The Baucus Health Care Proposal: Why Can't it Be a Starting Point?

President Obama failed to get the health care reform measure passed by the August recess as he hoped, and the full-throttle approach that the administration took in getting the legislation passed had some surprising and unintended consequences. For one, it resulted in the emergence of an opposing grass-roots movement that the conservative movement has not see in decades; the mustering of thousands of middle-aged and middle class town hall protesters caught both the administration and the Republican Party completely by surprise. Perhaps less surprisingly, it resulting in an increasingly shrill and elevated level of partisan vitriol and venom coming not only from rank and file Americans, but also from the press and the politicians themselves.

In the midst of such rhetoric, and in an environment where it's increasingly difficult to have a calm discussion of health care, how do you cut through the smoke and get to the meat of the proposal at hand? You read the source document. The Baucus proposal is on-line in several places, but I found it here, at KPAX, Billings, Montana. Be forewarned, it's about 200 pages, but it's not like reading a novel; much of it is definition of terms and a description of current system and can be scanned. Still, it is an undertaking.

One of the pat arguments that people use to dismiss critique of the health proposals put forth so far is that if you oppose President Obama's proposals, you are then by definition in favor of maintaining the status quo. My family's history is a perfect example of the reasons that one can indeed be against certain forms of restructuring of the health insurance and health delivery systems and yet not be in favor of the status quo. I have three small children under the age of seven. All three have food allergies and require visits to a pediatric allergist and other specialists. We found out about the allergies through two events with my oldest son; as he was growing up and moved to solid food, he did not have the appetite of a normal child and was identified as a child that was "failure to thrive". He was slowly, very slowly starving to death and though we went to various specialists, nobody could identify the cause. We eventually found a pediatric gastroenterologist that convinced us to let him do an endoscopy on my son, and he found severe lesions on his throat and upper part of the stomach and diagnosed my son with eosinophilic esophagitis, in his case caused by an allergic reaction. He was later diagnosed as having severe allergies to nuts and fish, first by an ambulance trip to an emergency room after eating cod, then later by an allergist.

My youngest son, at two years old, woke up on morning last year and was unable to walk, which was extremely alarming, since he was always an active kid and ran everywhere. We took him to the emergency room at Texas Children's Hospital, where he was steadily deteriorating and had a paralysis that was quickly making its way up his little body, and by noon there was talk of possible life support. We were fortunate to have Texas Children's Hospital here in Houston, and he was quickly diagnosed by the Chief of Neurology as having Guillain-Barre Syndrome, an autoimmune system disorder where the body's immune system for some unknown reason begins attacking the peripheral nervous system, stripping the protein sheath off of the nerves so that they are not able to carry signal to the muscles of the body. Texas Children's acted aggressively, and although he was almost completely paralyzed, his life was spared. There is not an inpatient pediatric rehabilitation facility here in Houston, so my son was transferred to Baylor's Our Children's House, were he began a long eight week intensive rehab to teach him how to function again, from sitting up, to walking, he went through the whole experience of relearning all the motor functions that he'd learned as a baby. Thankfully, just over a year later, he is as normal as any other child and shows very few signs of the ordeal he went through.

In both of these rather extreme cases, the health care system performed nearly flawlessly; the hospitals and our insurance company, Aetna, worked together seamlessly and both my sons received nothing but top notch care and service. I would not want any part of a program that would change our current arrangement, and I'm very skeptical of claims that introduction of a government entity in to the health insurance realm would be benign; it's impossible to me that a behemoth bigger than Microsoft, Walmart and Exxon put together could enter a market and not have a significant impact. Their pricing power alone could drive all competition out of the market. Comparisons to other non-profits are not apt, either. The government does not enter the market as a non-profit; if you rated the government against any other non-profit based on the number of funding dollars that go to the designated cause, the government would fail miserably.

So where do I see the need for reform? In two areas, the sheer cost of health insurance and accessibility. I work in the oil & gas industry, and previously on Wall Street - I know better than just about anybody how quickly situations can turn and industries collapse. It horrifies me to think about what would happen to our health care if we were no longer able to afford even the health insurance at subsidized levels provided by our employers; there is no way to buy coverage for a family of five for under a thousand dollars a month. What would happen if we had to buy all our medicine at full market prices? Thousands and thousands of Americans are living that nightmare right now.

I was more surprised at what was not in the Baucus bill than what was in the bill. This, after all, is a bill that not even the most liberal of Republicans feel that they can support. Again, what was not in the bill was more significant than what was in the proposal. First of all, there was nothing at all in the bill that resembles a public option. There is a provision to create non-profit "insurance cooperatives" and for the federal government to provide them with $6 billion seed money under the Consumer Operated and Oriented Plan (CO-OP) program. The programs would be non-profit, independent of any existing insurance company, independent of any branch or level of government, member owned and controlled and "required to operate with a strong consumer focus, including timeliness, responsiveness, and accountability to members". Although critics argue that this is an entirely new form of organization, it's not exactly true - the proposal cites examples of "certain fraternal beneficiary societies, orders, or associations operating under the lodge system or for the exclusive benefit of their members that provide for the payment of life, sick, accident, or other benefits to the members or their dependents." I'm thinking groups like the International Order of Foresters, which grew from a strictly fraternal organization into a full service life insurance provider. There is also provision for state insurance exchanges, where individuals seeking insurance could shop in a regulated marketplace.

Perhaps more important in encouraging competition and eliminating state-established and protected monopolies, the proposal allows for the creation of an interstate market both through Health Care Choice Compacts between the states and by defining national insurance plans.

The Chairman's Mark would allow national plans, with uniform benefit packages that are offered across state lines. These national plans must be licensed in every state that they choose to operate and would be regulated by the states in terms of solvency and other key consumer protections and would offer coverage through the state exchanges.

Such national plans must be compliant with the benefit levels and categories detailed in the Mark, but would preempt state benefit mandates- thereby allowing these national plans to offer a single, uniform benefit package. The National Association of Insurance Commissioners (NAIC), in consultation with consumer groups, business interests, including small businesses, the insurance industry, federal regulators, and benefit experts, will develop standards as to how benefit categories should be implemented (e.g., what constitute prescription drug coverage) taking into consideration how each benefit is offered in a majority (26) of the states. After NAIC publishes these standards, the state insurance commissioners will ensure that insurance companies offering national plans are providing plans that are compliant.

These provisions are a good step in establishing healthy competition in the marketplace.

The bottom line, though, is the bottom line. Who pays for the reform, and how? Well, insurance will be compulsory under the penalty of the IRS. Another, more obvious group that will pay are the currently uninsured who have themselves elected the status - the proposal calls them the "young invincibles" aged 25 years old and younger. One of the key selling points of the reform is the elimination of "pre-existing conditions" and caps on the premiums that could be charged on the basis of age, tobacco use and health status. Since insurance in its barest essence is a risk-assignment mechanism and there has to be actuarial smoothing of the pool in order for the assumption of risk to be profitable or "self-funding". Somebody has to provide the lower-end risk to average out the risk pool; that would be the "young invincibles". To be fair, the proposal offers them a lower cost, catastrophic coverage policy, but the forced coverage is even now being criticized as a new tax and an imposition on individual rights. Maybe so, but anybody with a basic understanding of statistics understands why this provision is in the Baucus proposal. You can't take on more high-risk cases without somehow balancing out the addition risk, either by raising premiums or balancing out the risk pool.

As presented, the Baucus proposal is going to cost an estimated $856 Billion over ten years, although that is arguably not true. Most of the key provisions of the proposal don't kick in until 2013, so the actual cost is not truly for a ten year program. It's an eight year program prefunded now. Can those who are in dire straights and on whose behalf this legislation is being ramrodded through Congress; can they wait until 2013?

So who pays? Part of it will be funded by up to $349 billion in new taxes on the insurance and ancillary health industries, part of it by an excise tax on "Cadillac" high benefit health insurance policies. In the end, though, the American public will pay; no matter how you slice it, we're still talking about spending $856 billion - not a trifling amount, and we've all been around long enough to know that "expected efficiencies" never show up, and government contracts never come in under budget. It is clear who is not paying - there is no provision whatsoever for any tort reform, which is odd given the high overhead that the personal injury industry tacks on to the health care system. In this go round, the lawyers get a free pass.

The Baucus proposal as written doesn't scare me - I don't see this proposal as putting us on the road to socialism, but we can't afford it right now, as it's written.

I don't see any reason why this could not be a good starting point for reform, but the Republicans are going to need to participate, if for no other reason to make an honest effort to tame the cost on this much needed reform, and if necessary, to kill it if the costs cannot be contained to a more realistic level given our national circumstance.