http://voices.washingtonpost.com/ezra-klein/2009/09/baucuss_framework_summary.html?hpid=topnewsLet's begin by stating what isn't in Max Baucus's health-care reform framework (pdf): a public plan, serious subsidies between 300 percent and 400 percent of poverty, and a real employer mandate for health-care coverage. Those omissions are disappointing, and will be the focus of a lot of wrangling over the next few days.
But much that's in Baucus's plan is encouraging. The proposal has three primary parts: insurance market reforms, affordability measures and mandates. We'll take each in turn.
Insurance Market Reforms: Beginning Jan. 1, 2013, insurers in the individual market are "required to offer coverage on a guaranteed issue basis and ... prohibited from excluding coverage for pre-existing health conditions." Policy prices can vary substantially based on age, and a bit based on family size and tobacco use. The small group market is subject to all the same rules, though their rules begin phasing in on Jan. 1, 2013, and states can take up to five years to implement them.
All plans sold on the individual and nongroup markets are required to cover "preventive and primary care, physician services, outpatient services, emergency services, hospitalization, day surgery and related anesthesia, diagnostic imaging/screenings (including X-rays), maternity and newborn care, pediatric services (including dental and vision), medical/surgical care, prescription drugs, radiation and chemotherapy, and mental health and substance abuse services that meet minimum standards set by federal and state laws." They're also "prohibited from applying annual or lifetime limits on benefits."
The proposal includes three types of risk sharing to further dissuade insurers from going after the healthy and leaving behind the sick: risk sharing, risk corridors and reinsurance. In other words, the government will impose heavy fees on insurers trying to risk select, making it a far less profitable strategy.
The exchanges are state-based, and, if I'm reading this right, different for the individual and small-group markets. That's not a good thing. The emphasis here, however, is on making them easy to use: "The exchange will provide a standardized enrollment application, a standard format for describing insurance options and marketing, call center support and customer service." It's not clear why you'd do all that if you weren't planning to let them expand.
Affordability: The exchanges transition us neatly into affordability, as that's where the subsidies live. Well, some of them. The first tier of subsidies are in Medicaid, which is expanded to 133 percent of the poverty line and now covers all adults, regardless of their parental status. That's a huge change.
The next tier lies in the exchanges, and actually includes a few different types of assistance. The first is tax credits to help families afford premiums. These are sliding scale subsidies that limit the percent of income that premiums can chew up. For a family at 100 percent of the poverty line, a "silver" class plan can only consume three percent of their income. For a family at 300 percent of the poverty line — about $65,000 a year for a family of four — the premiums are capped at 13 percent of income. There's some sort of flat credit for families between 300 percent and 400 percent of poverty that caps premiums at 13 percent of income, but that's not well defined in the paper.
Those work alongside cost-sharing subsidies to help families with coverage expenses that aren't related to premiums. For the poorest enrollees, cost sharing is quite substantial — equivalent to the very best plans offered on the exchange. As you go up the income ladder, subsidies are progressively lowered. This pairs with the out-of-pocket caps: For families between 100 percent and 200 percent of poverty, the out-of-pocket limit is about $3,900. Between 200 percent and 300 percent, the out-of-pocket limit is $5,800.
The Mandates: The Baucus plan de-emphasizes the employer mandate in favor of the individual mandate. Importantly, this mandate comes with an affordability exemption: If the lowest cost premium available exceeds 10 percent of a person’s income, they're exempt from the mandate. Beyond that, the fee for people who are not eligible for subsidies is $950 per year, up to $3,800 for a family. Compared to the cost of insurance, that's not a ton of money. But then the intent isn't to make not having insurance unaffordable: It's primarily to create a hard deadline so people don't simply put off the purchase of insurance, and secondarily to make sure free riders are paying something into the system.
The employer mandate is pretty much the free rider plan that the Center for Budget and Policy Priorities tore apart here. It's bad policy. An addendum though is that individuals whose employers offer them insurance are not eligible for subsidies, unless the insurance their employer offers would cost more than 13 percent of their income. I'd feel better about that if it were lower for low-income workers, but the plan says that the Secretary of Health and Human Services must revisit this number within five years to see if it should be lowered.
Co-Ops: I'm not going to analyze the co-ops as a substitute for the public plan. They aren't that, and shouldn't be considered such. But they're interesting policy on their own merits. There would be 51 co-ops (including D.C.) and they'd be able to band together "into collective purchasing arrangements for services and items that increase administrative and other cost efficiencies." That might actually make them viable. They will receive start-up loans and grants from the government, with priority going to "statewide proposals, integrated care models, and applications with significant private support."
2010: Much of Baucus's proposal comes into play in 2013. But the first page is full of elements that would start in 2010, and so provide workers with a more immediate benefit from health reform. Among them are huge — 50 percent — discounts for seniors in Medicare Part D's infamous "donut hole," state-based ombudsman who would "act as a consumer advocate for those with private coverage in the individual and small group markets," small-business tax credits, more transparency requirements for insurers and hospitals (including, finally, prices for hospital services), and funding for state-based high-risk pools.
Those are the basic specs for Baucus's proposal. Later today, I'll write a less technical post outlining my thoughts on whether the bill will work, and how it compares with the other pieces of legislation under consideration.
Photo credit: By J. Scott Applewhite — Associated Press
By Ezra Klein | September 8, 2009
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