Yesterday, by a vote of 14-9, the Senate Finance Committee passed the Baucus bill, the America's Healthy Future Act. This posting discusses the political line-up behind the bill and the CBO estimate regarding the cost of the bill to the federal government.
THE VOTE
Senator Olympia Snowe (R-ME) joined all 13 Democrats on the Committee in voting for the Baucus bill. In a statement yesterday President Obama singled out Senator Snowe for praise, saying:
"In particular Senator Snowe has been extraordinarily diligent in working together so that we can reduce costs of health care, make sure that people who don't have it are covered ,make sure that people who do have insurance have more security and stability, and that over the long term we're saving families, businesses, and government money. So, I never count chickens before they're hatched, but this is obviously another step forward in bringing about the American people a better deal."
Alexander Bolton of The Hill posted an article yesterday discussing the ramifications of Senator Snowe's defection on this issue and mentioning the next step in the process before the Senate. Bolton states that as a consequence for voting for the health care bill the Senate Republicans may prevent Snowe from ascending to the top Republican post on the Commerce Committee when Senator Kay Bailey Hutchinson leaves that post to run for Governor of Texas. Snowe is second in seniority behind Hutchinson on the Committee, and would normally rise to the post of Ranking Member upon Hutchinson's departure. Bolton suggests that this may not happen, however, because the Senators who are presently third and fourth in seniority, John Ensign and James De Mint, have problems of their own – Ensign is still facing questions over ethical concerns relating to his relationship with a staffer and her husband, and De Mint is viewed as extraordinarily partisan in light of his promise to make health care President Obama's "Waterloo." Bolton also notes that the Senate Republicans have not bucked the seniority system in over twenty years. In my opinion, Republicans are unlikely to retaliate against Senator Snowe. This would give her more than adequate grounds to switch parties, spelling the end of the Republican party's hopes to regain ground in the Northeast and among moderates.
It is also significant that Senator Baucus managed to hold onto the votes of all 13 Democrats, including conservatives like Ben Nelson (D-FL)and Blanche Lincoln (D-AR) who are skeptical of more government involvement in the health care industry, liberals like Jay Rockefeller (D-WV) who wanted a public option, and Ron Wyden (D-OR), whose amendment that would have expanded employer participation in the Exchange was not even permitted to come up for a vote.
Next up in the Senate – Bolton reports that the final shape of the bill that is reported to the Senate is up to Majority Leader Harry Reid (D-NV). Bolton says:
Senate Majority Leader Harry Reid (D-Nev.) will merge the bill with [the Kennedy bill which was] approved in July by the Senate Health, Education, Labor and Pensions Committee.
The easiest way to describe a "public option" is that it would allow people to purchase Medicare coverage from the government. The Baucus bil does not include a public option. Instead it would allow individuals and small employers to form "co-ops" to purchase insurance from private health insurance companies. The Kennedy bill, the Affordable Health Choices Act, summarized here on the late Senator Kennedy's website, creates a public option, the Community Health Insurance Option, which would be available to individuals and small employers the "Gateway" (which is equivalent to the "Exchange" created by the Baucus bill). The Las Vegas Review-Journal reported that in a conference call with constitutents Reid said:
We are going to have a public option before this bill goes to the president's desk.
Jordan Fabian of The Hill reports that yesterday Senator Chuch Schumer (D-NY) called on Reid to include the public option in the bill that is presented to the Senate:
"Well, first leader Reid has the option of putting [the public option] in the final bill. If he puts it in the final bill, in the combined bill, then you would need 60 votes to remove it," Schumer told MSNBC last night. "There are clearly not 60 votes against the public option. And so we’re urging him to do that, and he is seriously considering it."
THE CBO ESTIMATE
The Congressional Budget Office submitted this 27-page report to the Finance Committee evaluating the effect of the Baucus bill on the federal deficit. The study shows that the Baucus plan would reduce federal spending by about $81 billion over ten years. Although spending on health care would go up due primarily to the fact that the federal government would be subsidizing individuals and small employers to purchase insurance through the Exchange. In addition, the government would be adding people to Medicaid and CHIP and paying a higher percentage of the cost of those programs (the federal share would go from about 70% to 90%). These losses would be offset by savings or revenue gains in other areas. Here is my summary of the CBO report's findings.
Over ten years, the Baucus bill would result in these items of additional spending:
1. $345 billion in additional federal spending for Medicaid and CHIP;
2. $461 billion spending helping individuals and small businesses purchase private health insurance on the Exhcange;
3. $23 billion in tax credits for small employers;
Over the same period of time the government would realize the following savings and receive the following additional revenues:
1. $4 billion in penalty payments by individuals who choose not to purchase health insurance;
2. $23 billion in penalty payments by employers who choose not to purchase health insurance;
3. $201 billion in new taxes on so-called "Cadillac insurance plans" – health insurance plans costing more than
4. $162 billion in reductions in fee-for-service payments to hospitals under Medicare. (This provision excludes physicians from its operation. I assume that this measure is intended to force institutional health care providers to move towards HMO models of providing care.);
5. $117 billion in reductions to payments to health care providers under the Medicare Advantage Program by changing the way in which reimbursement rates are set;
7. $45 in reductions of Medicare and Medicaid payments to hospitals under the DSH (Disproportionate Share program). These are payments made to hospitals that serve a disproportionate share of poor and uninsured people. Because most people will now have insurance, DSH payments will cease.
8. $83 billion in "other" savings or additional revenues.
The CBO report also has some notable information regarding coverage. First, the Baucus bill does not achieve universal coverage. Within six years the number of persons without health insurance in the United States will be cut in half. By 2015 the number of uninsured persons will drop from 51 million to 24 million individuals. That will be achieved by enrolling an additional 14 million people in Medicaid and CHIP and assisting another 23 million people to purchase insurance through the Exchange. The CBO estimates that 8 million people will move from present health insurance plans to either Medicaid or a plan purchased through the Exchange. As a result, there will be a net reduction in the number of uninsured of about 29 million people. There will still be about 25 million uninsured people, of whom about 8 million are undocumented aliens and inelible for either Medicaid or subsidized health coverage.
The most surprising finding in the CBO report is what it has to say about the co-ops. The report states:
The proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments. As a result, CBO estimates that of the $6 billion in federal funds that would be made available, about $3 billion would be spent over the 2010–2019 period.
In short, according to the CBO the co-ops aren't likely to work. That will greatly increase calls for the inclusion of a public option in the final bill.
