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 <em>average </em>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 lower-income workers. But hitting you with more than five of them at once could conceivably be bad for your health.
Mr. Eskow,
I was unaware that you worked in the insurance industry. With your experience, what do have against a private solution, like; cross state purchase of insurance, tort reform, expansion of groups, mandating of reforms within large groups that make it good for the insurer as well as the insured etc. etc.
Posted by: j.mckenna42@yahoo.com | September 16, 2009 at 08:23 PM