Baucus Revisions to Reform Bill: Who Will Pay?

Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee, made some very significant concessions to the Democratic members of his committee and to Sen. Olympia Snowe (R-ME), who could be the swing vote in the Senate, in an effort to build support for his healthcare reform bill.

Among other things, Sen. Baucus would

• Allow families with incomes up to 400 percent of the poverty level to qualify for government subsidies to buy health insurance;
• Exempt policies for workers in high-risk industries, non-Medicare retirees and others who have expensive policies because of age or occupation from a federal excise tax on insurance, while proposing that the excise tax be raised from 35 to 40 percent;
• Reduce the penalty on households that decline to purchase insurance from $3,800 to $1,900.

The Congressional Budget Office (CBO) said last week that Baucus' original plan would save the government $49 billion over 10 years. Now, it's reported that the new modifications would cost $50 billion and, after offsets, eat up $28 billion of this surplus. Frankly, I don't believe that the cost would be that low. Just subsidizing coverage for the uninsured with incomes between 300 and 400 percent of the poverty level would cost far more than $5 billion a year, unless the subsidies were so low that they wouldn't make coverage affordable.

Julius Hobson, a senior policy advisor at the Washington, DC law firm Bryan Cave LLP, points out that it's difficult to estimate the cost of the revised bill, because the CBO has not yet recalculated it, based on the latest modifications.

Hobson, who was formerly the chief lobbyist for the AMA, does not believe that the final Senate Finance Committee bill will include a public option or substantial penalties for employers that do not offer coverage to their workers--both features of bills that have come out of other Congressional committees. He also doubts that Congress will seriously reduce Medicare reimbursement or change how providers are paid.

"If you hit some of these providers as much as some people on the far left want to hit them, they're not going to just sit there and take that. They're going to pass those costs on [to private payers]. It's just the economic reality. So that's one of the reasons you have to go other places to get some of the revenue [to cover the uninsured]."

In the end, Hobson says, Congress will pass a largely incremental bill that does not resemble a big government solution. "If you think [the healthcare crisis] requires a big government solution, you ain't going to get it. It's simply not going to happen, because the votes aren't there."

That's certainly true when it comes to major restructuring of the healthcare system, which isn't contemplated in any of the reform bills. And it's also true with regard to the public option. But requiring every citizen to have health insurance is a big-government solution that will affect not only the uninsured, but anyone who might lose their insurance in the future. That's a lot of people, when you consider that in a recent 10-year period, 40 percent of non-elderly Americans were uninsured for six months or more. And that's why the affordability of insurance is still the key issue.