The Snowe Effect on Health Care

There are two people who hold health care reform in the palms of their hands – at least this week. One is President Obama, set to make a big speech Wednesday night in which he (possibly) unveils a bill of his own, or (possibly) explains what he’d like to see in the health care bill, or (definitely) outlines some principles or features and spends the rest of the time making a big sales pitch. But the other is Sen. Olympia Snowe, the moderate Republican from Maine who sits on the Senate Finance Committee. Bloggers have spent the past week asking, “What does she want?”

Snowe was always going to be relevant to the debate. In order for there to be any Republican votes, and thus pass a filibuster even if the health problems of Sen. Robert Byrd and the late Ted Kennedy, the math required that the two Republicans from Maine be on board – Snowe and her fellow moderate Sen. Susan Collins – at least vote for the bill. She not only sat on the “gang of six” negotiators with Max Baucus, she has had “an open line of communication” to the White House.

The good news is that Snowe seems legitimately interested in solving the health care problem and not just having a coveted spot on the Sunday morning talk shows (Sen. Kent Conrad, I’m looking at you.) Jon Cohn breaks down the positives: she wants less variance in premiums by age than, say, fellow Republican Mike Enzi, so that a hypothetical $5,000 plan for a 30 year old would cost no more than $10,000 for a 60 year old (Enzi would prefer that plan cost $25,000 for a 60 year old, as many of them do now). She’s open to raising the level of subsidies for those in the Exchange to 400% of the poverty line, although she’d prefer the 300% line, leaving behind about 3 million uninsured. Finally, she’s be open to having larger businesses purchase insurance plans through the Exchange – an important feature since the more people who can have access to the Exchange, the better the economies of scale. Currently, the House bill is somewhat limited but can expand, and the Senate HELP bill is very limited – individuals and microbusinesses (up to 20 employees) only.

But that’s when the good news stops. She’s also the champion of a number of head-scratching provisions. Her focus on financing is confusing to say the least – she wants most of it to come from the system (no new taxes), but is unclear on how to do that. Since she also doesn’t want to cap the tax exemption on employer benefits, a within-the-system source of revenue championed by Max Baucus and CBO Director Doug Elmendorf, that leaves – what? Wringing even more savings out of Medicare? It’s not clear. One thing she wants to do is weaken the minimum standard of coverage for the plans in the Exchange – from plans that pay 75% of your medical bills (a little less than the percentage for most employer-sponsored insurance) to 65%. That may make them cheaper, but also make them cover less.

Instead of an employer mandate to prevent employers dumping their employees’ benefits willy-nilly, she’s pushing a “free rider” provision in which they’re asked to pay for a fraction of the subsidies for their own employees in the Exchange – a weaker detriment to dumping that would also require a more intensive bureaucracy to pull off. As mentioned, if she settles for the 300% level of subsidies, a number of people will have to be exempt from the “individual mandate” requirement that they purchase insurance or pay a fine for the simple fact that there will be fewer affordable insurance plans.

And then there’s the public option. Snowe has never been against it, even refusing to sign a letter by her fellow Republican Senators denouncing it a few months back. But her preferred option is a public option with a trigger. As I described it months ago, the public option would be “a ‘fallback’ only if insurers prove incapable of giving better, more affordable options.” The problem of course is how you define the conditions under which the trigger would be pulled. As Sen. Chuck Schumer points out, “The main criteria would be market share and premium price. This report today shows that in many states, both conditions have already been met. Premiums are high, and either one or two insurers dominate the market.” The current iteration of the trigger would have it be operating only in states where there are insufficient affordable options, leading to a crazy quilt of variance from state to state and undercutting one of the main features of the public option – that it’s national in scope and derives bargaining power from a large customer base. And, of course, trigger mechanisms in legislation have a bad history of never being pulled.

It’s hard to escape the conclusion that Sen. Snowe’s provisions undercut the features of the reform plan in Congress that promote shared responsibility and/or derive money to reduce costs or help fund subsidies – including the employer mandate, the individual mandate and the public option, as well as her “no new revenue” stance. Yet she doesn’t follow that up with ideas on how to increase savings in health care or health insurance, or additional ways to decrease costs or increase funding.

It’s not at all clear how that could possibly hang together, but it does seem consistent with our normal approach to health care, where we let the costs continue ramping up, weaken or deaden effects to keep the system in balance, and pay for it with gradually undermined benefits.

Sounds like fun.

(Photo credit:  Chris Dag on Flickr.)