No, this is NOT another Public Option Diary. Nor is it an attempt to in any way, down play the importance of the Public Option. I like many of you have read, diaried, and commented at length about the Public Option in all its forms, as well as the legislative process involved in getting a bill passed with a strong Public Option in it. While I would agree that it is a critically important aspect of the health insurance legislation and deserves a great deal of attention, it is not the only important part of the legislation that we need to be concerned about. This diary will explore some of these other important aspects that we should be concerned about and give some of our attention, including how the legislation is paid for, the insurance exchange participation limitations, and the 2013 implementation. If you are interested in one or all of these topics, please join me after the jump /\ for more details and discussion.
Let’s get right down to it, shall we:
How Its Paid For - As many of you know, the White House, the Senate and the House Dems. have all agreed that the legislation will not increase the deficit, that the government will provide subsidies for lower and lower-middle income folks to purchase insurance, and that these subsidies will NOT be paid for through middle class tax increases. As a result, the legislation must include ways of paying for these subsidies not involving the middle class, but that’s where the agreement between the House and Senate ends.
In the versions of the legislation coming out of the House committees, they pay for the subsidies by imposing an excise tax on those earning at or above $500,000 a year or the top 1%. This is sometimes called the "Millionaires" tax, and is basically the Robin Hood principle, taking from the rich to pay for the poor (no criticism intended). Yes , this is the payment version that we (the progressives) favor. It will not effect the middle class, or even the upper middle class income levels. From a political perspective, it is either neutral or beneficial to 99% of the voters and is detrimental to only 1% of the voters, and that upper, upper 1% don’t for Democrats anyway. It is also the populist approach for financing the subsidies. In the current climate of the Wall Street collapse and big CEO bonuses, who doesn’t want to inflict some pain (however minor) on these top earners, and I use the term "earners" in this case very loosely.
In the Senate, the Finance committee version of the legislation pays for the subsidies by imposing a tax on high benefit private health insurance policies or so called "Cadillac" policies. Since these high benefit policies also come with high premiums, it is thought that they are only being purchased by upper end individuals and employers who can afford them. Therefore, the assumption being made is that this payment proposal should be similar to the House version, only effecting the upper class. But, not so fast, there are some flaws in this assumption. First, while this method requires the private insurance companies to pay the additional tax on the Cadillac policies they issue, it does not require that they pass down the tax to only the holders of these Cadillac policies. If they choose, they can pass the cost of this tax onto any or all of its customers, which means it could pass the tax along to middle class policy holders. Second, there is no requirement for private insurers to continue to offer these Cadillac policies. Many may decide to drop them to avoid the tax. If this happens, which is certainly possible, it will substantially reduce the amount of revenue the government anticipates to get to pay for the subsidies, resulting in either more deficit spending or cuts in subsidies down the road. That’s why at first glance the Senate’s proposal looks fine, but as we dig a little deeper, it is one we should oppose.
However, what concerns me most about the House and Senate payment proposals is that they are worlds apart, and at some point they have to come togther if we are going to pass a bill. I have heard reports that some in the House consider the Senate’s proposal to be a "non-starter" which is political speak for "it don’t got a chance." On the other side, I haven’t heard a single Senator come forward and say they are enthused about the Houses’s proposal to tax millionaires. I am sure there are a number of Dem Senators who oppose the millionaires tax, after all many of their friends are millionaires and billionaires and would be in favor of raising taxes on your friends?
If you ask me, there is a greater threat that this payment issue could sink the whole bill, than from disagreements on the public option. At least with the public option they are discussing possible compromises. I have not heard about any such discussions going on between the House and Senate with regard to how to pay for subsidies. I sure hope they are discussing this behind the scenes.
Insurance Exchange Participation - The legislation proposes the creation of an Insurance Exchange which would include a variety of private insurers and hopefully a government run public option, through which individuals can purchase affordable health insurance policies. However, this exchange would NOT be available to those receiving health coverage through employer-based programs, which are the majority of us. Now, while the public option will provide competition to private insurers on the exchange, providing affordable coverage for all those able to purchase off the exchange, what happens to the rest of us in the employer-based private insurance wilderness? President Obama has promised that we can all keep the insurance we have, but he hasn’t guaranteed that we won’t have to pay more for it. Since private insurers will have to substantially reduce the costs of the policies they provide on the exchange to compete with the public option, they may, probably will substantially jack up premiums to the captive employer based policies to maintain their massive profits. In response, employers will probably either pass the added costs on to us, the employees, or dump coverage altogether leaving us to fend for ourselves.
Senator Wyden has been pushing his amendment to open the Exchange up to all, not just those outside the employer-based umbrella. This would prevent the potential for private insurers from gouging those of us in the employer-based system. Unfortunately, he is like the Man-of-LaMancha, with few other Senators supporting his cause. Even President Obama has said from the beginning that the exchange is meant to help the un-insured find affordable coverage, and has offered no support for expanding its availability to the rest of us. He has chosen this tactic to help down play the effect the public option will have on the insurance market by limiting its availability to uninsured individuals in hopes this will make it less threatening to them and reduce their opposition.
But assuming the Wyden amendment fails, which realistically seems likely, we could end up with a two-tiered insurance system with private individuals finding affordable coverage on the Exchange from the public & private providers, while those getting coverage from private insurers through employer based programs pay substantially higher premiums for basically the same coverage. President Obama and other Dems. in congress may be gambling that those in employer based systems will then demand legislation giving us access to the cheaper policies offered on the exchange, making it easier for them to open it up down the road. They may be right. But it also could create a backlash from employer based individuals who think they were told they would not be effected by the health care legislation, and now paying much more for health coverage due to the legislation, will feel they were sold a bill of goods.
Bottom line is if we can open up the Exchange to everyone now, we can avoid these problems. But make no mistake about it, it is a significant up hill push.
2013 Start Date - Whenever you hear someone say something like "coverage will start in Year One", "Year One" as prescribed in the current legislation is 2013. That is because it will take some time to set up the new insurance exchange and establish HHS administrative oversight. Understandable, but what happens to those desperate for health coverage between now and 2013?
President Obama touched on this in his speech to Congress, speaking in generalities about the need for a government safety net to help out desperate individuals between now and 2013. Representative Clyburn also talked about including something in the House bill to address this coverage gap between bill passage and implementation. But I have not heard much lately.
Besides being an all to real problem for the uninsured in need, it could create a political problem for Dems. in 2010 and 2012. No matter how much our candidates in 2010 & 2012 campaign on the theme of "Don’t worry, the calvary is coming in 2013", Republicans will portray the Democratic health insurance legislation as a failure or at least claim that it won’t help when it goes into effect. It will be a "he said, she said" type of campaign. Democrats would be far better off if we can point to some tangible positive results from the legislation going into the 2010 & 2012 races. Let’s hope we can get something in the bill to address this implementation lag.
Well that’s it! My point is that besides the public option, we need to pay some attention to the issues above, because if we don’t put some pressure on Congress to address them in the way we want, I am afraid bad things will happen.
Thanks for reading!