Evaluating Baucus’ Bill
Without a doubt, there are many, many reasons to be mad at Max Baucus. However, as The Atlantic notes, he did get a few things right. Namely, his “chairman’s mark” has a host of reforms, some high-profile and some low-key, which provide a solid fiscal foundation for health reform. In fact, the Congressional Budget Office estimates that Baucus’ bill will cost only $774 billion over a decade and actually reduce the deficit by $49 billion over this timeframe.
To be sure, Baucus does have many things wrong:
- The public option–Dropped in the futile search for compromise, the public option would have been a good idea. As a nonprofit it would have reduced premiums, and it would have injected competition into the insurance industry. More on the public option here.
- Subsidies–Baucus allocates only $463 billion to insurance subsidies, compared to $773 billion in the House bill. Given that reform will require individuals to have insurance, it’s only fair they be given the means to do so.
- Politics–By deliberating and delaying all summer, Baucus cost reform crucial momentum. The “bipartisan”outcome he sought now seems exceedingly unlikely. This will probably be his legacy in this fight, as it should be.
However, his bill fares far better on cost control. There he has several good ideas, each of which would “bend the cost curve” in the long run. While I do hope that a public option and increased subsidies are added to his bill, I’d like to see these provisions remain:
- Exchanges– All bills have “exchanges”, or marketplaces in which individuals can choose their coverage. Now, most are stuck with their employers’. Therefore insurance companies don’t have to compete for them, and they can treat them horribly. While exchanges would promote competition, other bills limit them to individuals and small businesses (20-50 employees). On the other hand, Baucus’ bill expands exchanges to all Americans by 2022.
- Employer Benefits–Currently, employer-based health benefits are tax exempt. As I argued earlier, this is regressive and promotes unnecessary health spending. Baucus’ bill is unique in that it taxes “gold plated” plans (at 35% over $21,000). This funding will scale in proportion to health costs, which other sources will not.
- Quality vs. quantity–Currently, doctors are rewarded for the quantity of procedures instead of the quality of care. As a result, they order unnecessary tests which do little for patients. In fact, the Council of Economic Advisors estimates that 30% of health spending may have no effect on outcomes. Beginning in 2015, Baucus’ bill will cut Medicare reimbursements 5% for those who order the most care without anything to show for it.
- Coordinated care–Currently, many doctors do not work in “teams”. This isolation leads to unnecessary duplication and waste. (For example, you could get an MRI from one doctor, who refers you to another, who in turn orders a second MRI because he does not know of your first). As Atul Gawande suggests, this is a major contributor to health inflation. Baucus’ bill has incentives, such as voluntary payment bundling, to encourage coordination.
- Independent Medicare Commission–Baucus’ bill would create an independent Medicare Commission to recommend savings if costs run too high. Their recommendations would then receive fast-track consideration in Congress. This could move forward the most promising reforms, and perhaps be the most important provision in the long term.
Baucus’ bill needs a lot of work. Sen. Rockefeller hopes to amend it with a public option, and Sen. Wyden hopes to broaden access to exchanges. Even Sen. Snowe, a Republican, hopes to increase subsidies. On these “big” issues, Baucus’ bill needs modification. But, on the small things, it does much better. These small things add up, and they should be in the final bill.