Baucus bill a dud, but not all bad

Now that the Senate Finance Committee’s bill has landed in draft form, it’s pretty much the turkey that progressives expected it to be. The Chairman’s (Max Baucus, D-MT) version, set for debate and vote within the committee next week, was released two days ago.

Leading the disappointing features of the bill is the lack of a public option – a government-financed program for health care. The bill does expand Medicare coverage modestly, and in that sense expands a public program of health care. It also provides $6 billion in start-up funds for non-profit health care co-ops. But the Congressional Budget Office (CBO) predicts that the co-ops will have little impact because, as currently drafted, they are not likely to be widely utilized or competitive.

A second disappointing feature of the bill is that it won’t accomplish universal coverage. The draft version itself estimates that the number of insured Americans will only reach 94% (from the present 83%), leaving close to 20 million legal residents without coverage. My guess is that that’s an underestimate. The bill mandates that individuals purchase health insurance, which typically costs several thousand dollars per year, but levies a penalty of only $400 per year for those who don’t. Too many people, I fear, will choose the cheaper option of paying the penalty, leaving them uninsured, detracting from their market power to spread risk and therefore lower costs, and leaving the expense of their emergency health care in the hands of the taxpayer, as it now is under the current broken system.

A third problem with the bill, which is a philosophical more than a practical objection, is that it so obviously benefits the health insurance industry directly. It mandates that more people buy insurance, but does little else to reign in the costs of that insurance up to premiums as high as $8,000 per year.

Notwithstanding these objections, there are some positive points in the bill.

Like all the other versions pending in Congress, the Baucus bill requires that insurance exchanges be set up that would provide a range of options for the individual to choose from (just as members of Congress enjoy). Insurers who participate in the exchange – and the prospect of a large pool of customers provides them incentive to do so – would have to (1) accept all applicants, (2) not deny coverage on the basis of preexisting conditions, and (3) not vary premiums on the basis of the health of the insured. These features alone are a huge improvement over the current, abusive practices.

Also in its favor is that the bill truly appears to be deficit-neutral, meaning that it will not add to the deficit over the long run. This is significant in undercutting the Republican allegation that health care reform will add to the national debt, making it harder for them to mount a filibuster against it in the Senate. The CBO estimates the net cost at about $500 billion over 10 years, considerably below the cost of the Tri-Com Bill in the House and the other Senate (HELP Committee) bill. Of course it does so by limiting subsidies to middle-income individuals well below the cost of the actual insurance and by providing no public option. The major source of revenue offsetting the cost of the program will be a surcharge on premium insurance plans – those costing more that $8,000 per year ($21,000 per family). Unions don’t like this, but this is what Obama has advocated, and I personally think it’s a move in the right direction.

I also believe, in contrast to some of my liberal friends, that a withholding tax surcharge on individuals (not to exceed 13% of income) is not such a bad thing. I have long believed that all of us need to face up to the need to pay for health care, in proportion to our ability to do so – not only as a public responsibility, but as incentive to buy into the program.

Don’t get me wrong. I would vastly prefer a public option (preferably a single payer plan) financed from general revenues. But those general revenues have to be augmented by taxes to be deficit-neutral, and being deficit-neutral in the long run is essential for avoiding a national economic catastrophe. So in the meantime, mandating that all of us pay into the system, provided that subsidies are available to ease the burden on those at low income levels, is a reasonable thing to do.

On balance, the bill deserves support. It has a number of strengths that represent an improvement over the status quo. It still requires debate, and may be amended in a more favorable way before being voted out of the Finance Committee. Once it has been, then reconciliation with the better version from the HELP Committee can proceed.

The House now appears likely to pass a bill that includes the public option. Whether the Senate is able to do so is questionable. Ultimately, though, the House and Senate have to come to agreement on a single bill to send to the President. I hope the public option is part of it. But even if it isn’t, I continue to maintain that some bill is better than none. I reserve the right to change my opinion when the details become clear, but for now I think that cause for optimism remains.

With all its deficiencies, the Baucus version of the Finance Committee bill is not all bad, and certainly provides a basis, at long last, for moving forward.