Baucus

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The Baucus Plan: Increasing Access…to the same old Healthcare System

September 22, 2009 in Current Events, Public Policy | 2 comments

Many people have asked me, what do you think about the Baucus health reform plan?  Taking the bird’s eye view, the Baucus plan does a very good job at expanding insurance coverage.  Eligibility limits for public plans (i.e., Medicaid and SCHIP) are more generous.  Lower middle class and middle class individuals qualify for health insurance subsidies to purchase private insurance.  The Health Insurance Exchange should diminish the fear of losing one’s insurance when you switch jobs.  Overall, Baucus has built on existing health infrastructure to expand health access.  

By building on existing infrastructure, what he will do is basically expand the same health care system–that everyone is now complaining about–to more people.  There is little sincere effort to reform Medicare.  Although a white paper claims that he would cut physician compensation in Medicare, Baucus unsurprisingly decided to raise Medicare physician payment rates.  Pledges to reduce ‘waste and fraud’ are uttered by every President and Congressman in recent history but this is difficult to accomplish.  What about the promise to “reward Medicare providers who deliver care more efficiently and penalize those who don’t.”  This is good in theory, but difficult in practice.  Can we adequately risk adjust to make up for the fact that some physicians have sicker populations?  Will physicians have an incentive to not treat the sickest patients in order to improve their bonuses from Medicare?

Other points

I am not in favor of an individual mandate.  Most people want insurance and will buy it if they can afford it.  Will the government really fine lower middle class individuals for not buying health insurance?  What if they are using their limited income towards shelter, food, or their children’s education?

The “free rider” problem is a serious problem and has been addressed nicely here.

The Health Insurance Exchange is an interesting idea.  On the one hand, standardizing health plans makes comparison shopping between insurers easier.  However, the standardization may hurt innovation in the health insurance industry.  Further, how will these standard evolve as new technologies are invented?  I would guess that these ‘standardized’ plans will be slower to cover newer technologies.

Taxing ‘cadillac’ insurance plans does not make sense to me.  Let us say that two people earn $50,000 per year.  One person decides to buy a fancy flat screen TV while the other buys a small TV and saves the rest.  Should we tax the person who likes TV more than the a non-TV loving person?  Similarly, some people will prefer to spend more money on comprehensive health insurance.  Others might forego a cadiallac plan and instead buy exercise equipment, organic food, cars or any other item.  A progressive tax to fund health insurance for poorer individuals makes sense.  Taxing those who want comprehensive health insurance does not.  In fact, Baucus is reconsidering the excise tax on high-end insurance plans.

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The Baucus Plan

September 20, 2009 in Current Events, Public Policy | 3 comments

What is Max Baucus proposing in his inital health reform bill?  Most of the principles are based on the Senate Finance Committee 2009 white paper.  Below 

  • Creation of a Health Insurance Exchange. Insurers participating in the exchange could would be precluded from discriminating based on pre-existing conditions.
  • Expand Medicaid to all individuals below 133% of the federal poverty line.
  • Expand SCHIP to cover all children in household below 250% of the federal poverty line in 2013.
  • Reduce Medicare Part D ‘donut hole’ so that enrollees in the donut hole range only pay 50% of drug costs rather than 100%.
  • Standardize benefits into 4 categories: bronze, silver, gold and platinum.  
  • Excise Tax: Levy a non‐deductible excise tax of 35% on insurance companies and plan administrators for any health insurance plan that is above the threshold of $8,000 for singles and $21,000 for family plans.  
  • Individual Mandate with tax subsidies.  Those with incomes between 133% and 300% of the FPL would be eligible for these subsidies.  Those who don’t get health insurance will be subject to a fine.
  • Employers who don’t provide health insurance must contribute to a fund to cover government insurance/subsidies for these individuals. Small employers with less than 50 employees are exempted from this requirement.
  • Small business subsidy.  Businesses with the fewest workers and the lowest wages would be offered a new tax credit to purchase health insurance for their employees.  The subsidy is up to 35% of the business’s contribution.  
  • $6 billion for co-ops.  This money would be used to fund the start-up costs and capital requirements for these co-ops.
  • Preventive Services: Eliminate Medicare copayment for preventive care.  Provide financial incentives to encourage Medicaid to cover preventive care services without copayments.
  • Do not cut Medicare physician payment according to the SGR.  Instead, increase Medicare physician compensation.
  • Malpractice reform. Allow states to develop alternatives to the current tort litigation system.

Ezra Klein also has a nice review of parts of the Baucus bill: Exchanges, Insurance Regulation, Affordability, Individual Mandate, Co-ops, Taxing Insurers.  Time magazine also has a FAQ on the Baucus bill.

Also see  the CBO and CBPP analysis of the plan.

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