Explaining and Deconstructing the Baucus Bill
Here is a roundup of analysis and commentary about the health care reform bill prepared by Max Baucus and the Gang of Six on the Senate Finance Committee.
Pretty much nobody likes the bill. Baucus scraps a “simple employer mandate that forces every employer over a certain size to provide health-care insurance or pay a small fee,” and replaces it with a “free rider” provision, which is explained in detail here.
The GOP leadership and conservatives in general have spent a lot of time arguing that we don’t need single-payer or a public option — we just need more competition in the free market. So what does Max Baucus do, but include a co-op option that cannot compete with the private insurance industry:
The co-ops have never been a satisfying alternative to the public option. But the version in Baucus’s bill isn’t even a satisfying alternative to the co-op option. It’s a neutered version of the co-op idea, which was in turn a neutered version of the public option.
The co-ops are on the state level, with each state pretty much required to have one. The 50 co-ops can then band together to leverage their national purchasing power. Sounds good, right? Sort of.
The co-ops can only compete in the small group and individual markets. That is to say, if the co-ops prove effective, and The Washington Post would like to offer co-op coverage as an option to its workers, it can’t. The co-ops are not allowed to contract with large employers, which is to say, they can’t compete with private insurers in the largest market, and they can’t get the purchasing power that would come from a serious foothold among corporate customers.
The bill does have the advantage, according to the Congressional Budget Office, of being deficit-neutral. In fact, the CBO claims it will reduce the deficit over 20 years.
Marcy Wheeler disagrees with Ezra in that she believes the free rider provision, although bad, is not the worst policy in the Baucus bill:
Here’s what MaxTax says. …
The employer would pay the lesser of the flat dollar amount multiplied by the number of employees receiving a tax creditor a fee of $400 per employee paid on its total number of employees.
For example, Employer A, who does not offer health coverage, has 100 employees, 30 of whom receive a tax credit for enrolling in a state exchange offered plan. If the flat dollar amount set by the Secretary of HHS for that year is $3,000, Employer A should owe $90,000. Since the maximum amount an employer must pay per year is limited to $400 multiplied by the total number of employees (for Employer A, 100), however, Employer A must pay only $40,000 (the lesser of the $40,000 maximum and the $90,000 calculated fee). [my emphasis]
So Ezra’s (and Baucus’) hypothetical employer would pay just $40,000. But say Employer B had just 5 employees who were subsidized, out of the same 100 employee firm. Employer B would pay $15,000, which brings it closer to the costs an employer might incur trying to preferentially hire an employee who might already have health care.
Ezra’s point still holds–to a degree. Both employers have an incentive to avoid hiring low income workers for whom they might be fined.
But that last bit is key: not every low income worker will get an employer fined. In fact, as I’ve pointed out, MaxTax actually includes an even bigger incentive for employers to hire very low income workers–and make sure they remain very low income. That’s because MaxTax does not penalize employers whose employees opt out of their health care by enrolling in Medicaid instead. With the Medicaid eligibility raised to 133% of poverty, it would be a very easy thing for a company like Wal-Mart to ensure its employees remain eligible for Medicaid. And, unlike a few of the scenarios that Ezra describes (such as preferring undocumented workers who can’t be enrolled in the exchange), this one is completely legal. So with the Medicaid provisions, the biggest incentive is for an employer to employ as many employees as possible who qualify for Medicaid, because it’s the one way for a large employer to get the federal government to pay for the employer’s health care for free.
[...]
The reason I say this is a worse policy than the one Ezra points to is that it is much easier to pull off while staying within the law and its got a bigger upside for employers. More importantly, it means the one employer action for which MaxTax provides the biggest incentive is to create huge numbers of jobs guaranteed to keep those working in them in poverty.The Wal-Mart bonus included in MaxTax would likely set off a race to the bottom among employers–to shift as much of its work force as possible into Medicaid-eligible shit jobs. MaxTax is a Democratic bill rewarding employers for keeping its employees in poverty, and it would accelerate the impoverishment of America’s workers.
One way or another, everyone seems to be riffing off of Ezra Klein’s thoughts on Baucus. Which, as Jay Stevens notes just before he summarizes Ezra’s points, is no surprise:
While many of us disagree with Ezra on the priorities, goals, and [purpose] of healthcare reform, I think it’s safe to say the dude knows his sh*t.
Baucus seems to have struck out with everyone, from liberal groups and professional health care advocacy organizations to Democrats and Republicans in Congress — that last despite the many concessions Baucus made to get the Republicans on board. Greg Sargent quotes Matthew Yglesias and continues:
In addition to the substantive concessions Baucus made in order to get nothing, it’s worth noting that Baucus made huge proceduralconcessions in order to get nothing. If he’d just stuck to the schedule, we would have been at this point in the process at a time when Barack Obama’s approval rating was considerably higher. And at the end of the day, politics is largely about politics and winning bipartisan support for proposals has at least as much to do with the popularity of the proposer.
It’s important to add here that Dems agreed to this delay largely because Republicans were insisting that we shouldn’t rush the process, and Dems blinked. The widely-blared GOP message was that Dems were intent on bum-rushing a bill through without GOP support, and that if they only slowed the process down, bipartisan compromise would be attainable.
Result: Baucus asked for more time for the Gang of Six to work its magic, and Harry Reid gave it to them, saying that this request was not “unreasonable.” The resulting delay was used by reform foes — and even by the same Republicans who were dangling the prospect of compromise — to stoke the public’s fears throughout the month of August.
Dana Goldstein at The American Prospect has the clearest, simplest explanation of the free rider provision I have seen so far. She makes it very easy to understand:
I want to say a little more about the “free rider” provision in the Baucus health plan, which Tim highlighted this morning. The HELP Committee and House bills require most employers to provide health insurance for their workers. But the Baucus plan does not include such an employer mandate. Instead, it requires companies to partially reimburse the government for the insurance affordability credits of uninsured workers and their dependents.
This creates some very perverse incentives. It discourages companies from hiring single people, who don’t have a spouse whose employer-provided insurance will cover them, thus offering the employer an “out” on the subsidy payback. It encourages employers to pressure married, uninsured workers to go into their spouse’s health plans, even if the worker feels they’d get better coverage for a lower cost on the exchange. And worst of all, it particularly discourages firms from hiring single people with children, because they’d have to pay for the children’s subsidies, as well.
We know who’ll be affected most by this bad, bad idea: low-income women, who are already pushed into “pink collar” jobs with more unstable hours, less benefits, and less pay than similarly educated men. Now even those jobs will be harder for single moms to get, as employers weigh whether a worker earning $15,000 or $20,000 a year is worth paying an extra several thousand dollars for, because of this subsidy payback requirement. Why not just hire someone without kids? Or someone married?
Cross-posted at Comments from Left Field.
18 Responses to “Explaining and Deconstructing the Baucus Bill”
The democrats should have had the vision and courage to push for a single payer system, then the resulting compromise would have included a public option. As it is, our “reform” will probably end up being meager and ineffective… thanks largely to the party of no, but with help from some foolish D's. Oh well, healthcare reform has only been in the works for decades now, we must be patient. Maybe in 2030?
Kathy, this post was enlightening. Thanks. I go back-and-forth on this issue. If we end up with a compromise along the lines of COBRA, then that will have been a defeat, since it's basically a worthless piece of legislation — far too expensive for those switching jobs. If all we end up with is prohibiting companies from not paying on the basis of pre-existing conditions and outlawing recission (sp?), then that would be a step in the right direction, though as the French say, the mountain will have given birth to a mouse. (Loosely translated, a tiny outcome for a lot of noise!)
I have to agree with redbus, Kathy. That was a very enlightening piece. Thank you.
I still hate the Baucus bill. Like redbus, I go back and forth on the issue. Not wild about single-payer and the crap that would bring, but I would like to see REAL reform through regulation of healthcare and insurance corporations; as well as serious tort reform to bring the cost down.
And as I've said before….
That will never happen since each of the aforementioned entities have republicans, democrats (or both) in their pockets.
Goes back to the 9-12 protests. The main reason for them: WE aren't being represented any more and haven't for a long long time.
Seems it would be a lot better for employers to have to pay the fee regardless of income status of the employee. $400 a year is still a bargain considering that an employer paying full healthcare is forking over about 13k per employee now. I think progressive actually have a valid point this time.
I agree, Leonidas. There's a somewhat positive article on the plan from Krugman today, so maybe the details and some compromises can be worked out.
It's very simple. The end game with any proposal that is other-than-public-option is to create something that can later be deregulated and the status quo of cash-for-denial-of-coverage can once again reign supreme.
That's all they're up to: buying time until the Mob gets back in the Whitehouse and Congress again. That's what the fury is about with Obama. A small group of superwealthy are milking ignorant racism from ever-willing sections of backwards populace at its flanks. The real issue is a money monopoly and the never-ending gyrations of MedMob to try to cloak it as an act of irrevokable compassion.
The keyword is “revokable”. If the public ACTUALLY is allowed to taste the sweet nectar of total coverage with no premium, like free police protection and free fire protection and free military…they'll never deregulate THAT…and MedMob knows it. Long ago I called them out on their sham “the public option is too expensive, too unwieldy…yadda yadda crapola. I asked why, if it's such a disaster waiting to happen, they just don't let it happen, laugh and say “I told you so”? The answer is, they know it will work, it will catch on, people will love the Public Option like they love police protection without effort. Private insurance will lose their precious monopoly and will be forced to actually compete with excellent rates and top notch service. In other words, their profit margin will decline…
That's what this ENTIRE BS is all about since day one: MedMob's profit margin vs the wellbeing of US citizens. Their trying to divide our country by inciting riots during war…? That's a side issue that should be addressed accordingly. Using trying to divide the country during time of war for profit…hmmm…what's that called again? hmmm…I think it's called “treason”. Reward accordingly Congress..
Well, I'll try to keep an open mind anyhow, but if Krugman likes it, its probably a disaster. There is no one I find to be as foolish as that man outside of the looney bin.
The Baucus bill was the adult Democrats' great hope, and it has bombed — the health care debacle is even more of a debacle now. Many Democrats in the Senate as well as the GOP don't like it, and the Dems there will be like the House Dems, trying to yank the final legislation leftward, so it will likely fail, as it ought.
Krugman: arrgh. What toxic waste. I was thinking of him and someone else while on the road yesterday and the day before. Krugman is such a pathetic hack and worse that he makes somebody else well to the Left actually refreshing and desireable to hear, as an alternative: Robert Reich!
“I would like to see REAL reform through regulation of healthcare and insurance corporations; as well as serious tort reform to bring the cost down”
That's always been able to be pursued from the very beginning, and never required the public option.
Instead, the Dems chose something else (incremental federal takeover). That, coupled with their increasingly disturbing overreach and rushing of bad legislation this year, has wrecked them.
And now the adult Dems' Hope [tm] that the Baucus bill would Change [tm] their self-made dismal prospects is shattered. They're in even worse shape now.
Now we await the new Dem Senator from Massachusetts (Dukakis, say) and see what stunt is next.
What redbus said.
Redundant, I know, but until we get rid of legalized bribery, special interest money and influence in Washington, this is what every piece of legislation turns into. It won't move unless the insurance lobby, the trial lawyers, the AMA, the AHA, the drug companies and the unions get what they want, or some great piece of what they want. Proof: look at the rise in stock value for health insurance companies across the board the day Baucus announced this proposal.
We have a legislature inured of systematic bribery (that they call “access”), a Supreme Court that encourages it under the rubrik of “commercial speech”, and pretty much nobody in the power corridors willing to take it on.
Hmmm:
http://online.wsj.com/article/SB114351554851509…
Thanks for the positive feedback, all (well, almost all — hi, DLS!). I did not understand the Baucus bill very well myself before I did this post; that's actually why I decided to do this roundup.
I find the specifics of that analysis suspect. “Race to the bottom” is an ugly way to say employers would suddenly find low-wage employees much more attractive and would hire more of them, which most of the nay-sayers would ordinarily tout as a terrific outcome.
But the broader point is true. The more complicated the regulations get, the more loopholes and side effects they open up. Those are hard to foresee in advance, and they'll be wonderful…occasionally.
The Baucus bill seems like another layer on top of a system already teetering under too many layers. Of course we can't predict the consequences, and of course we can imagine some we might not like. I'd much rather see a reform that moved toward simplifying the system, leaving us with fewer layers rather than more.
“Race to the bottom” is an ugly way to say employers would suddenly find low-wage employees much more attractive and would hire more of them, which most of the nay-sayers would ordinarily tout as a terrific outcome.
I don't think it's a terrific outcome, and I doubt many liberals or progressives would, either.
Just for clarity, I trust you understand that the word “bottom” in “race to the bottom” in the context Marcy Wheeler was using it refers to the quality of the jobs, not of the individuals who would be hired to fill them.
Also, when you say, “I don't believe this women-are-underpaid mantra stands up to scrutiny,” can you point to evidence that women are not over-represented in the kind of low-wage jobs employers would be hiring for with the incentives the Baucus bill creates?
Kathy, I just can't get into your frame of reference. Your second and third paragraphs are infused with this presumption of conspiracy that hasn't been proved. The ratio of women to men in low paying jobs might indeed be higher than the ratio in the population as a whole. That might be because they were “pushed” there, or it might not. Corporate America might be going out of its way to mint miserable jobs for them so it can secure a tax advantage, or the jobs might simply be what needs doing, the workers' skills and choices might be what they're capable of, and they might be getting paid what they're worth.
I'm uncomfortable with how easily you and many others hand out “guilty” verdicts without even the semblance of a trial.
Kathy, I just can't get into your frame of reference
Well, yeah, no kidding.
Your second and third paragraphs are infused with this presumption of conspiracy that hasn't been proved.
My 2nd and 3rd paragraphs of what? My last comment? My post? Because neither of those two possibilities make sense as being “infused with this presumption of conspiracy that hasn't been proved”? What presumption of conspiracy? What are you talking about?
I don't know where you think I referred to a “conspiracy,” but there doesn't have to be a “conspiracy” to keep women in low-paying jobs. But if most of those low-paying jobs are filled by women, then it might be a good idea to find out what the reason is and address it. Having said that, the larger problem is the incentive created by the Baucus bill for employers to prefer hiring workers for low-wage jobs, whether it's men or women who fill them. The point about women is that since women *are* more likely to be filling such jobs, it affects them disproportionately. I mean — obviously.
I don't know what part of this you don't get.
“positive feedback, all (well, almost all — hi, DLS!)”
Howdy, Kathy. Look at the (relatively) bright side. The Baucus fill has fizzled, and has been criticized by Dems in the _Senate_ as well as the House as being too far to the right, so now you'll be able to enjoy the reasonable expectation that the Senate revisions and the House-Senate conference is going to pull resulting legislation farther to the left than the Baucus fill. In fact, I would not be surprised if the legislation that does eventually make it to Obama's desk is a derivative mainly of HR 3200 (lib Dem House bill) rather than the Baucus bill, which nobody but Baucus seems to like.
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