal 20% of our tax dollars to pay for executive salaries. They get 10%.

They're peeing their pants right now.

But I suspect Jay Rock has offered this as an outcome of his meeting with Ob-Rahma. I'm sure at that meeting they said, "Jello Jay, We'd like you to pitch other ways to save money. We'd like to come up with a way to keep costs down."

And voila!!! 90%!!! Insurance companies have to actually provide health care without gobs of executive subsidies. We're actually going to demand a certain amount of health care in exchange for the half trillion MaxTax!!!

There's no way to vote against this and still claim that you are on the side of the people instead of the insurance companies. With the cost savings in the bill, not to mention the ease of using the exchange to advertise services, insurers should easily be able to spend 90% of all premiums and still make a health profit. The only problem with this is enforcement, and how you get compliance from insurers who lie about loss ratios currently.

The Finance Committee will consider all these amendments and have a final vote on the bill next week, with Harry Reid bringing a merged bill to the floor the following week. We now know the schedule - time to make sure the best bill gets out.

Who Could Have Anticipated?

Republicans decided to attack the individual mandate today, specifically hitting the notion of penalties for not buying insurance.

WASHINGTON -- Senior Republicans challenged Democratic plans to require nearly all people to carry health insurance, sharpening attacks on the first day of Senate Finance Committee debate over legislation to overhaul the nation's health-care system.

The criticism underscored Republican concerns that the legislation represents unwarranted government intrusion into private matters, and highlighted the partisan divide over the White House's top domestic priority. Put on the defensive, the committee's chairman, Sen. Max Baucus (D., Mont.), cut in half the maximum penalty for families that don't have health coverage to $1,900 from $3,800 per year.

Advocates of a coverage mandate say it is needed to ensure that young, healthy people get insurance and contribute to the system. They say this will ease costs associated with an influx of less-healthy people who are expected to get coverage under the Baucus legislation.

Republicans, who are trying to slow Democratic efforts to pass a health overhaul by the end of the year, rushed to criticize the proposal.

Iowa Sen. Charles Grassley, the Finance Committee's senior Republican, said the mandate is among the reasons that he couldn't support the bill despite months of negotiations with Mr. Baucus. "Individuals should maintain their freedom to chose health-care coverage, or not," he said.

"This bill is a stunning assault on liberty," said Sen. Jon Kyl of Arizona, the Senate's second-ranking Republican.

Now of course, Chuck Grassley is full of it. And the Republicans did agree to mandates months ago. But any Democratic official surprised by the intensity of this complaint needs to leave Washington permanently. These are the people who call the repeal of tax breaks a tax increase. They call a reduction in growth of defense spending a spending cut. Their logic has never had to subject itself to the rigors of consistency.

What's more, Obama argued against mandates in the primary campaign. And without a public option, there's a compelling argument to be made that mandates for private insurance is a forced monopoly. Furthermore, it was always going to be the case that criminalizing someone for not having insurance would be unpopular. As Richard Kirsch says, the public option makes mandates popular.

Baucus (D-Mont.) has tried to remedy the situation by halving the penalty on families who decline to buy coverage and increasing the subsidies to those middle-class families purchasing insurance. But Kirsch insists that, without the ability to choose a government run option, consumers - and by extension the politicians who represent them - will turn sour on the mandate.

"We did a poll in Maine and in 91 swing House districts," said Kirsch. "We found that if we asked people if they supported a requirement to buy health insurance they said no. But if we said, 'Do you support a requirement coverage between private and public?' they said yes."

"Conservative democrats are going to be attacked from the right on the mandates but what makes the mandates popular is the public option."

This is especially true if the coverage subsidies are too low.

So really, this is a problem of the Democrats' own making.

...to be clear, I believe in mandates because the system won't really work without them. But from a political standpoint, mandates on just private coverage are a loser.

Better By Inches

I should note that Max Baucus modified his chairman's mark to include some key elements sought mainly by Democrats, making the bill a bit better. The highlights:

• He increased the tax credits, as expected, so that they slide up to 12% of income instead of 13%, up to 400% of the poverty level. This makes the coverage subsidies a bit more generous and makes health insurance a bit more affordable. Emphasis on "bit". He also lowered maximum out-of-pocket costs.

• He reduced the "age band," lowering the difference between the cheapest policy and the most expensive based on age from 5:1 to 4:1. In other words, insurers will only be able to charge someone 4 times as high a price based on age, not 5 times as high. Again, this is a minor improvement, but an improvement nonetheless.

• He accepted Olympia Snowe's amendment lowering the threshold for affordability for employer-based insurance. If that costs someone more than 10% of their income, they can go to the exchange.

• He indexed the threshold where the insurance company excise tax comes in to the Consumer Price Index. This will limit the damage from average insurance policies getting hit with the tax as the years go on, but not completely. He also raised the initial threshold number up to $22,000 for a family plan, which isn't likely to satisfy the unions.

• The penalty for not getting insurance is now much smaller, down to $1,900 per family from $3,800.

• Anyone exempt from the individual mandate because of affordability can now buy the bare-bones catastrophic policy designed for "young invincibles."

Baucus did something sneaky, too. He delayed the coverage subsidies by six months:

Effective date of Health Care Affordability Tax Credits - The modified Chairman's Mark would set the effective date of the Health Care Affordability Tax Credits at July 1, 2013.

That's one way to save money in the overall bill - turn a ten-year bill down to 5 1/2, although Igor Volsky estimates that the cost has increased to $900 billion.

There are some other minor improvements outlined by Jon Walker.

Health Care Update

Looks like lawmakers are gradually expanding the puny subsidies in the Baucus health care bill:

The chairman of the Senate Finance Committee, Max Baucus, said Monday that he would modify his health care bill to provide more generous assistance to moderate-income Americans, to help them buy insurance.

In addition, Mr. Baucus said he would make changes to reduce the impact of a proposed tax on high-end health insurance policies.

Mr. Baucus, Democrat of Montana, disclosed his plans in an interview a day before the committee is to begin meeting to debate and vote on the sweeping legislation, which is intended to remake the nation’s health care system and guarantee insurance for millions of Americans.

Mr. Baucus said the changes showed that he had heard the criticism of his bill from colleagues, who asserted that many people would be required to buy insurance who could not afford it — even with federal subsidies to help defray the cost of premiums.

“Affordability — that, I think, is the primary concern,” Mr. Baucus said. “We want to make sure that if Americans have to buy insurance, it’s affordable.”

Affordability to Baucus means reducing the limit of policies from 13% of total income to 12% of total income, through subsidies up to 400% of the poverty level. That's at least a start, though still short of what's in the House bills.

As it says above, responding to changes Baucus will reduce the impact of taxing insurance companies, basically by raising the threshold when plans start to hit the tax. But this is paradoxical. Raising the subsidy levels costs money. Raising the tax threshold takes away money. Lawmakers want the bill to protect more people on affordability while taking away some of the money that would pay for those protections. There is a late and familiar entry here, however, and that's Jay Rockefeller's idea to add back in a variation of what the Obama Administration sought all along:

In fairness to Rockefeller, he's got some ideas along those lines.

He's said many times he would be perfectly happy with the sort of financing they have in the House--i.e., a straight-up tax on the rich. And while such a scheme might have trouble in the Senate, Rockefeller is trying gamely to intorduce a more scaled-down version.

Among the amendments he's introduced for this week's Finance Committee hearings is a proposal to cap the deductability of charitable contributions at 35 percent--which would, in effect, reduce the deductability of contributions that very, very wealthy people make to charities. It seems to be a version of what President Obama proposed at the beginning of this process, an idea that still has a lot of merit even though many Senators rejected it out of hand.

Would they reject it again? Maybe not in scaled-back form, which might be enough. In the end, the most likely solution to the funding problem is some sort of combination strategy--a tax that hits expensive health benefits, a tax that hits the wealthy, and, maybe, some sort of tax sugary drinks or tobacco. The new Rockefeller proposal, according to Capitol Hill sources familiar with it, will probably raise about $90 to $100 billion--which is a decent chunk of change and could pay for a lot of new subsidies.

The President wanted to roll the charitable deduction credit back to 28% - exactly where it was during the Reagan Administration, at a savings to the government that could easily top $300 billion over ten years, enough to make the subsidies big enough to make health care truly affordable for everyone. And it would only hit those who make enough money to take advantage of the charitable deduction to begin with. It's really a no-brainer.

Of course, there are more areas of conflict in the bill beyond affordability and financing. There are various amendments in the Senate Finance Committee to add a public option, as well as Olympia Snowe's amendment to add a trigger, and a weak trigger to boot. Obama went on the record saying “I absolutely do not believe that (the public option is) dead," although his close colleague Dick Durbin said today that only a "variation" of it could make it through the Senate. Nancy Pelosi continued her public statements that the public option must be included to pass the House, though House liberals, wary of a bait and switch, asked the Speaker to stand with them when the bill reaches a conference committee. Jerry Nadler reiterated the seriousness of the threat from the progressive side:

Rep. Jerrold Nadler (D-N.Y.) said Monday he is optimistic that any healthcare bill from the House will include a public (or "government-run") option, and are undertaking a whip count to test lawmakers' commitment to that measure.

"The public option is still very much alive only because the progressives have stood together and held our ground and said that, regardless of what the President or Leadership says, we won't vote for any bill [without] a public option," Nadler said in a chat online hosted by the liberal AMERICAblog.

Nadler told the blog that 60 lawmakers had pledged to vote against any healthcare bill lacking the public plan, and that liberal Democrats are "undertaking a whip count now to see how firm these pledges are."

While affordability and financing may come to some compromise position that is at least passable, the statements above show that there's no such middle ground for the public option. This may vex the White House, but they will eventually have to show their cards.

Rockefeller And Wyden: Senate Finance Holdouts

Ezra Klein had two very good interviews today, with Sen. Jay Rockefeller and Sen. Ron Wyden, detailing their concerns with the Senate Finance bill and how they hope to change it. I know that people are getting bent out of shape about the emphasis on the Finance Committee bill when four other committees have jurisdiction, but right now, it's the only committee left to report something out, Wyden and Rockefeller sit on the committee so they represent the best hope for improving that version, and let's be honest, the White House is certainly using Baucus' bill as a framework, with the hope to at least just get it out of there. So it's important to take a look at their concerns.

Wyden, who like Rockefeller spent time at the White House this week, emphasized affordability concerns, like most other Democrats have. But Wyden also wants his proposal for Free Choice in the bill, allowing anyone to buy insurance off the exchange, not just those who don't get coverage through an employer. I thought he answered the concerns about the "end of the employer-based system" (you say that like it's a bad thing) pretty well:

Let me ask you about some of the concerns people have on this bill. One is that it will hasten the decline of the employer-based system. Young workers will leave quickly for cheap, catastrophic plans on the exchange. Workplaces will be left with older, sicker workers, and they won’t be able to continue offering health-care insurance.

That just doesn’t make sense, either from an economic standpoint or the nature of American life. First, companies will continue to see good benefits as a recruitment tool. It remains a primary way to attract young, talented workers. Second, as we look at this in terms of who would leave, I don’t get the sense that young, healthy workers will be the first to traipse off. Are they really going to be the ones to fill out the forms and contact the exchanges and all that? I think the most likely to go shopping are middle-class people who are pinched right now. We’ve also put into the bill safety valves for any worst-case scenario: after-the-fact risk adjustment that will review who stayed and who left and make adjustments based on that fact.

If what we’re saying is that we can’t find a sweet spot between blowing everything up in 15 minutes and telling people that you can’t improve your situation and have more choices, we’re not doing our job. And I think this is that sweet spot.

Wyden also spoke strongly against the "free rider" position, and said he is working with the Center for Budget and Policy Priorities to improve it.

Rockefeller, who has become the stand-in for liberals on health care in the Senate, has a whole different set of concerns, while still keying on affordability.

There are a number of big things. The Children's Health Insurance Program is put into the exchange. That's like putting it into a farmer's market. It loses its defined benefits. And children need defined benefits.

Obviously the public option. I feel very strongly about that as a discipline on the private health insurance market. The public health insurance option doesn't have to make a dime. It doesn't have to make Wall Street happy or shareholders happy. It just has to sell a product at cost. That will put pressure on private insurance companies to bring down their premiums. What's the alternative? My staff has done extensive research on co-ops and everyone says they can't do health insurance. The best health care co-op exists in the state of Washington, and both of Washington's senators are adamantly for a public option. That ought to tell you something.

Another issue is that 46 percent of the American people have health insurance from fairly large companies that self-insure. And they're not included in the regulations. They have to have protection from preexisting conditions and lifetime caps and rescissions too. People hear that the regulations in the bill don't apply to these companies and they think it's not possible. But it's true. And it's almost half of the insurance market!

Another piece is the MedPAC proposal. if you really want to be honest about it, eight to 10 percent of the members of Congress understand health care. At maximum. I chaired the intelligence committee, and health care makes it look like riding on a tricycle it's so complicated. So what you have is lobbyists picking on congressmen who don't know health-care reform, and they say, you know what, you could get a lot more jobs in your state if you only put more money into oxygen or a certain medical device. If you're going to do Medicare right, understanding that the trust fund is going to go downhill in 2016, you can't have Congress making these decisions. You need professionals.

My understanding is that MedPAC is in the Baucus bill, but I could be wrong. The self-insurance thing is something I discovered only recently. Large conglomerates like Disney and GE run their own insurance companies, essentially, contracting out to a health insurer to do the billing, at a fixed rate. So the profit that an insurance company could make off of insuring the employees of a large company is actually going to that large company themselves. They are running a small profit center off of their own employees. And that seems insane to me. So Rockefeller is right to bring this up.

Rockefeller did offer this bit of optimism, though.

What's the mood in the Democratic Caucus like right now?

There's very hot discussion. At the second-to-last meeting with Baucus, Democrats really let loose at Baucus. When you're getting close to the time you need to vote, public policy takes on a new type of intensity. Baucus, to his credit, had another meeting last night, and it was the best meeting we've ever had with the chairman. He told me they'd make sure CHIP is preserved. He knows he needs our votes. That's why I said I wouldn't vote for the bill. Democrats need leverage.

Rockefeller added that Olympia Snowe is getting hammered by Republican leadership for her dalliances with supporting the bill. Maybe that's why she laid down a subtle hint that "the party left me" and maybe she'd be better off elsewhere.

The fact that some Democrats are getting louder about what they would and would not accept is extremely healthy for this process. Maria Cantwell said yesterday that she wouldn't vote for a bill without a public option, and like Rockefeller and Wyden she's on the Finance Committee. Ultimately, progressives should encourage those who want to bring the bill back to the center of the Democratic caucus and away from being a Republican-lite bill.

Coinkydink

Ryan Grim has been all over the story of Big Pharma's deal with the White House and Max Baucus, and despite the denials from everyone, Grim notes that the language in Baucus' draft matches the terms of the deal.

In August, the Huffington Post published a memo that outlined exactly what each side was going to do for the other. And Big Pharma was getting a lot more than they were giving up.

Pharmaceutical Research and Manufacturers of America senior vice president Ken Johnson said that the outline "is simply not accurate." White House spokesman Reid Cherlin concurred: "This memo isn't accurate and does not reflect the agreement with the drug companies."

But now that the bill is out, let's fact check those denials.

1) The memo said that PhRMA would "[a]gree to increase of Medicaid rebate from 15.1 - 23.1%".
The finance bill, on page 56, increases the Medicaid rebates for patented drugs from 15.1 to 23.1 percent.
Check.

2) The memo said that the parties had agreed "to get FOBs done." FOBs refer to follow-on biologic drugs - vaccines and other drugs made from living cells that are the fastest growing field of pharmaceutical research.

PhRMA wants extended patent protections from generic biologic drug makers. A finance committee aide said that the Baucus bill doesn't address biologics, leaving that to the Senate health committee's bill. The health committee bill gives drug makers 12 years of market exclusivity -- five more than the White House proposed -- and allows a 12-year extension with a minor tweak to the drug. The protection is worth billions to drug makers and is entirely unnecessary to encourage research, according to the Federal Trade Commission, which recommended zero years of market exclusivity.

"Already biologics take up at least 30% of Medicare part B spending and this proposal has been rolled into the overall health care reform bill, which is meant create cost savings, which it will not do," Jane Andrews, a medical student at the Johns Hopkins University and a member of Universities Allied for Essential Medicines, wrote in an e-mail to HuffPost. "It's simply a giveaway to BIO/PhRMA from Congress supported by the American Association of Universities."

Check (more or less.)

There are more, just go read. Baucus actually doubled the fee on the industry, from $1.2 billion a year to $2.3 billion, but the rest pretty much matches up. No importation of drugs from Canada, no negotiating with drugmakers for cheaper prices on prescription drugs, no shift of drugs into Medicare Part D.

There's no denying that this deal has been made, and the consequences are also clear. Right now, Democrats are worried about the coverage subsidies in the bill, believing they don't make health care affordable enough. One reason for the constraint is that these deals artificially limit the amount of money that can be wrung from inside the system. Because it's an article of faith that you cannot say the word "taxes" in Washington, as a result poor people who can't afford health insurance may pay the price for deals with Big Pharma, a kind of tax on the lower classes.

I hope avoiding the Harry and Louise ads were worth it. Fortunately, no groups on the right managed to make any headway attacking the overall plan.

I'm sorry, "death panels"? Never heard of it.

Affordability Changes On The Way?

A bunch of Senate moderates praised Max Baucus for his health care bill yesterday, leading many to believe that Baucus-care wasn't totally dead. But there was an important caveat - the letter says, "While we each have outstanding concerns we wish to see addressed, Senator Baucus has taken an important and critical step forward with this legislation." It looks like the major concern is affordability. Olympia Snowe, one of those moderates, expressed as much in today's New York Times as well as the Washington Post.

Senator Olympia J. Snowe, Republican of Maine, voiced the same concern. In an interview with The New York Times and CNBC, Ms. Snowe said that for her to support the bill, “there would have to be more subsidies” for low- and middle-income people and that she was trying to figure out how to pay for them.

Ms. Snowe said “the time has come” to pass comprehensive health legislation. But she added that it was important to get the policy and the details right, because they would affect every American.

Max Baucus has signaled an openness to work on the affordability issue.

Specifically, Baucus is talking to Democratic members of his committee about addressing one of their chief complaints about the bill — that it won't do enough to make insurance affordable to the middle class. That's a crucial question, because the legislation would, for the first time, impose a requirement that virtually everyone have some kind of coverage or face a fine. Under Baucus' bill, the government would provide some help-giving subsidies to help those earning up to three times the poverty level (in other words, a family of four making as much as $66,000 a year) buy insurance and setting caps on their out-of-pocket expenses.

But many in his party say that help doesn't go far enough — especially in comparison with the version that the House is working on, which would provide assistance for those earning up to 400% of the poverty level (or a family of four making $88,000). "We're working to address that concern," Baucus said, adding that one idea "very much on the table" is to increase the refundable tax credits for those purchasing insurance. That, however, would likely increase the overall price tax for the measure, which in its current form would cost $774 billion over the next decade, according to estimates by the Congressional Budget Office.

Karen Tumulty gets at the main point here. Snowe has talked a lot about affordability, and wants to expand coverage subsidies. But she doesn't want to spend any more money on the bill, which in order to raise the subsidies, you would have to do. From the other side of this, Democrats and Republicans want to shrink the tax on high-end insurance policies which, under current health inflation, would quickly hit more average-sized policies. But of course, that's how the bill is paid for in the Baucus plan.

Senators of both parties said Thursday that they would seek significant changes in a Democratic proposal to tax generous high-cost health insurance policies.

The tax, proposed as a way to help finance coverage of the uninsured, would be levied on insurance companies. But the senators said they worried that it would be passed on to individual policyholders, families and employers who buy insurance for their workers.

Senator John Kerry, Democrat of Massachusetts, who first proposed the insurance tax, said Mr. Baucus had set the thresholds too low. As a result, Mr. Kerry said, “working folks with a lower level of income will get dragged in,” and the tax could affect union members who have sacrificed pay raises to get health benefits.

Mr. Kerry said the threshold for family coverage should be at least $24,000.

So those inclined to vote for health care want more subsidies in the bill and less taxes on insurers. And I want a pony. But the President laid down a marker of not adding to the deficit, and so in order to do both those things, you need to find another revenue source.

Fortunately, there are several. Just repealing the Bush tax cuts a year early and applying that to health care would save $135 billion dollars. Or using the initial Obama Administration idea of lowering the charitable deduction rate to 28% from 35% would capture something like $300 billion. Or the House's surtax on the wealthy would add even more. There are plenty of options; but will there be the political will?

There's definitely the will to increase the subsidies. The White House is assuring liberal members of that, although not about the public option. The question is, will that be enough to satisfy progressives, particularly in the House? Paul Krugman asks that today.

It would be disastrous if health care goes the way of the economic stimulus plan, earlier this year. As you may recall, that plan — which was clearly too weak even as originally proposed — was made even weaker to win the support of three Republican senators. If the same thing happens to health reform, progressives should and will walk away.

But maybe things will go the other way, and Mr. Baucus (and the White House) will, for once, actually listen to progressive concerns, making the bill stronger.

Even if the Baucus plan gets better, rather than worse, what emerges won’t be legislation reformers can love. Will it nonetheless be legislation that passes the threshold of acceptability, legislation they can vote for? We’ll see.

Indeed.

Everyone Hates Baucus

Boy, Max Baucus (R-MT) sure knows how to make friends and influence people, doesn't he? He bends over backwards to please Republicans and they spurn his bill. In the process he alienates Democrats, who now... hate the concessions made in his bill and don't understand their purpose, given that it brought no Republicans along. He had to stand alone to announce his bill because nobody wants to be associated with him. Not even Kent Conrad, his best bud because he included his industry-sponsored weak co-op plan, wouldn't take the dais with him. He's become such the public face for Democratic incompetence that his very name leads to boos at Democratic events:



Workers are chanting "bullshit!" at the mere mention of Baucus' name at labor events. Health care advocacy groups use his name as a punchline, if not an obscenity. He's literally gone from the most important man in the room on health care to a potentially irrelevant one.

A dealmaker needs credibility and respect on both sides, and Baucus has lost it. The Democrats on his committee don't trust his instincts or his core commitments or his legislative skill. Nor do the Democrats outside his committee. They feel he gave away too much in return for not just too little, but nothing at all. That means the Republicans on his committee have further reason to distrust his ability to make a deal, because restive Democrats are going to want to change his bill. Meanwhile, House Democrats are enraged that he left them to suffer through August, and have little interest in passing a bipartisan compromise that doesn't come with any Republican votes [...]

Even within his committee, it's not obvious he can secure the votes of the liberals, and if he does, he almost certainly sacrifices Snowe. That means the White House and the Senate leadership are going to play the primary role in both offering concessions and guaranteeing their preservation in the process. The bill remains in Max Baucus's committee, but at this point, it's largely out of his hands.

That's a good thing, on balance, for supporters of real health reform. The media still acts as if Baucus' bill is the final bill, but that's not quite the case. His bill would require substantial changes before he could even get a majority of the vote in the Senate. And there are plenty of areas for improvement:

• Subsidies. The Baucus bill is simply not affordable. Forget everything else about health care - if the coverage isn't affordable for Americans to buy into it, the reforms won't work. It won't be universal, shrinking the risk pool, and insurers will want to deny coverage or care to maximize profits in that lower risk pool. The Center for Budget and Policy Priorities tells you pretty much what you need to know. This amounts to a $140 billion dollar tax on the middle class.

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.

• Bad Employer Incentives. The lack of an employer mandate, replaced with a terrible "free rider" policy, is completely unacceptable. Whether you believe that it incentivizes employers to not hire low-income workers, or that it incentivizes large employers to keep wages down so they can push their employees off onto Medicaid, employers have clear, giant loopholes that they can exploit to make life for their workers objectively worse.

• No public option. The co-ops are crap. Almost worse than useless. Everyone knows it. The CBO admits it and they've been practically writing the bill with Baucus.

"Liberal Democrats fumed that Baucus had dropped the idea of a government-run insurance plan to compete with private insurance companies in favor of a national network of member-run cooperatives -- an alternative the CBO said seems "unlikely to establish a significant market presence in many areas of the country."

There is no mechanism for competition with the private insurance industry, which the President has viewed as a fundamental principle.

Now, the Baucus bill does do a couple OK things. It raises a decent amount of revenue through excise taxes on industry, a back-door way to cap the employer deduction. It reduces the deficit. And it provides for a gradual shift away from employer coverage and toward the exchanges, although that shift could happen quicker, similar to what Ron Wyden is proposing.

The fact that the President spoke with Jay Rockefeller, the leading critic of the Baucus bill and its co-ops, as well as Wyden and Bob Bennett, who hold the bill that would move away from the employer-based system, tells me that he's actually looking to improve the Baucus draft down the road in the process. As Matt Yglesias said today, this is tailor-made for the conference committee process:

Viewed optimistically, this is what conference committee is for. Each version of the legislation is audacious along one axis—committing major funds to affordability in the House, trying to take a serious whack at cost growth in Baucus—and a conference committee could meld them into a bill that does both. You could imagine a productive meeting that produces the kind of result I’m talking about that lets Mike Ross walk out and say he added tough cost controls to the bill, while Jay Rockefeller gets to walk out and say he beefed up affordability, and then Max Baucus and Henry Waxman get to congratulate each other on being masters of legislative compromise. Alternatively, of course, the whole thing could fall apart. But ultimately my point would be that both version of the legislation have strong points that could be combined into some very good legislation indeed.

Absolutely, though admittedly we don't live in a perfect world. For example, you could add back in the President's shift on charitable deductions from 35% to the 28% it was in the Reagan Administration, which would impact pretty much nobody and save $350 billion over 10 years, plow that into subsidies, and call it a day. The bill would remain fully paid for and everybody would be happy.

Ezra has some further thoughts on this. I would just add that the President knows he owns this bill, so regardless of whether or not it would make the insurance industry mad, he needs to get this right so it works for people.

The Baucus Circus

The votes are in! Everybody's talking about Max Baucus' plan for health care!

Mostly, people don't like it!

Republicans don't like it because... it's a health care bill. Democrats don't like it because... it's a bad health care bill designed to kowtow to Republicans who won't even vote for it. Health care advocacy groups don't like it because it "would give a government-subsidized monopoly to the private insurance industry to sell their most profitable plans - high-deductible insurance - without having to face competition from a public health insurer." A good reason not to like it! And unions don't like it because there's no employer mandate and it would "tax health plans."

A bill of particulars:

• The bill spends too little on coverage subsidies. While putting a price tag on something that is paid for inside the budget window is misleading, the fact is that Baucus artificially lowered that price tag to meet some conception of centrism, and the lowered subsidies have a direct impact on affordability.

People in Massaschusetts are by and large satisfied with the Connector. It's toughest on the fairly small number of families earning just over 300% of FPL (of which there aren't that many), and on the larger number of young individuals who make just over 300% of FPL (which is $32,320 for an individual, so there are a decent number of those folks). Working class families earning up to 200% of FPL have fairly low premiums. $90 per month is going to pinch, but for uninsured households, they'll get some real value out of that: Commonwealth Care plans include dental insurance, wellness checkups have low co-payments; chronic disease care is especially well covered, and so forth. Likewise, three hundred pre-tax dollars a month for a family with a gross income of $60,000 per year is Real Money, but it's not going to break the bank. It's less than what they should be saving for college, for instance.

But as you can see from the graph, the Baucus bill doesn't fare as well. It's not even close to faring as well. The eight million individuals without insurance who earn between 200% and 300% of FPL will pay more than twice what similar households in Massachusetts currently pay. And working class families will feel a real pinch; $250 per month ($3,000 per year) for a family of four with an income of $38,000 is going to hurt.

• The community rating provision, mandating that insurers offer the same price to everyone regardless of medical history, comes with a tremendous loophole that will allow them to change five times as much for a policy based on age, which is just another way to discriminate against the sick.

• The employer "free rider" problem, called "one of the worst policy ideas I've ever seen" by Ezra Klein, would penalize employers for hiring anyone who qualifies for subsidies, encouraging them to find people who get coverage through a spouse or illegal immigrants. It also gives large employers like Wal-Mart a competitive advantage for paying crappy wages. And you can't opt out of the garbage insurance that giant employer - let's call them Ball Bart - might offer you.

• The excise tax for violating the individual mandate could cost up to $3,800 but wouldn't kick in if the individual could not find coverage that costs more than 10% of his income. In which case, you've built a robust architecture for a useless plan, because if millions opt out the coverage gets less universal and insurers want to stop come-as-you-are guaranteed issue.

• The co-ops are even weaker than imaginable:

The co-ops can only compete in the small group and individual markets. That is to say, if the co-ops prove effective, and The Washington Post would like to offer co-op coverage as an option to its workers, it can't. The co-ops are not allowed to contract with large employers, which is to say, they can't compete with private insurers in the largest market, and they can't get the purchasing power that would come from a serious foothold among corporate customers.

Not only is their size restricted, so too is what they can do with their size. The co-ops can band together to increase their purchasing power, but they can't set national payment rates for their members, a la Medicare. As I understand it, they have to bargain with each provider and drug manufacturer and hospital and so forth separately, meaning they're denied one of the main advantages of size. The insurance industry is, in other words, being protected from not just public competition, but co-op competition.

Jay Rockefeller today sent a letter proving, based on tons of research, that co-ops were a complete sham that have failed in the marketplace on a number of occasions, saying that "I believe it is irresponsible to invest over $6 billion in a concept that has not proven to provide quality, affordable health care, when we know that a public health insurance option will rein in costs and save taxpayers billions of dollars."

Marcy Wheeler has a lot more. There's one promising sign that the exchanges look expandable and available to all businesses, a neat way to gradually wean the system off of exclusive employer-based insurance, but that's about the only silver lining. Kent Conrad's gambit of increasing the budget window to make the Senate Finance bill look better did work, as the deficit reduction aspects look improved for the bill over the House bill. But crucially, that's a function of the funding, not the outlay in subsidies. Those will be too stingy to make the bill work for people, only for the bean-counters. In fact, the bill will start taking more and more from the middle class, much like the alternative minimum tax, and political reality will force scalebacks, so the budget picture doesn't look as rosy as advertised.

But it also suggests some real dangers in the bill's second decade. The unpopular elements of the bill become a lot bigger and more onerous. The excise tax on high-cost insurance plans begins affecting insurance plans that aren't particularly high-cost. The Medicare and Medicaid savings begin to tighten. That said, there are a lot of potential savings that the CBO isn't taking into account here, so that might ease the pain. Plus, at some point, we are going to have to start cutting costs in the system, and you can't escape some eventual hurt in that. But you can be sure the GOP is going to run these numbers aggressively and spin them viciously.

The good news is that this is in no way "the bill" that will get signed by the President. It has to go through a significant amount of changes, and key Democrats are already balking at it. In fact, lil' ol' Roland Burris said he wouldn't vote for anything without a public option, and with the numbers so tight, every Senator is in a bargaining position. Baucuscare is an abomination. But it doesn't have to be the endpoint, only the beginning.

I should say that one group really, really likes the Baucus bill - insurance companies.

The Unceasing Disaster That Is Max Baucus

This is it. A year of planning. Three months of intensive bipartisan discussions. Weeks of preparation for the public. And Max Baucus is going to deliver his health care bill... without a single Republican vote. Which anyone with a brain could have told you would be the outcome right from the start.

Senate Finance Committee Chairman Max Baucus (D-Mont.) will release his long-awaited health care reform bill Wednesday – but without the Republican support he has sought for months.

Baucus tailored his proposal to win the backing of some Republicans, hoping to keep alive the possibility that Congress would pass a bipartisan bill.

But after months of closed-door talks, none of the three Republicans involved the bipartisan Gang of Six is expected to declare support for the bill Wednesday.

Baucus said he was still hopeful the bill will emerge from the committee vote with bipartisan backing.

Get that? Baucus wrote a Republican bill, essentially, one that is a gift to the insurance industry, and he got nowhere. And for his efforts, he got blasted by Charles Grassley, who disapproves of the "process." See, he wanted another year or two at the bargaining table delaying a final product, anything else is just a power grab. By the way, Baucus is still "hopeful" for a bipartisan vote. Which means what, he'll add in riders criminalizing abortion and commemorating Rush Limbaugh Day?

The GOP freeze-out on the Baucus bill includes Olympia Snowe, who's actually concerned, like many Democrats, about the weak affordability standards.

But let's not lose sight of why Snowe balked at the Baucus framework. For one thing, she's concerned about the financing mechanism, which she believes would hit Maine hard. But just as importantly, Snowe also believes (as I do) that Baucus' plan offers weak and inadequate subsidies. "The affordability question is crucial," Snowe said. "It's a central component, because at the end of the day people have high expectations they will have access to affordable health insurance."

In other words, one of the leading Republican negotiators on health care reform believes Baucus' plan is too conservative.

More Democrats have spoken up about the affordability concerns, which fall on the poor and middle class. At best, the weak subsidies would force loads of Americans to opt out of the mandate, making the bill useless. At worst, people would be forking over large portions of their income to private industry for substandard coverage. It's just another version of the middle-class squeeze.

Mr. Norton, 49 years old, is an adjunct professor at a local community college who earns about $40,000 a year. He's also one of roughly 200,000 Massachusetts residents who remain uninsured despite a state law requiring residents to have health insurance.

"I can't use up all of my savings just to buy mandatory insurance," Mr. Norton says. It's like penalizing "the homeless for refusing to buy a mansion." [...]

An independent contractor, Mr. Norton doesn't get benefits through the state-run Quinsigamond Community College where he works. His wife's employer, a dental practice, covers her, but not dependents. With a combined income of between $60,000 and $70,000, the family goes without cellphones for Mr. Norton and his teenage daughter, and a needed roof repair, but still makes too much to qualify for subsidies.

The cheapest plan available to him and his 16-year-old daughter costs $464 a month, or $5,568 a year, and comes with a $2,000 deductible per person.

"It's insurance you can't possibly use," he says, referring to the thousands of dollars he'd pay in premiums and deductibles before the coverage would kick in.

Baucus has an anodyne op-ed putting the best face on his plan. Those who've taken a look at it know better. And it has to be improved before getting out of the Senate.

...here's the Baucus chairman's mark. It's mostly in plain English.

It's The Affordability, Stupid

Jon Cohn found a document from the Senate Finance Committee showing the impact of the Baucus health care bill on the middle class:

Total medical expenses, including premiums and out-of-pocket expenses, would be no more than 20 percent of annual income for most of the people profiled in the document. For the poor, it'd be dramatically less. That's the (relatively) good news.

And the bad news? These figures are all for people in average health. But people end up paying a lot more in out-of-pocket expenses when they have a serious medical issue--whether it's because of an accident, an acute illness, or a chronic disease. According to my back-of-the-envelope calculations, a family of four making $42,000 a year could owe $9,000 a year in medical expenses if it hit the maximum in out-of-pocket expenses--which is pegged, in the Finance legislation, to deductible levels in Health Savings Accounts. That's easy to do when one family member gets in an accident, has an acute medical problem, or is dealing with a chronic disease.

A family of four making $78,000 a year could owe $23,000--nearly a third of its income--if it had a member with high medical bills.

The committee analysis (and mine) includes a ton of assumptions--chief among them, that the families are buying the "silver" option, the benchmark plan on which federal subsidies are based. In other words, these figures are not precise, particularly since we don't even have an actual bill yet. And, in case you were wondering, families staring at such huge medical expenses would probably fall under the "hardship" waiver, exempting them from the requirement to purchase insurance. (In other words, neither Baucus nor any other sane member of Congress is going to force people to shell out money for insurance that leaves them so exposed to costs.)

On that last point, if families are exempted from buying insurance under the hardship waiver, then 1) the program will be far less universal than necessary, 2) the smaller risk pool will lead to higher premium prices from insurers, 3) most people WANT to be covered by insurance, and under this plan their only option would be to purchase unaffordable insurance that would still not shield them from potential bankruptcy in the event of an illness.

All of this is to say that the real problem here is the final cost of the bill. Already we've seen it drop from $1.3 trillion over ten years to $880 billion, with some Senators agitating for less. And not for any reason, mind you, other than to make the bill more "moderate". But that lowered cost means a cap on subsidies which will be insufficient for most.

At least some Democrats are aware of the deficiencies, and the fact that Baucus tailored his bill to attend to all of the concerns of a GOP who won't vote for it, instead of a Democratic Party who may. Even at this point, the Axis of Grassley and Enzi aren't satisfied, and are offering wildly contradictory proposals, like asking the Feds to bear the full cost of Medicaid expansion instead of part going to the states (I don't disagree) and also wanting to eliminate the tax on insurance companies that would pay for, among other things, Medicaid expansion. By contrast, Democrats are extremely concerned about the subsidies, which would lead to a package that people hate or cannot use.

Even within his own party, Baucus confronted a fresh wave of concern about affordability. Sen. Ron Wyden (D-Ore.) declared himself dissatisfied with the chairman's plan, which, like other congressional reform proposals, would require every American to buy health insurance by 2013.

"Additional steps are going to have to be taken to make coverage more affordable," Wyden said, "and my sense is that will be a concern to members on both sides of the aisle."

Charlie Rangel is sounding similar concerns on the cost. And The Hill reports that Democrats on the Senate Finance Committee will push this with amendments.

Near the top of the list for the panel’s Democrats is worry that health insurance subsidies will not be sufficiently generous nor available to enough people despite the fact that the bill would legally require most people to obtain coverage. Beyond premiums, some Democrats are concerned that Baucus’s proposal would not do enough to protect middle-class families from high healthcare expenses.

"It's very clear, at this point in the debate, the flashpoint is all about affordability,” said Sen. Ron Wyden (D-Ore.). “I personally think there’s a lot of heavy lifting left to do on the affordability issue.”

The healthcare bills already approved by three House committees and another Senate committee offer more generous subsidies – but at a higher cost to taxpayers.

“We’re doing our very best to make an insurance requirement as affordable as we possibly can, recognizing that we’re trying to get this bill under $900 billion total,” said Baucus, who has been courting Republican support for his measure in an attempt to guarantee that a healthcare bill can achieve the 60 votes or more needed to avoid a Senate filibuster.

“I’m going to work even harder to address any legitimate affordability concerns. I knew they were there,” Baucus said.

I just don't believe that the guy who created a bill which represents a gift to the insurance industry is all that concerned about "legitimate" affordability concerns. But in the end, the bill can't work unless people can afford coverage. That would obliterate everything the bill is trying to do.

President Snowe's Capriciousness

Despite the Obama joint session of Congress speech having moved the needle in the public for health care reform, Republicans still feel cocky that nothing's happening this year. They'll even put out phony whip counts to prove it. But if there's one reason to err on their side, it's because the moderates that have largely co-opted the debate seem destined to destroy it of their own volition.

Another Republican negotiator voiced concerns to Fox. Sen. Olympia Snowe, R-ME, said there is still concern about the size of the package which is carrying a near $900 billion price tag. “Maybe we could shrink that to $800 billion or below,” the moderate senator said, citing a skeptical public with bailout fatigue and concern for rising deficits. Snowe said she is certain there will be amendments offered in committee to scale back the scope of the bill.

As for the much-touted idea of a “trigger,” a set time at which if current plans don’t provide affordable, quality care, a government-run plan kicks in, this appears to be more talk in the media than in the negotiating room. Snowe told Fox that she thinks the White House is talking about it more than senators. She would not even concede that it will be offered as an amendment, and as the Baucus plan currently stands, there is no mention of a “trigger.” Baucus even told reporters that it was not mentioned in compromise talks.

That the trigger is a non-starter in the Senate is certainly interesting. But Snowe is being completely ridiculous here. She's lowering costs just for the sake of lowering costs. This won't help people get affordable health care; quite the opposite. It won't lower the deficit because the President has asserted that the legislation will be deficit neutral or he'll veto it. She just wants to take $100 billion out of the bill for the purposes of giving herself cover for voting for it. This is despite her stated interest in improving the subsidies to those who can't afford insurance, which, um, cost money. This is just not the way to legislate:

Ideally, we'd have policymakers identify the problem, come up with a solution, and then figure out how to pay for it. Instead, we have a few too many policymakers come up with a price tag first, whether it's sufficient in solving the problem or not.... (b)ecause it just sounds better. Less is necessarily superior to more, the argument goes, for vague, personal reasons that have nothing to do with addressing the problem at hand.

I realize we're talking about a lot of money here, but the difference between a $900 billion reform package and an $800 billion package is $10 billion a year. Given the size of the U.S. economy, the federal government's budget, and the willingness of lawmakers to spend freely when it was debt-financed Bush-era initiatives on the line, an additional $10 billion a year to help Americans have quality, affordable health coverage is more than reasonable.

Making health care reform worse, based on nothing but capricious standards on what price tags sound nice is absurd.

More from the usual suspects. The only thing I can think of for this is that she has enough cachet inside the Administration that the Republicans are using her as a vehicle to create a terrible bill that everyone will blame the Democrats for passing.

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.

Fines For Failing To Pay Insurance Companies

This was a spectacular headline to weather for a full day atop Drudge:

Americans would be fined up to $3,800 for failing to buy health insurance under a plan that circulated in Congress on Tuesday as President Barack Obama met Democratic leaders to search for ways to salvage his health care overhaul [...]

The latest proposal: a bipartisan compromise that Sen. Max Baucus, D-Mont., a moderate who heads the influential Finance Committee, was trying to broker.

Baucus, meeting with a small group of fellow senators, promoted a plan that would guarantee coverage for nearly all Americans at a cost to taxpayers of under $900 billion over 10 years.

Some experts consider that a relative bargain because the country now spends about $2.5 trillion a year on health care. But it would require hefty fees on insurers, drug companies and others in the health care industry to help pay for it.

Just as auto coverage is now mandatory in most states, Baucus would a require that all Americans get health insurance once the system is overhauled. Penalties for failing to get insurance would start at $750 a year for individuals and $1,500 for families. Households making more than three times the federal poverty level - about $66,000 for a family of four - would face the maximum fines. For families, it would be $3,800, and for individuals, $950.

As I've pointed out, the bill is a bargain because Baucus achieves it through allowing insurers to provide less comprehensive health coverage to practically everyone in the country.

This will, and should, be the next line of attack for conservatives - that everybody will have to pay $3,800 to the government if they don't buy health insurance. That's just the maximum fine, but that will become the individual fine for everyone in the country after a trip through the conservative puke funnel. And there's an exemption if you can't find insurance premiums less than 10% of your income. But I prefer to look at the other side of this. This bill forces you to give up to 10% of your income to insurance companies who have, as part of their business, lied their way out of paying for health care for decades. Health insurers can also charge individuals five times as much based on their age, under this plan, a stark difference from the 2:1 community rating in the other Congressional plans. And the coverage doesn't have to be very good, particularly for young adults, who can get "only-if-you're-hit-by-a-bus" coverage. I believe in an individual mandate to increase the risk pool to the maximum level, but the above headline is its threat - that it just looks like a stick-up.

If Baucus wants Olympia Snowe to sign on to this, and the bill appears to be designed that way, he's probably going to have to increase the subsidies to 400% of federal poverty level, or at least 350%. Of course, that would cost more money, and Snowe wants to pay for the bill entirely through internal system costs, which I don't think can fill that gap. Baucus' numbers on revenue don't even seem to add up. Maybe something like David Cutler and Judy Feder's plan could make it in:

Health policy experts David Cutler and Judy Feder, however, have an innovative proposal for making them count. In a paper for the Center for American Progress, they argue for the implementation of "failsafe" policies — crude, surefire interventions — that will kick in if the expected savings don't manifest. Limiting the growth of Medicare payments, for instance. Increasing the excise tax on insurers. Moving the public plan towards Medicare rates.

You can think of a dozen with little trouble. But if you kept them looming behind the curtain — the Oddjob to your Goldfinger — in the event that the expected modernization savings didn't manifest, it would make the anticipated savings visible to CBO, and free up money for affordability. Moreover, it would make those savings more likely to manifest, as insurers wouldn't want more of tax on their heads and hospitals wouldn't want lower rates, and so there would be more of an incentive to implement some of the softer, gentler reforms.

All in all, I understand why policy experts think the pendulum is swinging back toward reform happening. But without a public option, forcing people under penalty of fines (and what if they don't pay the fines? Prison?) to fork out a bunch of money to private insurance companies is just going to be flat-out unpopular. Especially if the help from the government to pay for that insurance is not affordable, which I don't believe it is in the Baucus plan. I guess Snowe's trigger would be tied directly to affordability, but it just seems like a trigger would be written so as to assure its never coming into existence.

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.