While most Americans do not have time to read this enormous piece of legislation, policy wonks like me do. The Baucus plan includes the following:
•Public Option? No. Instead, the bill provides funding for a state and groups of states to create nonprofit, consumer-owned-and-operated health-insurance cooperatives. These cooperatives would collect premiums from members and pay out claims from those funds. Individuals could join the cooperative through the state insurance exchanges that legislation intends to set up.
•Restrictions on insurance plans? Yes. Insurance companies would be banned for excluding anyone with a preexisting condition. They would only be allowed to adjust premiums based on tobacco use, age, family size and geographic location. Finally, insurers would not be allowed to cap the amount they pay out on a policy annually.
•Individual Mandate? Yes. Beginning in 2013, individuals without health insurance would be fined.
•Employer Mandate? No. However, employers would be fined if any of their employees received subsidies to purchase insurance through the exchanges. In addition, if employers that have 200 or more employees offer health-insurance coverage, they would automatically have to enroll workers, although workers could opt out if they could obtain insurance from another source.
•Health care industry pays for part of reforms? Yes. Pharmaceutical companies would as per an agreement made with the White House earlier this year, cut name-brand drug costs 50 percent for Medicare Part D recipients stuck in the “doughnut hole,” the gap in prescription-drug coverage that occurs when seniors’ drug costs for the year exceed a certain amount. In addition, insurance companies would have to pay an annual total of $6 billion; pharmaceutical companies, $2.3 billion; medical-device makers, $4 billion; clinical laboratories, $750 million (amount each company pays is based on market share).
Does the Baucus healthcare plan achieve the goals of health care reform? If we agree with President Obama, the aims of health care reform are to: “provide more security and stability to those who have health insurance,” “provide insurance for those who don’t,” and “slow the growth of health care costs for our families, our businesses, and our government.” Moreover, according to President Obama, the guiding principle for health care reform should be: “consumers do better when there is choice and competition.”
The Baucus health care plan achieves the goal of providing security and stability to those already with insurance by prohibiting insurance companies from excluding anyone with a preexisting condition and capping the amount paid out on a policy annually. These reforms are made possible by the individual mandate; without it, either many would choose to go without insurance, or likely, some employers would not provide workers with healthcare. When these uninsured become sick, the provider often has to pick up the emergency room costs. The provider then passes on that loss to patients who can pay in the form of higher fees, which leads to higher premiums with exclusions for preexisting conditions and annual payment caps.
While the Baucus plan mandates that everyone must have insurance, it does not achieve the second goal of insuring the uninsured. The high cost of insurance deters the uninsured from buying it. The Baucus legislation’s inadequate reforms for health care affordability do not guarantee that every American will have health insurance. Congressional Budget experts expect the bill to reduce the uninsured population by 29 million in 10 years; the current uninsured population is 45 million people. The bill attempts to make insurance affordable by creating state or multi-state insurance exchanges. However, these exchanges are not available to all Americans and lack competition. First, only small companies and those individuals unable to obtain insurance outside the exchange can shop in the exchange. This population is 25 million people. Second, the bill tries to increase competition in the exchanges by creating nonprofit health insurance cooperatives; however, the Congressional Budget Office states that these cooperatives “seem unlikely to establish a significant market presence in many areas of the country.” Third, according Jacob Hacker, professor of political science at Yale and a health policy authority, “the federal subsidies for low-income and (especially) middle-income Americans [are] inadequate, [and] the standards for coverage are extremely weak.” Finally, the bill penalizes employers if any of their works receive subsidies through exchange, which increase with family size; therefore, it penalizes employers for hiring low and middle income parents (read single mothers).
Two amendments currently proposed would achieve the goal of affordable insurance. New York Senator Charles Schumer’s amendment would create a public health insurance plan that would compete with private insurers on a level playing field. According to most health and economic policy experts, a public option is one of the best ways to achieve choice and contain costs. On the other hand, Oregon Senator Ron Wyden’s amendment would require employers to offer at least two health insurance options or provide vouchers for workers to purchase insurance through the new state insurance exchanges. This would open up the exchanges by allowing consumers to buy the insurance plan that meets their needs.
The Baucus health care plan somewhat meets the third goal of slowing the growth of health care costs. The bill includes reforms proposed in a Brookings Institution health policy paper such as investing in health IT, using comparative effectiveness research and an increased emphasis on prevention. However, it leaves out many of the more fundamental and important changes proposed in the paper, such as provider payment reform and benefit design. Most health policy experts support the elimination of the fee-for-service payment system. Under this system, providers are incentivized not to achieve beneficial outcomes, but to produce as many services as possible. The Baucus plan does not put us on the path to attaining a value-based payment and delivery system. The amendment proposed by Washington Senator Maria Cantwell, for instance, would nudge us in that direction; it revamps Medicare’s payments to doctors, hospitals and other providers to reward high-quality, lower-cost care.
All in all, the Baucus plan is a political compromise. Yet, political compromise only postpones making the tough decisions and makes those future difficult decisions even harder. We need a serious attempt to reform our health care system, not another inadequate attempt without a public health insurance option and reforms to the payment and delivery system of healthcare.