Thursday, September 17, 2009

Chairman's Mark misses the mark

A well-known joke in statistics goes,
If you stick your left foot in a bucket of ice and your right foot in a bucket of scalding water, the law of averages says you should be pretty comfortable.
So too go some types of political compromise, including Sen. Max Baucus' proposal on insurance reform.

The fundamental flaw of the proposal is that it combines Democrats' calls for personal insurance mandates with Republican-friendly provisions that reduce subsidies, eliminate employer mandates, water-down public alternatives, and increase insurance pricing flexibility. If enacted, the legislation will require people to purchase insurance without providing affordable alternatives. Middle class families could be required to pay up to 13 percent of their income in insurance costs or face up to a $3,800 penalty.

Requiring families to purchase health insurance (or partially self-insure through health savings accounts and catastrophic policies) makes sense. Bad health happens. When it does, society, rightly, will not completely turn its back. One way or the other, some care is going to be provided, and people should make reasonable contributions toward this care.

However, such a mandate in turn requires that an affordable option be available or that people be provided the resources to make a purchase. These types of considerations underlie the proposed expansion of Medicaid for households with incomes below 133 percent of the poverty line and the proposed provision of subsidies for those with incomes between 133 and 400 percent of the poverty line. Unfortunately, the subsidies in Sen. Baucus' proposal aren't especially generous enough given the types of insurance that are likely to be available.

Middle-class families will feel the squeeze, and too many are likely to experience hardships under this proposal.

There are two alternative ways to fix this legislation. One alternative is to drop the personal insurance mandate. The expansion of Medicaid, the availability of subsidies, and the limited penalty on large employers who fail to provide insurance will lead to more coverage. Some other provisions, such as the restrictions on how insurance companies can treat pre-existing conditions, will also make insurance more attractive. The U.S. would achieve more insurance coverage, just not universal coverage for all of its citizens.

The other alternative is keep the personal insurance mandate but provide reasonable means for people to purchase insurance. The easiest way to accomplish this would be to keep the present schedule of subsidies but allow anyone who is under age 65 and who wants to purchase insurance to do so through Medicaid--that is, to make Medicaid available essentially at cost. Other more-costly options are to expand subsidies, provide a robust public alternative, or expand employer mandates.

Absent either of these fixes, Sen. Baucus' proposal should be rejected.

1 comment:

Roch101 said...

Can I tell Kay Hagan to call you?

That might not work. Can you do us all a big favor and distill your spot-on understanding into a paragraph and send it to her?