Health Care Is All About the Benjamins

Say what you want about Sen. Max Baucus, but the Senate Finance Committee has been the most transparent of all the committees with jurisdiction over health care.  Today, Baucus and his Republican counterpart, Chuck Grassley, released their third “options document,” laying out all the ideas they’re considering for the financing of health care.  You would not normally call a document about tax exclusions and itemized deductions as “a thriller.”  But there are more twists and turns in this document to get my adrenaline pumping.

Oddly enough, it’s been the most surprising document of the three.  The previous two – on delivery system reform and expanding access – were thorough but not very shocking.  Baucus had released a white paper on health reform, so many of the “big picture” ideas were already spelled out.  The options documents then flushed out implementation points and details.  But virtually none of the issues related to health care financing have been plumbed in depth anywhere but in this 40-page policy paper.  Sure, a lot of focus has been on the tax-exclusion on health benefits for businesses, and the option document explores progressive ways to do that, mainly by focusing on health plans for the wealthy, or only on “Cadillac” expensive plans.  And, out of deference for the president, the committee lists all of his proposals for cost savings and new revenue for health care from the federal budget (even in bulleted list format with absolutely no comment, the president’s list takes up 3.5 pages all by itself).  But a lot of the material is new – and a political hot potato.

See, we know health care reform will cost some up-front dollars to implement.  If we do it correctly, there will be savings down the road from prevention, rooting out some of the waste and unnecessary care, Health IT, and reform (or abolishment) of the inefficiencies in private insurance.  Even when those savings manifest 4-10 years down the road, there’s uncertainty, particularly at the Congressional Budget Office, on how much credit to give them – something Baucus has been grumpy about.  Realistically, we’re looking at $100-$150 billion per year to set up something like the plan Obama and Baucus have in mind.  That’s a lot of tough decisions to make.

The tax exclusion would be a home run as it could bring in well over $100 billion a year, depending on how it would be implemented.  But you could also do it with scratch singles, walks, and smart base-running.  Here are the three ideas that jumped out at me the most:

1.)    Health Savings Accounts have been a conservative staple for fixing health care reform.  The idea has some merit – something I’ll get into another time – but they’re most useful right now as tax shelters.  According to the GAO, the average adjusted gross income for someone making a contribution to an HSA is $139,000 – almost three times the average income of the under-65 population.  Moreover, you get a deduction when you make a contribution to the HSA and when you make a withdrawal!  Add to that a pretty anemic penalty of 10% if you make a withdrawal for non-medical expenses, and you have a lot that needs reforming, and a lot of lost revenue.

2.)    Excise taxes on beverages were discussed here in New York City for sodas and other sugar-rich beverages – they’d raise money and discourage the rising rates of obesity that contribute to costs.  That’s an option, as are alcoholic beverages, which can be similarly highly caloric and already have an excise tax on them if they’re imported.

3.)    Capping inflation in Medicare. The Finance Committee is looking at forcibly capping the growth in Medicare spending based on projecting what we should be spending if the new technology and productivity efficiencies that should be widely implemented actually were.  Medicare reimbursement would be capped anywhere from one quarter to the full amount that would be estimated to be saved by tech and best practices.

Notice what’s missing here:  the political sense of expediency and cowardice.  Ditto the bellyaching that prevention, or Health IT, or costs derived from insurance market reform aren’t being “scored” generously enough in place of real, tough financing options.  Put another way, any one of the ideas is going to send some lobbyist to the Hill, screaming bloody murder.  Cap the rate of inflation in Medicare, and some caregiver, hospital, clinic or nursing home will complain that whatever is determined to be the “savings” from efficiencies and tech is way too optimistic.  Threaten an excise tax on domestic alcohol and expect the King of Beers to quickly hire the King of Lobbyists.  Even look cross-eyed at the tax shelters for the moderately to completely wealthy that HSAs have become and several fellow members of the Senate are likely to want to rip your face off.

I’ve done bellyaching of my own that too few decision-makers were putting forward serious proposals on finding the money to actually finance health care reform, so it’s only fair that I tip my cap where it’s due.  Any randomly selected option in this document is going to be a fight – but it’d be a fight worth having and winning.  When it comes to health care, it’s all about finding the Benjamins to make it happen.

(Photo credit:  rbbaird on Flickr.)