Politics & Policy

Baucus’s Take on the Takeover

The health-care proposal unveiled yesterday by Senate Finance Committee chairman Max Baucus is fundamentally flawed because — like the other flavors of Obamacare — it tries to expand coverage through coercion and hidden taxes instead of through consumer choice and price competition in a free market.

Like the bills that have been approved by committees in the House and Senate, the Baucus plan is built on mandates, expanded governmental control, and taxes. It would require all Americans to sign up for government-approved insurance or face a hefty federal tax penalty — up to $3,800 per family. Employers would be required to offer insurance conforming to government specs or pay a head tax on each of their full-time employees.

There is no breakthrough miracle cure to be found here: Insurance coverage is expanded with tried-and-true, heavy-handed regulation. Americans who don’t play along will be disciplined by the IRS.

To take some of the sting out of the individual mandate, Senator Baucus promises new subsidies to some low-income families. He would limit their portion of the insurance premiums to a percentage of their income. Families with incomes at three to four times the poverty level would pay no more than 13 percent of their incomes toward insurance. But this promise comes with a lot of fine print: Workers with incomes in these ranges who are offered qualified coverage by their employers are ineligible for additional subsidization. They will have no choice but to take what is offered at work — whether they can afford it or not. According to the Congressional Budget Office (CBO), only about 13 million people will be getting subsidized insurance through the exchanges in 2014 even though there are, as of 2008, 127 million Americans under age 65 in households with incomes between 100 and 400 percent of the federal poverty line. For the vast majority of Americans, therefore, the individual mandate is simply a hidden, onerous, and regressive tax.

#ad#Senator Baucus, more than others, has said he wants to produce a bill that fundamentally alters how health care is delivered in order to make it less costly, more efficient, and of higher quality. But his proposal resorts to the same kinds of arbitrary fee cuts, taxes, and regulatory payment-control schemes that have been tried many times before and have never worked. All hospitals will suffer essentially the same cut in payment rates, no matter how well or badly they treat their patients. There is no effort to make distinctions based on quality or value. The taxes imposed on insurers, medicine makers, and medical-device manufacturers will be passed on to consumers in the form of higher prices and will certainly serve to discourage the introduction of new and better products and care.

President Obama has said repeatedly that Americans will get to keep the insurance they have if they like it. But Senator Baucus’s plan would force millions of senior citizens out of their Medicare Advantage (MA) plans — the private-insurance component of Medicare — and back into the government-run fee-for-service program. MA payment rates would be reduced by requiring these plans to bid against each other — but the fee-for-service would remain exempt from competition. The resulting cut in Medicare — $124 billion over ten years — would come directly out of the pockets of the beneficiaries. They would lose the extra benefits MA plans now provide and would be forced to pay much higher monthly premiums for supplemental coverage. No matter how the Democrats spin it, the MA cut would represent a deep slashing of Medicare benefits, and seniors around the country know it.

Perhaps the worst element of the Baucus package is the Medicare Commission. It would be made up of 15 members and charged with achieving spending cuts beginning in 2014. If the commission’s recommendations were not approved by Congress, they would go into effect automatically. But the commission’s mandate limits its range of considerations to provider-payment questions that don’t get to the heart of the problem. There would be no fundamental restructuring of the program to put spending decisions in the hands of consumers. Indeed, if enacted, this commission would provide an excuse for evading the fundamental reform of Medicare that is desperately needed, both to improve health-care quality and to head off fiscal calamity. Instead, it would hasten the march down the price-control road that leads inevitably to government-enforced rationing of health care.

Senator Baucus says he wants bipartisan support for his proposal, and his is marginally less awful that the bills produced by the other committees. But it is really a difference of degree, not of kind. The Baucus plan is in its essentials another version of Obamacare, built on central planning and governmental control, not consumer choice and markets. And it therefore should face principled and unyielding opposition.

The Editors — The Editors comprise the senior editorial staff of the National Review magazine and website.

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