Top Five Reasons the Baucus Bill Is Really, Really Bad

By now you've probably heard about the draft bill submitted by Sen. Max Baucus. You may even have heard it's not a very good bill -- for the American public, anyway. But it's a complex topic, and a complex bill (even though it has been written in relatively plain English and posted on the Web, to the Senator's credit).

So in order to clarify this complicated issue, here are the top five reasons why it's a really bad bill:

1. Premium rules that are a giveaway to the insurance companies.

The first shocker in the Baucus bill came early on in the draft. Since I've worked in health insurance underwriting I have a certain familiarity with these kinds of numbers. I was stunned to see that the bill allows insurers to charge up to five times as much for some enrollees as for others, based on age. (By contrast, the House draft bill only allows them to charge up to twice as much based on age.)

One of the things we've been hearing from the President and other Democrats is that insurance needs to be affordable to everyone, including those with pre-existing conditions. This new provision, however, is a back-door way to let insurers essentially evade that provision. High-cost medical conditions, including chronic (and therefore pre-existing) conditions, aren't restricted to older people, of course. But they become increasingly common as we age -- so much so that indexing costs to age addresses a lot of the difference. The Baucus bill allows insurers to use age as a proxy for costly medical conditions and make coverage prohibitively expensive for those who need it the most.

There's a principle involved here. The fundamental reason we have insurance in the first place is to spread the risk, so that services are accessible and affordable in our time of need. That's why it's considered a social good (if done right). This provision goes a long way toward undoing the principle of shared risk.

The net result would be to make insurance increasingly unaffordable to Americans as they age. Nevertheless ...

2. The individual mandate is in there anyway.

Although I've been critical of the way many proposals have structured the individual mandate, I've always said that I understand the logic behind them: If you're going to force insurers to take all comers at a relatively average price, the healthy as well as the sick need to enroll. But if you're allowing insurers to charge much more for the (probably) sick than they do for the (probably) healthier, why have a mandate at all? You're not pooling risk in the manner originally proposed, so this is a heads-I-win-tails-you-lose proposition for the health plans.

3. It taxes benefits, slowly but surely.

I've been opposing the idea of taxing so-called "Cadillac benefits" for a long time. This plan does just that, although they're not likely to be "Cadillac plans" for long. As I feared, the tax isn't based on plan design. It targets plans above $21,000 indiscriminately, regardless of the reason for the added cost.

How is this terrible? Let us count the ways. First, it will hit plans hardest when they enroll older employees (who, you will remember, can cost five times as much to cover). That will penalize older employee groups, and will encourage employers to discriminate on the basis of age. Next, it will hurt people who live in urban and coastal areas where medical costs are higher (not that the Senator from Montana cares about that, I suppose). Lastly, if medical costs continue to increase at 10% per year, $21,000 will be the cost of the average plan in five or six years.

This plan's good CBO forecast rests in part on this new tax income. In other words, it achieves much of its vaunted "budget consciousness" on the backs of the middle class. It's a lousy bargain for workers and business alike. Granted, taxes will apply only to that portion of cost that exceeds $21,000 -- but that portion will increase nationally every year. And the tax rate for costs above the cap is 35%, so it will quickly become a huge new burden.

4. No public plan option.

But you knew that already, didn't you?

5. Co-ops can't always "cooperate."

First, the good news: Co-ops will be able to share data systems and some other services. Given the horrible nature of the bill overall, I was surprised to find that. But they can't pool their negotiating ability to get better deals from providers on behalf of the American consumer. (Congratulations, Dems -- more money out of the taxpayer's pocket.)

The draft language reads: "[Purchasing councils for co-ops] shall be prohibited from setting payment rates for health care facilities and providers." That means less savings to be passed on to enrollees."

It's unclear whether this provision also applies to drug companies and pharmacy benefit programs. If so, guess who that benefits? After all, most physicians serve patients primarily from one state, so this provision wouldn't apply to them. Hospital systems may serve patients in two or three states at most. But pharmaceutical companies are national entities. If co-ops could bargain with them collectively (make that "cooperatively"), they could demand substantial savings.

This issue needs to be clarified right away -- hopefully in the consumer's favor, by indicating that it does not apply to drug companies.

The plan does other bad things, too, like the provision that will encourage employers to discriminate against lower-income workers. But hitting you with more than five of them at once could conceivably be bad for your health.

RJ Eskow blogs when he can at:

A Night Light
The Sentinel Effect: Healthcare Blog
Eskow and Associates

 

 

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Comments

[NoFooling]

This is starting to look exactly like TARP for health insurance companies. Allocate billions to subsidize the insurance industry, and make sure there are easy ways for them to take the money and run without providing any benefits or stabilizing the health care marketplace.

Corporate theft of taxpayer money has become so blatant they don't even try to disguise it anymore.

[texfly]

With the advent of health insurance we’ve lost the incentive to question our doctors and healthcare providers about charges and medical needs. We’ve made them more godlike and omniscient … beyond questioning by mere mortals. As individuals we will alienate our physicians if we question them. Guaranteed! Even insurance companies bow to them. No one can get a straight answer about the true cost of procedures and hospital stays. You’ve all heard of the $10 aspirin, I’m sure. This has resulted from the practice of cost-shifting to the point of absurdity. When it comes to medical advances that surgeons are now applying daily, they are reaping huge profits for the corporations that sell them. Yet we don’t have a clue about the true cost of supplying those devices and equipment.

Any legislation for healthcare MUST address these inadequacies in order to be effective at controlling healthcare costs. Only a Single-Payer or (a distant second) Public-Option can bring “We the People” into the equation as a group with power. No matter what you say about government, the government is US! The same apathy that came with getting health insurance in the first place has led to corporations having the same rights as real people and to K-Street lobbyists controlling the debate. We MUST as a society take back that control and find out what things REALLY COST and take action as a society to correct it.

[billc685]

I feel we need a single payer plan. Today there are many who have insurance but can't afford to go to the doctor because of the co-pays or the deductibles. Many of the medical-caused bankruptcies are by people with insurance. How is the mandatory insurance going to help that? Whether by premiums or higher taxes we still pay, what's the difference. At least the total cost would be spread-out.

[waynep]

Well, we have all been waiting for the Republican plan to emerge to counter the more progressive plans approved by the democrats. . Now we have the conservative republican plan , and in an obvious attempt at a bipartisan approach, this Republican bill was written by a Democratic.
Easy to understand however: folks do like simplicity.
The insurance companies will be amply rewarded for their greed and successful lobbying effort. This will put the force of law behind efforts to see every American join in the insurance market, greatly increasing the profits. Real regulations of rates, even the ability to bargain as a unit for better prices disallowed. Insurance companies have more clients, n o real regulation on the insurance policies and rates, medical providers and pharmacies will be protected from competition or from pressure to lower rates by the "new non-profit co-ops" who will not be allowed to negotiate for lower prices . No price controls. Will we continue to forbid the crossing of borders to buy the same pharmaceuticals at significantly lower rates .
Nothing in this bill to significantly bring down prices for Americans.
Nothing to greatly increase availability of affordable services.
Our medical system shocks foreign visitors who would never allow themselves to be treated this way by any private business, let along one that determines life and death issues. This overpriced corporate system under which Americans suffer will be changed if this Baukus bill passes.. Just unfortunately NOT for the better. This is NOT reform.

[gfulmore]

O.K. Now, how about the top five reasons the Baucus bill is a good bill?

First, it eliminates pre-conditions and does not allow insurance companies from kicking people out when they get sick.
Second, it move us toward the moral imperative of getting all under health care insurance. If you can't afford it, there is a subsidy.
Third, it provides tax incentives to small businesses to get health insurance for workers.
Fourth, it implements delivery system reforms that should begin to reign in health care costs.
Fifth, it is federal deficit neutral, as Obama has promised.

That's a start. Let's think this through. Let's not throw the baby out with the bath water.

[WritusMaximus]

You have Baucus on your side, go get him for more! But folks, you gotta read the article again. That first point of yours sure got a hammering. By the way, "deficit neutral" sounds like Bush's "Iraq's oil will pay for the war" sounds-cre­dible-to-t­he-gullibl­e tactic.

[ChelseaC]

Harvard study on our health care crisis:
http://www.commondreams.org/newswire/2009/09/17-21

[wpmiller]

Max Baucus: Somebody please tell me why we allow someone to chair the healthcare reform committee who has received $2 million in contributions from the insurance industry -- and expect that the public good will be served?

WTF?!?

[BamBam2012]

Why do we allow any private contributions to any elected official?!

The solution to 90% of this entire mess is soooooo simple--make all private money contributions to any political candidate, or sitting politician, iron-clad ILLEGIAL!

[b5b4]

We allow private contributions because the first amendment guarantees free speech and contributing money candidates of our choice is an extension of free speech.

[martinspringfield]

We'd have a much better free enterprise system if we had publicly financed elections. When lobbyists write your legislation, you don't get market capitalism, you get fascism.

[jayhkatz]

Baucus, bought and paid for by you know who.

[BlueMed]

Mr Eskow: there is NOTHING to "clarify" about the Bogus Plan.
IT NEEDS TO BE REJECTED.

NO PUBLIC OPTION, NO PLAN!

THOSE OF US WHO KNOW THAT THE ONLY REALLY GOOD HEALTH SYSTEM WOULD BE SINGLE-PAYER HAVE ALREADY COMPROMISED TOO MUCH!

NO PUBLIC OPTION, NO PLAN!

I WILL NOT BE FORCED TO GIVE MONEY TO CORPORATIONS. I WOULD RATHER GO WITHOUT HEALTH CARE, THANKS.

[can-am]

single payer, if they have to do the 51. they should go single payer. if they do this they will win more seats next year. then we should have enough of them with a spine to push dabishthru

[PeterNY]

Kill the bill before it kills us.

[texfly]

The 800 lb gorilla in the room is HEALTHCARE COST! Not insurance. Everyone seems to accept that costs must come dowm, but I know of NOT A SINGLE cost accounting for any sector of the healthcare community. Doctors don't devulge, hospitals don't devulge, and insurance companies don't devulge. We only use guesses based on what insurance compnies report on their expense outlays.

Here in Houston I see all sort of medical cost gouging which I call "Glitz and Glass". Hundreds of local centers for emergenc care, imaging, new hospitals, etc. They probably are being funded by adding charges to insurance-paid claims. I see doctors moving from adequately sized facilties to palacial offices with huge well-appointed waiting rooms. I see surgeons continue to take x-rays series even when a 100 recent MRI images accompany the patient. I see the same specialist have an PA visit with you before his arrival to do nothing more than flex your joints as the specialist will do. The PA will bill sepaarately. All of this multiplies the charges with virtually zero ampount of added cost.

[Osprey3]

The health insurance industry in this country skims off approximately 30% of your (or your employer's) premiums for administrative costs, profits and lavish executive salaries, compared to 4% for Medicare. That's 30% of premiums NOT going for patient health! So don't tell me that for-profit insurance is not a problem- it's a BIG problem. The only real way to control rising health care costs is Medicare for all, which can set reasonable rates for services rendered, deny duplicate or triplicate tests by electronically sharing the original test result. A single payer system would also have immense bargaining power with Pharma, which also drives medical costs off the charts. The same problem that pervades the large banks and Wall St. and nearly took the global economy over the proverbial cliff, also pervades the health care industry: unbridled GREED!

[texfly]

Don't get me wrong, I'm all for HR676. Anything that makes healthcare a profit making endeavor is idiotic. The problem is that the insurance companies have no clout in dealing with the healthcare community that are gouging us. If we shine the light of transparency on BOTH we probably could cut healthcare costs in half very, very quickly.

[b5b4]

None of the bills under consideration address the real problems you have outlined.

[AnotherunhappyDemocrat]

I just read that the $21,000 limit is for plans that cover a family of four, and that for individuals the tax would apply to "Cadillac Plans" costing more than $8,000. Permission to be horrified, please. Whereas I don't know what my employer-provided plan costs, I am fairly certain that it is more than 8K. And while I have no complaints about what I get, if mine is considered Cadillac, then the overwhelming majority of Americans are in really bad shape.

[gfulmore]

The majority of Americans ARE probably worse than you. Now, many are denied coverage out of hand. Others have to pay the market cost of the premium, which is probably about $12,000 per year for a family. So, the question is what do you as an employee pay? You probably pay 20-30% of the actual premium, or about $3,000 per year; thus, you have about $9,000 paid for by your employer. (The average percentage paid by the federal government by federal employees is about 72%.) So, you will be taxed on about $4,000 of your policy, in addition to the $3,000 you now pay for. Assuming you are in a 30% tax bracket, federal and state, you would be paying an additional $1,200, for a total paid of $4,200, still far less than the family who has to pay market premiums of about $12,000 per year or more. Your contribution to health care reform will be minimal. Join the party. Celebrate the U.S. joining the rest of the world in it moral imperative to have all residents under health care insurance.

[AnotherunhappyDemocrat]

Long-time advocate of single payer here. And I hope people start to realize that if what I receive - as good as it is - is considered "Cadillac", then most Americans really are in bad shape. And I will happily pay my fair share ONLY if we all get the public option in return. That should be non-negotiable. For me, it is.

[sarawaters]

Dumb:
Proposition: Health care reform is supposed to be about reforming the way health care is delivered in America and making quality care accessible to all.

Proposition: Private health insurers are not about health care. According to Wendell Potter, a former insurance executive, private insurance companies are about making money. It has been the practice of private insurers to deny, delay and finally label medical procedures as "experimental" in order to maintain their profits in spite of risk to their policy holders. Rationing health care access is the chief function of private insurance.

Ergo: health care access does not equal owning a private insurance policy--no matter how the politicians who are in collusion with this industry manage to slant it.

Dumber:
That we continue to pay Baucus and those like him to present such ridiculous plans to the American public defies any common sense. We pay this man to collude with the insurance companies to perpetuate their profits at the sacrifice of American health and lives. And when Baucus does retire, we will continue paying him a handsome retirement as our tax dollars cover 67% of his health care insurance.

When we begin the debate on making doctors' and teachers' incomes dependent on their outcomes, please remember how we pay our legislators for their outcomes. Duh!

There is "dumb," and then there is "dumber.

[Alabama John]

Can capitalism work in a medical industry that has a goal to reduce customers, reduce gross profit, reduce return on investment, reduce employees as soon as possible and measure success based on how fast you can go out of business? But what fool would invest real money in such a venture?

We have a capitalist medical industry that charges twice as much for medical coverage as any nation on earth, and still 32 other countries have better overall health and longer life expectancy. The reason being we operate our medical industry for maximum profit in the only way possible, by zero oversight and no regulation.

Comes now a quest for the impossible, to reform our medical industry in a way that increases health better, reduces the need for medicine faster, and still allows for increasing profit and capital growth.

Venezuela, now they had the identical problem several years back when President Chavez enacted Medicare for all, as all the doctors and hospitals went on strike. So they hired several thousand doctors and nurses from Cuba, and in a nation where 70% never saw a doctor they all get free healthcare and a most friendly doctor.