If Nobody Can Afford It, Does It Make A Difference?

by dday

I mentioned below that there are other major concerns with the Baucus draft, which is really the blueprint for what the President laid out last week in a variety of ways. Jon Cohn found a document from the Senate Finance Committee showing the impact of the bill on the middle class:

Total medical expenses, including premiums and out-of-pocket expenses, would be no more than 20 percent of annual income for most of the people profiled in the document. For the poor, it’d be dramatically less. That’s the (relatively) good news.

And the bad news? These figures are all for people in average health. But people end up paying a lot more in out-of-pocket expenses when they have a serious medical issue–whether it’s because of an accident, an acute illness, or a chronic disease. According to my back-of-the-envelope calculations, a family of four making $42,000 a year could owe $9,000 a year in medical expenses if it hit the maximum in out-of-pocket expenses–which is pegged, in the Finance legislation, to deductible levels in Health Savings Accounts. That’s easy to do when one family member gets in an accident, has an acute medical problem, or is dealing with a chronic disease.

A family of four making $78,000 a year could owe $23,000–nearly a third of its income–if it had a member with high medical bills.

The committee analysis (and mine) includes a ton of assumptions–chief among them, that the families are buying the “silver” option, the benchmark plan on which federal subsidies are based. In other words, these figures are not precise, particularly since we don’t even have an actual bill yet. And, in case you were wondering, families staring at such huge medical expenses would probably fall under the “hardship” waiver, exempting them from the requirement to purchase insurance. (In other words, neither Baucus nor any other sane member of Congress is going to force people to shell out money for insurance that leaves them so exposed to costs.)

On that last point, if families are exempted from buying insurance under the hardship waiver, then 1) the program will be far less universal than needed, 2) the smaller risk pool will lead to higher premium prices from insurers, 3) most people WANT to be covered by insurance, and under this plan their only option would be to purchase unaffordable insurance that would still not shield them from potential bankruptcy in the event of an illness.

All of this is to say that the real problem here is the final cost of the bill. Already we’ve seen it drop from $1.3 trillion over ten years to $880 billion, with some Senators agitating for less. And not for any reason, mind you, other than to make the bill more “moderate,” just like on the stimulus. But that lowered cost means a cap on subsidies which will be insufficient for most. “Moderate” in this case being another word for “ineffective.”

At least some Democrats are aware of the deficiencies, and the fact that Baucus tailored his bill to attend to all of the concerns of a GOP who won’t vote for it, instead of a Democratic Party who may. Even at this point, the Axis of Grassley and Enzi aren’t satisfied, and are offering wildly contradictory proposals, like asking the Feds to bear the full cost of Medicaid expansion instead of part going to the states (I don’t disagree) and also wanting to eliminate the tax on insurance companies that would pay for, among other things, Medicaid expansion. By contrast, a few Democrats are extremely concerned about the subsidies, which would lead to a package that people would either hate or not be able to use. And The Hill reports that Democrats on the Senate Finance Committee will push this with amendments.

Near the top of the list for the panel’s Democrats is worry that health insurance subsidies will not be sufficiently generous nor available to enough people despite the fact that the bill would legally require most people to obtain coverage. Beyond premiums, some Democrats are concerned that Baucus’s proposal would not do enough to protect middle-class families from high healthcare expenses.

“It’s very clear, at this point in the debate, the flashpoint is all about affordability,” said Sen. Ron Wyden (D-Ore.). “I personally think there’s a lot of heavy lifting left to do on the affordability issue.”

The healthcare bills already approved by three House committees and another Senate committee offer more generous subsidies – but at a higher cost to taxpayers.

“We’re doing our very best to make an insurance requirement as affordable as we possibly can, recognizing that we’re trying to get this bill under $900 billion total,” said Baucus, who has been courting Republican support for his measure in an attempt to guarantee that a healthcare bill can achieve the 60 votes or more needed to avoid a Senate filibuster.

“I’m going to work even harder to address any legitimate affordability concerns. I knew they were there,” Baucus said.

I just don’t believe that the guy who created a bill which represents a gift to the insurance industry is all that concerned about “legitimate” affordability concerns. But in the end, the bill can’t work unless people can afford coverage. That would obliterate everything it’s trying to do.

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