The Baucus Bill

The Baucus Bill passed out of the Senate Finance Committee with one Republican vote (Olympia Snowe of Maine). Or at least an outline of the bill passed. We don't yet have legislative language. But it is clear that the Democrats are really intent on passing some kind of legislation. This is surely a temporary win for the reform side, but it raises more questions than it answers.

But the evil insurance companies, which up to now have been playing ball with the reform forces, have finally shown their color. The American Health Insurance Providers issued a report that projects rising insurance premiums for a lot of American voters. Of course they are evil, and, to be sure, motivated by interest. But the logic of the report is hard to escape.

If you are going to extend coverage to a lot of people who can't pay for it now, the money has to come from somewhere. One place a lot of cash was supposed to come from was young workers and others who can afford some insurance but choose not to purchase it. The bill had included a pretty severe set of sanctions to force them to open their wallets, and that would have been a source of revenue for private insurers. But the sanctions have been weakened to the point of ineffectiveness. Since the bill would also prohibit denying coverage to people with pre-existing illnesses, it will make sense for the recalcitrant uninsured to pay the modest penalties and keep on being uninsured. After all, if they do get sick they can pick up coverage then.

All this means that private insurers will have to cover a lot of new people with little if any new revenue. I'm no economist, but I think that means that premium costs will have to rise significantly. Of course a public option might take care of this, but that means the costs will be borne by public, and the price of the legislation will balloon. Houston, we have a problem.

Politically speaking, we now see two powerful forces arrayed against the Baucus plan. One is the insurance industry, and the other is the labor unions. They don't want their extremely generous healthcare packages, painstakingly negotiated, to be punitively taxed, as would happen under the Baucus plan.

It seems to me that a little momentum for reform has been generated, but that nothing much has been settled.

Comments

[A.I.]

One thing Left and Right can agree on is "nothing much has been settled" by the Baucus bill--except perhaps in the mind of Baucus himself. The evil thing is not quite so universal, even among the Left.

Many, if not most of us who favor reform do not consider the insurance companies evil per say. We believe they are doing what any company in a capitalistic system is expected to do, they are trying to make money by all legal means possible. And they are trying to keep their companies viable by satisfying the demands of Wall Street which, in turn, tries to satisfy investors who happen to be many of us. So if one wants to throw the term evil around, it is widely shared. Or put another way, the enemy is us.

[William]

The Democrats learned the wrong lesson from the failure of "Hillary Care". It's not that Americans don't like the IDEA of universal health care, it's that once they learn the inevitable costs, they're unwilling to pay for it. Given the current economic situation, people are particularly unwilling to support it.

If the Democrats don't pass a bill now, it will be viewed as a loss. If they DO pass a bill, it will likely be a mortal loss for the party once the details are recognized by the public.

[KB]

A.I.! I can't find anything wrong with what you just said. Where's the fun in that?

[Amy]

The insurance industry will always be greedy, hopefully the health care reform will help people that need it.

[George Mason]

KB; AI made a huge mistake. Insurance companies (like any business) can only stay in business by satisfying the demands of their clientele. Adam Smith explained this 250 years ago and it has not changed. Wall Street is interested in profitable businesses (those that take care of their clients) not in unprofitable businesses (those that don't). AI old friend, savvy investors look for companies that take note of the markets demand (the better mouse trap)and deliver it. These companies will be profitable. Any company that abuses their clientele (poor products, overpricing, poor service) will soon be out of business.

[Anthony D. Renli]

George- here is the problem. Adam Smith's theories only work if the game isn't rigged.

You and I don't have a choice as to who we go to for health insurance; it is our employer’s decision. Now – if insurance wasn’t tied to employment in the U.S. we wouldn’t have this problem…but it is, so we do. Therefore, the insurance companies’ customers are your employer and/or the doctors and hospitals they work with. So long as “their” customers are happy, they really don’t need to make you happy.

Insurance companies don’t tell you what is and/or isn’t covered, or how much will be covered until AFTER the fact. Having had procedures “Pre-Approved” only to find out after the fact that they are in fact not covered – I can tell you that the game here is rigged.

Insurance companies also have the ability to change the terms of your contract and/or void your contract pretty much when you see fit. They have dropped cancer patients because of acne. They have dropped heart patients because of un-reported yeast infections. They cheat…but because they can.

I guess I’m one of the ones who think that Insurance Companies are in fact evil…but that’s because I’ve had to fight tooth and nail to get covered services actually covered. I don’t know that this particular health care bill (or any of the ones that have been discussed) is the solution to the problem. If I knew what the fix actually would be, I’d tell you all.

[duggersd]

Anthony, there is nothing that says you HAVE to take your company's health insurance. There are independent companies out there. I happen to have a friend in the business. I keep hearing about those cases about acne, etc. but have never seen the substantiated. Even if they are, I find it hard to believe it is the norm.
This health care proposal that is being rammed through cannot even be scored honestly. In order for it to "appear" to cut the deficit over 10 years, the health care coverage does not go into effect until 2013. However the increased taxes go into effect as soon as the President signs the bill. So in effect, we have 10 years of taxes having a head start on the costs. If you look at the second 10 years, the costs something like triple. But who would ever think the Democrats had to be dishonest in order to get their program rammed through? BTW, I have never had any trouble getting something paid for that was covered.
Also, there are some proposals out there that would not cost what this monstrosity will and takes care of many of the problems some people have mentioned here and on other sites.

[William]

"You and I don't have a choice as to who we go to for health insurance; it is our employer’s decision"

Which is, perhaps, one of the biggest factors in the high price and inefficiencies in our present "system". Having healthcare delivered by Big Government isn't going to create competition or be "more efficient" than what we already have.

Anthony, you're right! The game is rigged because our insurance and health care choices are largely being made by third parties (business AND government) and until we can use real market competition allowing US to own and control our insurance and healthcare choices, we'll never have "real reform".

[lexrex]

i, for one, am thankful for insurance companies. without them, i would be bankrupt. are insurance companies perfect? not at all. i've had my problems with them in the past. but without them, i can't imagine where we'd be.

same thing goes for pharmaceutical companies. they've greatly lowered the cost of health care. what may have once cost someone tens of thousands for a heart surgery, can now be done for a few hundred with a simple little pill.

[George Mason]

If the government was really interested in reducing the cost of health care
they would change the tax laws to eliminate companies buying insurance for
their employees and provide tax breaks for individuals to buy their own.
They would allow individuals to purchase in a truly national market (a GEICO
health insurance company/companies?). These actions would put real competition into the market. Then the government has to do something about limiting damages (tort reform) and reforming medicare and medicaid to pay to cost so that these costs are not shifted those in non-government controlled insurance programs. This cost shifting is a direct tax on consumers.
Some of us have noticed that Obama et.al. have demonized everyone involved to
some extent in healthcare except for lawyers and Democrat politicians. The two
groups most responsible for artificially increasing costs to the consumer.

[KB]

Great discussion! I weigh in with this: it is true that private corporations serve the interests of their share holders and managers and not the public interest. That is their job. The trouble is, the same is true of public corporations, as well as Congress. The CBO estimates that tort reform would save about $54 billion over ten years. Granted, that is about a third of this year's budget deficit, but it ain't small potatoes.

So why isn't it in the bill? Because the Trial Lawyers (who really are evil) have a lock on Congressional Democrats. Congress has no hesitation to sacrifice fifty four billion dollars of the public interest for the sake of a gaggle of diamond ring shysters. Likewise many state healthcare systems are rigged in favor of public unions.

New York State spends as much on Medicaid as California and Texas combined, due to a hospital-union alliance. Is that in the public interest? Government is more prone to factional influence than private enterprises, with this difference: private corporations have to compete.

[lexrex]

i agree with you, kb, but shouldn't tort reform be up to the states? i don't see any authority for the federal government to determine how much a victim may recover in damages.

[Anthony D. Renli]

DruggardSD - actually - some companies (When Gateway still existed it was like this) require you to prove that you are covered by another employer's insurance plan OR you were signed up for their insurance. You didn't have an option to opt out and buy your own.

George – You have found one key to the problem – decoupling health insurance from employment. The problem is how do we do this? The health insurance companies will fight against this because then they would have to actually sell and service people instead of companies. Unless we put in VERY strict regulations in place, this would greatly increase the number of uninsured, as there are a large number of people who would not be able to buy insurance on their own if they were not part of an employee program at some business.
Your Geico analogy – is good on some levels, it seriously breaks down for health insurance. Unlike car insurance, where you can’t predict when someone will have a car accident, if I have a chronic condition (say I’ve got a bad back, or high blood pressure) or heck, I’m a young married woman, the insurance company will look at this and be able to calculate with a reasonable degree of success that this is a poor risk for health care costs because they KNOW that they will have expenditures for these individual customers.

KB - While Tort reform is necessary, it is a pretty small piece of the puzzle. The CBO says that tort reform could save up to 54 Billion a year, and Yes – this should be done. Don’t get me wrong - we need to do this…but Health Care is a 2.5 Trillion dollar a year industry – Dropping it to a 2.45 Trillion dollar a year industry while useful, isn’t really that much of a savings. Especially when you factor into the mix that that savings will be eaten up within one year’s cost increases.

[KB]

Anthony: thanks for the informative post. I agree with you that Tort reform is a small item fiscally, but 50 billion here and 50 billion there, and pretty soon you are talking about real money.

If tort reform is small in dollars, it's big politically. If Congress can't stand up to the Tort Lawyers, who can they stand up to? Fox News, perhaps. Behind the lawyers are healthcare worker unions, and doctors and hospitals, and the elderly. Any serious attempt to control costs is going to hurt some powerful group. But a lot of these groups can at least claim to be doing a serious public good. Does anyone really think that about tort lawyers? If the Administration and Congress can't afford to do tort reform, then you can kiss cost control goodbye. They can't.

It is not possible to believe that the Democrats will really produce a revenue neutral reform. That means they will have to pass another really large deficit inflating package, without Republican support, at a time when people are really worried about such things. Wow.