Baucus Health Care Reform Plan is a Bomb

When Senator Max Baucus (D-Montana) unveiled his health-care reform plan on September 16, he stood alone at the podium. And for a good reason. It didn't take long for politicians of all stripes to grasp that Baucus' Senate Finance Committee reform bill as currently written is the health insurance equivalent of an improvised explosive device.

From a distance, the Baucus health reform bill doesn't look all that bad. While all sides might have to hold their noses to make it law, the bill seems to offer compromise.

Under the bill, everyone will purchase heavily regulated insurance policies or pay a fine. All insurance contracts will be rewritten to federal specifications, to include first-dollar coverage for many services. The federal government will subsidize up to 80% of the average working American family's health insurance premium costs. And a "public option" is not part of the equation.

Total cost: around $800 billion over ten years-much less than competing House and Senate bills.

Sounds feasible, right?

Would that it were so. A closer look at Baucus' bill reveals legislation that seeks fiscal traction through a series of cost cuts and tax increases of dubious value--including dismantling of the Medicare Advantage program and big new levies on medical device manufacturers.

But questionable funding is not the only tripwire attached to Baucus' bill. if enacted, the senator's reform legislation will also blow Americans' personal financial houses to bits.

The Baucus bill aims to subsidize people who do not have a health plan provided by their employer and who earn up to three times the poverty level, or $66,000 for a family of four.

The problem is that despite the massive federal subsidies, the cost of health insurance coverage for both families and individuals who are not covered at their jobs will swell to tsunami in size.

According to a Congressional Budget Office analysis, under the Baucus health care reform bill a family of four making $42,00 a year in 2016 will pay $6,000 out of pocket for health insurance coverage-on top of the government subsidy. That would be 14.3% of their income. For a family of four making $54,000 a year, the health insurance price tag could soar to 18.1% of income.

For individuals, the outlook is equally grim. A single worker earning as little as $26,500 per year would pay up to 15.5% of income for health insurance premiums, and a working stiff earning just $32,400 would get clobbered for as much as 17.3% of income.

The net result is that lower income workers not covered by their employers will find themselves forced into financial servitude to federal government health care insurance mandates.

The negative impact on personal financial independence, job creation and economic growth is hard to imagine.

More bad news

Moreover, under the Baucus plan the rising cost of federally "qualified coverage" will drive employers toward the rational decision of dropping their employee health plans in lieu of paying a less-costly federal fine.

This will require the federal government to pay more and more federal subsidies for more and more families and individuals forced to bear financially crippling health insurance costs.

As the Wall Street Journal summarized in a recent editorial, "The Baucus ... plan would increase the cost of insurance and then force people to buy it, requiring subsidies. Those subsidies would be paid for by taxes that make health care and thus insurance even more expensive, requiring even more subsidies and still higher taxes."

To defuse a potent threat to working Americans' financial future as well as the fiscal and economic health of the US, the Senate must scrap the Baucus health care reform bill.

Source

Wall Street Journal, "Public Option Lite," September 17, 2009