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Baucus Bill Survives Committee: What Next

The Senate Finance Committee this afternoon, on a vote of 14-9, approved the Baucus Bill out of committee, sending it theoretically to a floor vote. Sen. Olympia Snowe, a Republican from Maine, was the lone Republican vote in support.  The Bill, a center of recent controversy in terms of its lack of reported details, incomplete CBO scoring, and the target of a report released by the insurance industry via Price Waterhouse and Coopers, now faces an arduous re-write process as Senate Democrats, specifically Senate Majority Leader Harry Reid, will try to meld the Baucus version with the Dodd version (Health, Education, Labor and Pensions Committee), producing a single piece of legislation for a vote.

While this step is considered historic by many (the first piece of health reform legislation ever to be voted on by any aspect of the House or Senate), the Bill faces certain wholesale reconstruction over the next days.  Enormous questions and uncertainties remain over significant aspects of the legislation, none the least is what its actual cost will be.  In testimony today before the Finance Committee, representatives from the CBO admitted that a lack of time and detail prevented accurate estimates to be completed.  As I have noted before, the CBO has been historically inaccurate (low) on estimating the cost of major legislative initiatives.  Other major “questions” that need to be addressed are as follows;

  • The lack of requirement for private citizens to purchase insurance or companies to provide insurance.  The insurance industry is stating that without such a requirement, healthy individuals will opt to pay the very modest tax penalty and remain uninsured knowing that as soon as an illness of significance strikes, they can purchase insurance with no penalty – the bill prohibits insurers from barring coverage due to pre-existing conditions.  The insurance industry believes that only “ill” or “sick” people will be insured thereby creating adverse selection, higher costs and too small of a risk pool to spread the risk.
  • The issue of future private costs of insurance is a significant area of contention.  The legislation, without a mandate for all individuals to be insured, potentially raises significantly, the cost of private insurance.  With private insurers taking on a group with pre-existing health conditions and substantial cuts forthcoming (the Bill requires these) to Medicare and Medicaid spending levels, there is justifiable concern that private insurers will bear the brunt of cost-shifting among providers as well as the costs of an abnormally unhealthy cohort group.  While the Bill contains subsidies for private insurance companies, the levels are unlikely high enough to avoid or abate, rising private insurance premium levels.  Some estimates, such as those contained in the Price Waterhouse Coopers report suggest the increases could double the current average cost of insurance within ten years.
  • Considering the point above, smaller employers are now somewhat concerned that the Bill, containing no public option aside from the unknown and undefined co-op program, may bear significantly higher costs of insurance if they continue to offer health insurance.  Employers that choose to drop their programs altogether are concerned that they may become non-competitive in the labor market.  Employers also, if they choose to drop their health programs, face a penalty for every employee that sought insurance with a government subsidy.
  • The Bill includes a significant expansion of Medicaid as a means of covering low income individuals.  Medicaid is already considered by providers (doctors, hospitals, etc.) as the poorest payer (amount) of all sources of reimbursement.  Without a reform on the payment side to assure more payment adequacy under Medicaid or alternatively, rules mandating providers to treat Medicaid patients, access issues (already a problem in many urban areas) could be made considerably worse.
  • The Bill doesn’t address a number of issues that are significant to both parties – Republicans and Democrats.  On the Republican side, issues of tort reform, taxation, and funding are still an issue.  On the Democratic side, the issue of a public option, coverage mandates, and Medicaid access will need to be addressed.  Both parties will need to wrestle with the impact of Medicare and Medicaid spending reductions in the Bill as provider groups are already at arms over issues of reimbursement reductions, especially physician fees which only receive a one-year protection under the Baucus legislation.

Historic?  Yes but more history is yet to be made.  This first step is almost insignificant in terms of where the health reform movement will ultimately end.  This step if anything is purely symbolic and framing; a jumping off point for a journey that still must wander through the Senate, arise in the House, navigate through Conference, and then back to each floor for possible final approval.  In the world of politics and public policy, this is a lifetime with its requisite fits and starts, ups and downs, successes and failures.


October 13, 2009 - Posted by | Policy and Politics - Federal | , , , ,

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