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Tilting at Windmills

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September 15, 2009

BAUCUS PLAN FACES SCRUTINY, CHANGES.... It's likely that sometime today, Senate Finance Committee Chairman Max Baucus (D-Mont.) will formally unveil the framework of his health care reform proposal for his colleagues. After months of delays, that's a positive development -- policymakers have been waiting on Baucus' panel for far too long.

The problem, at this point, is with the proposal itself. Putting aside the public option for a moment -- Baucus' plan doesn't have one -- most reform advocates agree that the subsidy cap for uninsured families should be set at 400% of the federal poverty level. Last week, Baucus signaled his intention to support a 300% cap, and there was some scuttlebutt about a 350% compromise.

Suzy Khimm reports that Baucus won't budge. This will not help in making the bill more appealing to Democrats. For that matter, the far less generous approach won't even help with Republicans -- only Sen. Olympia Snowe (R-Maine) is even considering support for the bill.

Jonathan Cohn considers whether the Baucus framework is adequate in its subsidies.

The bottom line here depends, in part, on which people you consider--in particular, whether you're looking at the poor or middle class, and whether you're looking at the relatively sick or the relatively healthy.

Total medical expenses, including premiums and out-of-pocket expenses, would be no more than 20 percent of annual income for most of the people profiled in the document. For the poor, it'd be dramatically less. That's the (relatively) good news.

And the bad news? These figures are all for people in average health. But people end up paying a lot more in out-of-pocket expenses when they have a serious medical issue--whether it's because of an accident, an acute illness, or a chronic disease. According to my back-of-the-envelope calculations, a family of four making $42,000 a year could owe $9,000 a year in medical expenses if it hit the maximum in out-of-pocket expenses--which is pegged, in the Finance legislation, to deductible levels in Health Savings Accounts. That's easy to do when one family member gets in an accident, has an acute medical problem, or is dealing with a chronic disease.

A family of four making $78,000 a year could owe $23,000 -- nearly a third of its income -- if it had a member with high medical bills.

Keep in mind, progressive Dems on the Finance Committee were blocked from Baucus' negotiations on shaping the proposal, and weren't even told which provisions were under discussion. Today will be their first real chance to examine the plan in any kind of detail, and they're going to want to make some changes. Indeed, The Hill reports that they're likely to "demand" some fairly significant improvements to the framework.

Publius makes the case that reform advocates should keep fighting for the public option, but at the same time, "can get more substantive bang for their buck by fighting for both better subsidies and higher levels of coverage (i.e., % of costs individuals have to provide).... [T]he public option is important, but I see it as a longer-term protection. If the Dems pass a bill that mandates coverage but provides skimpy subsidies and anemic coverage, it could be a full-blown policy disaster immediately."

I realize that it's not exactly a catchy rallying slogan to chant, "A subsidy cap at 300% of the federal poverty level is unacceptable!" but the truth is, it's a provision that really needs to be changed.

Steve Benen 9:25 AM Permalink | Trackbacks | Comments (36)

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Hurray for Publius & thanks for this post! I've been saying all along that progressives shouldn't be blinded by obsession with the Public Option. The really decisive question with regard to whether we get really worthwhile health reform is this one of the funding levels and support for subsidies for insurance.

Sure, all the noise on the public option may HELP politically in getting progressives invited to the bargaining table, but the win, if win there is to be will be in the size of the bill and in the adequacy of subsidies.

Posted by: tb on September 15, 2009 at 9:39 AM | PERMALINK

So, like every bill ever to make it to a president's desk, this will be filled with arcane, confusing language that makes our eyes glaze over, while simultaneously giving massive tax dollars to Vested Interests.

Same as it ever was, same as it ever was. . .

Posted by: DAY on September 15, 2009 at 9:41 AM | PERMALINK

"can get more substantive bang for their buck by fighting for both better subsidies and higher levels of coverage"

True, but this sort of thing is probably going to see-saw with different administrations' priorities. Instead of this sort of policy battle, the public option gives the promise of structural change to the left. That then can affect politics in a positive, permanent way.

Posted by: Chris__ on September 15, 2009 at 9:58 AM | PERMALINK

I think Baucus is an internationally recognized pig, and in a decent world his bill would never see the light of day, or would be trashed immediately.

But in this country, we start with the hog excrement of a corporate-written and corporate-approved bill and hafta fight like hell to make it human.

whatta country!

Posted by: neill on September 15, 2009 at 10:03 AM | PERMALINK

Democrats are insane. Even with a public option, taking 1/5 to 1/3 of your average American's income will bankrupt them as surely as their previous medical bills will have. An individual mandate will be the death of the Democratic party. You'll lose all the recent pick-ups, they mostly voted for Obama to make the economic situation better, not worse. You'll lose Michigan, those voters just can't afford this even with generous subsidies. You may even lose New York if you piss off the poorer voters in the city and turn every upstate blue-voter bright, bright red.

The country can't afford this plan. Not because of deficits or taxes, but because the actual individual citizens of this country just don't have enough free money to do what you're forcing them to do.

Posted by: soullite on September 15, 2009 at 10:25 AM | PERMALINK

Isn't the point though that we basically have got to get this out of committee. Baucus is holding up the larger Democratic Caucus from making changes as it reconciles them with the HELP bill in the Senate. On top of that, if it can get past the Senate 1 time, and go to conference with the House, then I think the confernce bill (all fixed up) can't be fillibustered when it comes back to the Senate.

Posted by: Chris on September 15, 2009 at 10:26 AM | PERMALINK

I realize that generous subsidies will help alleviate some suffering and add some security to peole's lives who both need and deserve it, but the truth remains we are subsidizing a system that is morally bankrupt and fundamentally broken. This for-profit private system is completely unsustainable if no mechanism is put in place to rein in costs and regulate abuses. The danger is that we probably can sustain it for several decades with federal funding, but this is simply putting off the day of real reform. Further, the system will most likely survive by continuing incremental increases in federal subsidies and incremental degradations in quality, all while everyone remains "insured." This is the worst of all possible "reforms", unless, of course, you are an insurance company. As progressives, we need to seriously consider whether or not it might be better to forgo subsidies and fight for a robust public option. Even if we lose, we can be assured that the status quo will, at least, die a quicker death than it would otherwise.

Posted by: jason on September 15, 2009 at 10:43 AM | PERMALINK

And so my prediction of two weeks ago comes true: The Baucus bill amounts to HUGE subsidies to the insurance industry while saddling middle-class taxpayers with a mandate to buy over-priced, under-covering policies.

There's only one truly consistent thing about Democrats: They will always, always, always leave their base bitterly disappointed.

But I guess expecting them to be able to pass legislation when they only have an overwhelming majority in the House, a filibuster-proof majority in the Senate AND a Democratic president is just too much to expect. The Democrats probably need to control 90% of the House and have 90 votes in the Senate to go along with a Democratic president. But I suspect that even then they would figure out a way to capitulate to the remaining 10 Republicans.

Posted by: Domage on September 15, 2009 at 10:45 AM | PERMALINK

The country can't afford this plan. Not because of deficits or taxes, but because the actual individual citizens of this country just don't have enough free money to do what you're forcing them to do.

As logiclite points out, Americans are strapped because their income has been robbed/stagnated by the blind greed of Republicans. Tax breaks for the wealthiest, corporate backing of unfair trade treaties, mismanagement of tax dollars, and on and on, these things have left the country in a very precarious financial spot.

That's exactly why we need health-care reform NOW.

The really decisive question with regard to whether we get really worthwhile health reform is this one of the funding levels and support for subsidies for insurance.

Subsidies and funding don't address the very important issue of cost control. The whole point of the "public option" isn't to provide insurance to poor people, it's to force private insurers to drop their "let's rake in 700% profit returns" in the midst of a health-care crisis. That's unsustainable. As a bonus, the public option would help keep them honest, as in, actually paying benefits to policy holders.

Posted by: about time on September 15, 2009 at 10:49 AM | PERMALINK

So the Baucus plan essentially mandates that families lose everything, as opposed to losing everything as things stand already, there's just a legal mandate now. Great job!

If I was one of the Senate Finance Dems who was shut out of negotiations, I would have declared anything the scumbag Gang of 6 issued to be DOA as far as I was concerned, as a matter of principle not to mention basic human decency.

Posted by: Allan Snyder on September 15, 2009 at 10:55 AM | PERMALINK

I had an illuminating change with a friend who's a bartender, and know lots of folks in his position, e.g. wait staff, restaurant owners with few employees. Any bill which forces them to allocate more than $100 or so per month to health insurance will be a huge hardship. If they are going to be forced to purchase health insurance (which I agree with, in that it will help long-term to bring costs down), they have to get something of value. Current insurance policies, even with expanded regulations of their practices (which as we well know are quite fragile), ain't it. If they get a well-designed public option their money goes to something they can trust and appropriately value.

Posted by: Ron Mexico on September 15, 2009 at 10:59 AM | PERMALINK

I wonder how much in subsidies Baccus got Montana farmers for crop insurance premiums. I am sure it was a pretty penny regardless of how rich or poor those farmers were. For instance in 2008 and 2009 Grassley got Iowa farmers $910 million to reduce preniums, Ben Nelson got Nebraska farmers $724 million and Co-op Conrad got North Dakota farmers over a BILLION. Yet all these Senators will not budge on the public opp. or want to reduce the sudsidy gap to 300% of the poverty level. And except for Grassley they are suppose to be Dems.

Posted by: nodaK on September 15, 2009 at 11:02 AM | PERMALINK

Sure, all the noise on the public option may HELP politically in getting progressives invited to the bargaining table, but the win, if win there is to be will be in the size of the bill and in the adequacy of subsidies.

You mean how many billions of taxpayer dollars will be transfered to for-profit insurers with families legally required to lose most of their disposable income(if they even have any) to the for-profits as well? You consider that acceptable without a public option?
We have to fund the industry that is without a doubt the primary cause of this crisis?
You want to see real progressives actually join with teabaggers in protest, this is surely the best way to accomplish it.

Posted by: Allan Snyder on September 15, 2009 at 11:02 AM | PERMALINK

"Sure, all the noise on the public option may HELP politically in getting progressives invited to the bargaining table, but the win, if win there is to be will be in the size of the bill and in the adequacy of subsidies."

Basically what you think is important is the amount of tax dollars transferred to Private Insurance Companies, because without the public option that's what's going to happen. Republicans agree with you and they are planning their 2012 campaigns around it.

Posted by: Henk on September 15, 2009 at 11:05 AM | PERMALINK

Congratulations to Baucus for the closest thing to a nation-wide flat tax ever.

Posted by: anonymous on September 15, 2009 at 11:15 AM | PERMALINK

I think Baucus is heading in the right direction. I am amazed when I hear that health care is of the utmost importance but that it needs to be heavily subsidized to make it attractive enough for people to spend their money on. The family of 4 earning $78K and spending $23K - big deal...what else are they supposed to do with their money if not take care of themselves with it? If health care is so important then families and individuals will willingly drop their cable TV packages, continue to drive "clunkers" (too bad we diminished the fleet of inexpensive functioning autos), get by without the latest cell phone, give heartfelt but inexpensive Christmas gifts, etc., etc. I feel comfortable in saying that in almost all real life instances the $78K family, after the $23K medical expenses, will still have considerable expenditures that we will all agree are less critical than health care. Subsidies could be even lower and not cut into expenses that are theoretically as critical as health care.

Posted by: Eric on September 15, 2009 at 11:17 AM | PERMALINK

Obama said the public option or something better. Something better is single payer. This is not a fringe position. We should get it on the table. On Saturday he said everyone should have what Congress has for an insurance policy. This too is a better option. We need to fight.

Asking Americans to pony up 20% of their income is insane. People don't have it. We have a negative savings rate in this country. We spend more now than we make. What on earth are the Dems thinking?

Posted by: wild west on September 15, 2009 at 11:26 AM | PERMALINK

Does the Senate need a Baucus Bill, or is refusing to pass one good enough? Another question is how much control the chairman has to prevent the other members from forcing a vote on a substitute (or anything else, for that matter)?

Posted by: jhm on September 15, 2009 at 11:28 AM | PERMALINK

Wow, real impressive Eric, tons of assumptions with no numbers to back them up. Well, you did list maybe a couple hundred dollars in expenses that's supposed to make up for a family being legally required to spend over a quarter of their pre-tax income on for profit insurers.
I assume you also believe that the for-profits should be legally required to limit their executive pay, bonuses and perks as well, not to mention the millions they spend on advertising and lobbying to prevent real reform, as opposed to actually providing the healthcare that their customers pay for--or do you actually favor taxpayer subsidies of corporate lobbyists?
Never mind, seeing that you're such an ignorant tool, I assume you are fine with that.
Just sit back and watch other countries pass us by as our economy stagnates and collapses due to all disposable income being spent on private insurance.
And you still won't be able to get treatment for your chronic stupidity, seeing as how it's a pre-existing condition.

Posted by: Allan Snyder on September 15, 2009 at 11:33 AM | PERMALINK

Allan, I think Eric was being facetious. Am I correct? If not, eric is a very mean person.

Posted by: st john on September 15, 2009 at 11:41 AM | PERMALINK

One other thing - I think we should push for canceling Congress' health insurance and make them buy it on the open market. Lots of them have pre-existing conditions, but they have no idea how it works in the real world. A couple of years could make a huge difference in what they think.

We should also tie their salary increases to the minimum wage. You want a raise, so do we. Your insurance sucks, so does ours.

Oh and of course you have to get the special perks out of it somehow....

Posted by: wild west on September 15, 2009 at 11:41 AM | PERMALINK

wild west - you would need an oversight ombudsman office to audit the details for all congressman claims each year and compare against industry norms, leading to fines for any health provider that puts a congressman on a "special program" or gives special deals, levied personally against all C-level executives (not the company). Keep 'em honest!

Posted by: royalblue_tom on September 15, 2009 at 12:05 PM | PERMALINK

it actually could be worse than described: as someone who has had medical problems that started in december and continued into january, one learns that insurance deductibles roll back to zero at year's end. Blam! 2 years of deductibles to cover in one event. $18 grand out of pocket? I can't wait!

Posted by: dukej on September 15, 2009 at 12:24 PM | PERMALINK

Here's a catchy slogan - chant with me now...

"No public option? No mandates for the poor!"
"No public option? No mandates for the poor!"
"No public option? No mandates for the poor!"

Posted by: Ohioan on September 15, 2009 at 12:29 PM | PERMALINK

Is there a theoretical benefit to employers that can be passed on to employees and/or customers? Isn't a big reason that we need to reform the health care/health insurance system attempting to making our industry more competitive? No one is mentioning this angle anymore, I am starting to think that I imagined it.

Can someone help me here?

Posted by: phg on September 15, 2009 at 12:29 PM | PERMALINK

I sort of hope that the Obama-Emmanuel strategy on health care is the result of corruption and payoffs from the health biz. Because the alternative explanation is that Obama and Emmanuel are for some reason trying to sabotage the Democratic Party by pulling a Carter.

It just can't be stupidity. They're super-wonky wonks and have an average IQ somewhere past 150. Non-paranoid explanations just don't work.

Posted by: John Emerson on September 15, 2009 at 12:32 PM | PERMALINK

A quick review of the comments below reveal why change is so hard to come by. Currently, people are paying well over 100% of their income and going bankrupt. Under this bill - which will be tweaked to provide more benefit - people will not exceed a certain percentage of their income. My far left friends need to understand that EVERYBODY needs to start saving/paying and portion of their income for healthcare regardless of the system we are in. Moreover, insurance companies are NOT going to like this legislation...it eliminates pre-existing conditions, it contains caps, it eliminates cancelling of coverage due to illness. Medicaid is being expanding (brining millions on at little cost). Cost controls are in the bill - although not robust enough - and include more reasonable payments to Medicare Advantage (a republican scam), not paying full amounts if a person is re-admitted to the hospital, discouraging endless testing.

This is not perfect, but its a start

Posted by: MichMike on September 15, 2009 at 1:26 PM | PERMALINK

There's pretty good evidence that the insurance biz WILL like this legislation. And that's a very bad thing.

Posted by: John Emerson on September 15, 2009 at 1:54 PM | PERMALINK

Finance Committee Dems who were frozen out should just vote 'Yay' on the plan and note that they were frozen out of the process and fully intend to make their views heard on the Senate floor and cite specific examples from the HELP bill or the House bills that reference their concerns.

The Finance process is poisoned and Finance Dems who were frozen out should heed Groucho Marx's advice about not wanted to belong to any club that would have him. Now that Baucus is ready to hear their concerns they should offer them? The shortest distance to health care reform is to get Max Baucus off the damn stage.

Posted by: joejoejoe on September 15, 2009 at 2:34 PM | PERMALINK

Using the poverty rate as a peg is bad politics. You could give the same subsidies sliding down from the first 3 quintiles of household income and go around bragging about helping 60% of the people directly pay for health insurance. People at the top of the third quintile of income don't like to think of themselves as being some multiple above the poverty rate. They like to think of themselves as average or middle class. It's the same plan, just phrased differently.

Posted by: joejoejoe on September 15, 2009 at 2:51 PM | PERMALINK

Two points:

One it is a little dishonest to argue that we should use the outlier as the typical. That is most of the figures that get tossed around whether that be $3800, or $12,000 or 33%, or $32,000 as various measures of fines, out of pocket expenses, percentage of family income, or total cost represent maximums and not averages. Too many people are suggesting that every family will pay $12,000 every year out of their $36,000 income. This just isn't so.

Two, while it is true that for someone with a chronic illness you could hit maximums every year, that is something you can address specifically. But I am not impressed with the argument that in any given year you MIGHT have a family member with an illness or accident which would max you out for THAT year as an argument against the plan. That is to lose a certain amount of perspective. After all when you total your car or have a bad house fire even with the best insurance you will be substantially out of pocket, for THAT year and maybe a couple more. The right response is to thank your own diety for getting you out alive and hope that it will be a one time event.

I landed in the hospital last year with a life-threatening condition, not having insurance I delayed seeking help too long, my bad. The result was some big bills, the biggest of which was written off by the hospital (originally a charitable Catholic hospital) but the rest of which were passed on to me to be paid out of a combination of savings, credit and unemployment. It wasn't easy, on the other hand I wasn't dead so on balance I don't have much to complain about.

Personally i am for universal single-payer, it is not right that in the richest country in the world I had to rely on Nuns with whom I don't even share a faith to keep me out of bankruptcy. That isn't right. And there is no doubt that the Baucus Bill is too stingy. But I am seeing these same arguments deployed against the HELP and HR3200 Bills in pretty unfair ways. Lower income people lucky enough to be covered with employer paid insurance are ALREADY paying huge percentages of their combined compensation for health insurance. How about us seeing some before and after comparisons rather than just pulling scary totals and percentages out.

Posted by: Bruce Webb on September 15, 2009 at 3:11 PM | PERMALINK

Bruce, most people are healthy. Sick people are all outliers. The whole point of insurance is to flatten out that difference.

Posted by: John Emerson on September 15, 2009 at 3:33 PM | PERMALINK

It's obvious that the only reason the Republicans on the committee have agreed to the bill is because of it's flaws. Any Democrat stupid enough to vote for this garbage once it gets out of committee deserves to lose their seat. Something the Republicans have assuredly taken into consideration.
To gain support for the HELP bill, all Democrats need to do is publicize what was included in Baucus' bill to gain Republican support. Then make certain that the word gets out about the contents; something that will, probably, have to be done in spite of the MSM. Referring to the bill as the "Republican HCR", while it may anger Baucus, will all but ensure the passage of the HELP bill, an actual piece of effective reform legislation.
Baucus' ego could be salved, I suppose, by always referring to the bill as "the Republican-supported Finance committee bill", most voters won't know who the chairman is/was.
Really, so much is in how you word it.

Posted by: Doug on September 15, 2009 at 10:14 PM | PERMALINK

This article will sober you up:


Also, those caps on how much you have to pay out are pegged to GROSS income. Take away taxes, the recommended 10% you are supposed to save, your retirement that you are supposed to save for, your children's education that you are supposed to save for, and then your housing, which is allowed to be 30% of your GROSS income, I would say you are in the hole before you pay any bills at all.

Given that the poverty level is pegged to inflation of food prices and not housing prices, which has created a huge homeless population among other things, I am not for subsidies based on poverty levels.

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