Wednesday, September 16, 2009

Max Baucus Delivers - For the Insurance Industry

Senate Finance Chairman Max Baucus finally released his health care plan after months of haggling. I'm not too impressed, especially on the matter of affordability.
It would extend benefits to millions of people who are uninsured by broadly expanding Medicaid, the state-federal insurance program for the poor, and by offering subsidies to individuals and families with modest incomes to help them buy insurance.

The proposal would also set limits on out-of-pocket health care expenses. It would cap at 13 percent of household income — not including cost-sharing such as co-payments and deductibles — the cost of insurance premiums for middle-class Americans who just miss qualifying for the new government subsidies.

Starting in 2013, it would require nearly all Americans to obtain coverage or face a penalty of up to $3,800 a year for families.
Did the committee see this item in yesterday's USA Today?
An average family health insurance policy now costs more than some compact cars, and four in 10 companies will likely pass more of that expense on to workers, according to a closely watched survey of businesses released Tuesday.

The average cost of a family policy offered by employers was $13,375 this year, up 5% from 2008, the Kaiser Family Foundation and the Health Research & Educational Trust survey found. By comparison, wages rose 3% over that period, the study said.
Or this information from Kaiser?
Let's do some very simple arithmetic. Start with a fairly conservative assumption: If we assume that premium increases over the next ten years will average what they did over the last five (about 6.1% per year), the average premium for a family policy in 2019 will be $24,180. That's a big number. On the other hand, if we assume increases revert to the average of the last ten years—an average annual increase of about 8.7% and a very plausible scenario—premiums in 2019 will average a whopping $30,803, a very scary number.
If my employer doesn't provide health insurance, I'd be better off paying the $3,800 penalty. No wonder Democrats and Republicans have raised all kinds of objections. In fact, Democrat Jay Rockefeller expressed very strong opposition to various features of the bill, including affordability, and he was supported by Yale Professor Jacob Hacker.
Have To Ensure That Coverage Is Affordable: Hacker pointed out a public option would save approximately $150 billion over 10 years and allow the government to invest those savings into better and stronger subsidies.
Hacker is the person widely credited with coming up with the idea for a public option. Did I mention Baucus's plan doesn't include one?
The Baucus plan calls for the creation of private, nonprofit health insurance cooperatives to compete with private insurers, a compromise aimed at bridging the gap between Democrats who want a government-run insurance plan and Republicans who adamantly oppose that idea.

As insurers, the cooperatives could offer their coverage plans on the exchanges.

And in a nod to the stiff Republican opposition, the proposal does not include a trigger calling for the creation of a public plan if the legislation fails to make affordable health insurance widely available, a compromise step that Mr. Obama has indicated he could accept.
No trigger. No public option. Unrealistic subsidies. This isn't reform. It's a handout to the insurance industry. That's not to say the public option is dead in the water.
Instead, Mr. Baucus seems to have left the public option to the alternate health care legislation developing in the House, where more liberal Democrats strongly support the idea and the House speaker, Nancy Pelosi, has called it crucial to getting a bill adopted in her chamber.
We really need Pelosi to deliver on the public option. The bottom line on affordability according to Ezra Klein is that the premium subsidies aren't where they need to be, but are pretty good, particularly for folks making up to 300 percent of the poverty line. However, ...
The question is what happens when you get sick. And the answer is pretty much that people making more than 200 percent of the poverty line will be less ruined than they'd be under current law, but still facing tens of thousands of dollars in out-of-pocket expenses a year.

Medical bankruptcy, in other words, isn't going away. One fairly dramatic way to think about this is that health-care costs are so high in this country that we can talk about spending almost $900 billion helping low-income Americans afford coverage and still be left with a situation where coverage is unaffordable and illness rips through a family's savings.
So after months of wrangling and innumerable compromises meant to attract Republican never existed support, this is what we get from the Finance Committee. Baucus isn't crying though. In fact, he's laughing all the way to the bank where he's depositing the $3 million he got from the insurance industry.


Kathy said...

Instead of writing another diary, I'm putting this under comments since it relates to the Baucus plan. The Center on Budget and Policy Priorities reviewed the info and determined "Subsidies Inadequate in Helping Low- and Moderate-Income People Afford Coverage."

Details here:

The plan would require premium contributions from low- and moderate-income individuals and families that are likely to be above what many of them can afford. These premiums also would be sharply higher than under the proposals adopted by the Senate HELP Committee and the House health reform bill (as amended by the Energy and Commerce Committee). (See Table 1.) In fact, premiums under the Baucus plan would be three times as large as under the House bill and nearly five times as large as under the HELP bill.

For example, a family of three at 133 percent of the poverty line (which would have gross income of $24,312) would have to pay $1,132 per year in premiums (or 4.7 percent of income) under the Baucus plan, compared to $365 and $243 per year under the House and HELP bills, respectively. A single individual at this income level (who would have income of only $14,404) would have to pay $670 per year toward premiums under the Baucus plan, compared to $216 under the House bill and $144 under the HELP bill. People at this income level would either have to pay these substantial premiums or face a significant penalty.[5]

Many moderate-income people also could likely have significant difficulty affording insurance. A family of three making $46,000 per year — approximately 250 percent of the poverty line — would have to pay approximately $4,800 — or 10.5 percent of its income — to purchase insurance. This would impose considerable burdens on many families, particularly in view of what they already have to spend on necessities. By comparison, under the HELP bill, the family would pay about $2,600 (5.6 percent of income), while under the House bill the family would pay $3,700 (or 8 percent of income). These figures are for the premiums alone; deductibles and co-payments would impose additional costs.

Check out the Tables at the link above. Very informative.

Kathy said...

Continued from above:

They also give this example of just how stingy the subsidies are.

Consider an illustrative family of three in which the father earns $35,000 from a small retailer and the mother earns $11,000 as a part-time sales clerk. Neither receives health care through his or her employer. The couple has a daughter in second grade at the local public school. The couple has avoided accruing credit card debt but has no life insurance or retirement savings. After paying basic expenses, [6] this family would have a little less than $650 a month to cover any costs for clothes or shoes, car repairs or maintenance, household expenses, restaurant meals, and any hobbies or activities — and all of the family’s health expenses. Under the Baucus plan, this family could pay $400 — 62 percent of the remaining monthly amount — just to cover the cost of premiums before taking deductibles and co-payments into account. In comparison, under the Senate HELP bill, this family would pay $214, or 33 percent of its remaining monthly budget, for premiums. Under the House bill, the family would pay monthly premiums of about $305, or 47 percent of its remaining monthly income.

The rich politicians in Washington are clueless. They have no idea what it's like to live a lower or middle-class lifestyle. Here's another example from the WaPo showing an example of a family with higher earnings.

Under the Baucus plan, subsidies would be offered to people who earn up to 400 percent of the poverty level ($43,000 for an individual or $88,000 for a family of four) in the form of tax credits that would be paid directly to the insurance company of the person's choice. The credit would be calibrated on a sliding scale to ensure that people at the bottom of the income range paid no more than 3 percent of their earnings for premiums while those at the top would be liable for as much as 13 percent.

That would amount to more than $700 a month for a family of four making $66,000 a year -- significantly more than most people at the same income level now pay, according to research conducted by Linda Blumberg, a senior fellow in the Health Policy Center at the Urban Institute. Families earning less than 300 percent of the poverty level also would be eligible for assistance with deductibles and other out-of-pocket expenses, but families who earn more would be on their own.

"That group does spend in the neighborhood of 12 percent of their income. But it's not just the premium. It includes out-of-pocket spending," Blumberg said, adding that the Baucus plan "is going to be somewhat of a wakeup call."

Families are struggling to keep their heads above water and this is the best they can do? Washington politicians get annual raises, the best health care taxpayer money can provide and hefty pensions, and they throw us bones? They deserve to be run out of office.