The Baucus Health Care Plan: Who Asked for THIS?

It may already be “mission accomplished” for President Obama’s speech tonight – and he hasn’t even said a word. The one committee that’s been mired in the mud, Sen. Max Baucus’ Senate Finance Committee, and its informal “gang of six” bipartisan negotiators, has at long last released its “Framework for Comprehensive Health Reform.” There’s an extent to which just getting those guys off the dime (their original projected completion date was the Fourth of July) is more important for momentum than anything else. Unsurprisingly, the plan contains many of the shudder-inducing features and bad policy that we thought would be there, like co-ops in lieu of a public option and the “free rider” provision in lieu of an employer mandate. We knew the Baucus plan would have some stark differences from the other bills in Congress, presumably because the Republicans around the table had more influence on it. Like a good mystery, the key to understanding why it needed to be so different is to ask, "Who benefits?"

A lot of the immediate commentary from the blogosphere has focused on how non-terrible life would be if Baucus’ framework was implemented largely as-is. True, the framework isn’t as bad as many feared. And Ezra Klein isn’t wrong when he says, “it really will be the most important progressive policy passed since Lyndon Johnson.” But that's not because Baucus' bill is different -- it's largely because it's 75% the same as the other bills in Congress. But about 25% of the time, the gang of six has deliberately deviated from the direction other committees were going in. I’m struggling to find even one where the solution they came up with is legitimately better, easier, less bureaucratic, simpler, or more likely to help those who are crushed by the problems with American health care as it is today.

Here are some examples:

The other bills create an Exchange or state-based Gateways -- transparent marketplaces where those without employer-based benefits or small businesses can buy comprehensive coverage with a minimum standard of benefits, and compare like to like. Obviously, the more people who are allowed to participate in the Exchange, the better the system will work and the better the administrative economies of scale. But the Baucus plan’s Exchange is far more complicated. It’s state-based instead of national, and open to individuals right away in 2010, but small businesses are kept out for at least three years and possibly as many as eight. Even then, small businesses will be kept separate from the pool of individuals. And a further class of benefits for “young invincibles” will offer catastrophic-only coverage with some to be determined preventative services -- they won't even get the standard Exchange plan at all.

So the pools are kept small, the healthiest people (who are needed to bring the cost of insurance down for everyone) are given an escape hatch and, of course, you’re covered for less since the Baucus set of benefits and percentage to which private insurance must pay for your medical costs are lower than any other bill’s. Moreover, the Exchange itself starts up in 2010 but the new regulations to curb the most abusive practices of the insurance industry don’t kick in until 2013. So... what happens during those three years? Who asked for all of that?

We’ve mentioned how health insurance reform must limit the rating system so that you’re not charging a 60 year-old $25,000 for a plan that costs a 30 year-old $5,000. The House and Senate Health, Education, Labor and Pensions bill eliminates rating based on health status, geography, gender or occupation, and limits age to a 2:1 ration. The Baucus proposal has a cockeyed scheme where different ratings are allowed based on age, how many people are in your family, regional variation, and tobacco use. Moreover, all of these different ratings are cumulative, with a maximum variance of a shocking 7.5 : 1. Put in concrete terms, a 30 year-old single non-smoker in El Paso, TX would be charged $5,000 for a plan, but a 60 year-old non-smoking couple with two teenaged kids in McAllen, TX could be charged $37,500 for theirs. Who asked for that?

Employers are not required to offer benefits at all, and would only pay part of the costs for subsidies if and only if their employers bought from the Exchange. Medicare Advantage plans -- private HMOs paid for by the feds at 114% the rate for a regular Medicare beneficiary but with no better health outcomes -- would keep their overpayments until 2014, at which point they’d be paid the “weighted average” of all the Medicare Advantage plans combined. In layman’s terms, they’d still be getting paid more than traditional Medicare, albeit possibly less than the 14% extra they get now. Individuals who currently buy their own insurance outside the Exchange could keep what they have, point blank -- even if it’s the “mini-medical” skimpy coverage plans that the Exchange is designed to avoid.

Finally, the main funding mechanism are largely fees on insurance providers, pharma, medical device manufacturers and others. In addition to being relatively small sums of money, we’ve already been promised by the insurance industry that these fees will just be passed on to the rest of us in the form of higher premiums.

Perhaps we’ve all bought too much into the hype that the goal of this gang of six was to be “bipartisan” – especially it seems to be a forgone conclusion that 2 of the 3 Republicans at the negotiating table won’t vote for the fruit of their labors. Perhaps the better clue is that K Street had a copy of the gang of six’s proposal before the White House did. On each of these tough choices, the gang of six went in their own direction. Nothing wrong with that -- we need all the ideas we can get to fix health care.

But it can’t be a coincidence that the winner each and every time was one of the same industries who make money off the status quo.

More analysis of the Baucus plan:

• Jon Cohn
• Ezra Klein
• Igor Volsky
• Maggie Mahar

(Photo credit: http://www.flickr.com/photos/americanprogressaction/ / CC BY-ND 2.0)