The Baucus Bill Explained and Deconstructed

Piggybacking on Mike Tedesco’s post about the Health Reform Committee meetings being aired on C-Span now, here is a roundup of analysis and commentary about the health care reform bill that Max Baucus just released from 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 credit or 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 purpsoe 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 procedural concessions 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?

One Response to “The Baucus Bill Explained and Deconstructed”

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