Baucus Bill and Cost Increases

The original purpose of health care reform, we were told, had everything to do with the money.  In order to control ever-increasing health care costs we need to trust the federal government to implement a program that would reduce those costs and make insurance coverage more affordable for more Americans.

The Senate isn’t giving us access to the Baucus bill, but those who’ve analyzed it say it will do anything but cut costs.  Not only will tax revenue need to be raised significantly, but individuals who buy their own insurance plans or receive coverage through an employer will also be paying substantially more if they don’t qualify for government subsidies.

The projections of costs for the standard family policy, currently at $12,300 per year, is outlined as follows:

  • 2013 – $15,500 under current law, $17,200 with Baucus bill        
  • 2016 – $18,400 under current law, $21,300 with Baucus bill
  • 2019 – $21,900 under current law, $25,900 with Baucus bill

There are a number of reasons for the increases in premium costs.  They include the fact that without universal coverage and with the inability of insurance companies to refuse to cover pre-existing conditions, there is a powerful incentive to wait to purchase insurance until one becomes sick.  This is call cost-shifting, not insurance.

New taxes contained in the bill for medical device makers and pharmaceutical manufacturers also lead to higher costs for coverage, which insurers will have to pass on to the consumer.

Private insurance companies have long supplemented the reduced rates of reimbursement from some government plans, but would have to do so to a greater degree.  Rates to doctors would be cut 25 percent across the board with no adjustments for inflation.  Hospitals and doctors would still need to cover their costs and if the plan does nothing to attempt to lower the actual cost of providing services, rather only reduces the amount reimbursed for those services, it fails to deal with the real underlying issue.

A proposed 40 percent tax on high-value plans further increases the cost of employer-based coverage. argues that as a result of those ridiculously high tax rates, employers will drop the good coverage in favor of less comprehensive health insurance, thus holding costs in check and somewhat reducing the projected rise in premiums.  I’m not quite sure why they tout that as a benefit . . .

They also claim that as a result of shifting to less expensive coverage, employers will raise pay which will increase federal tax revenue by way of payroll and income taxes.  I’ve seen no data showing that increase in revenue offsets any loss incurred by the employers thus avoiding the 40 percent tax (money needed to help pay for the bill itself).

President Obama has promised again and again that any health care bill approved by Congress and himself will not increase the federal deficit.  I’d love it to be so, but after seeing the inability of government to adequately estimate the costs of a simple short-term program like Cash for Clunkers, I’m not really sure they have a clue of the real expenses involved in a plan like those being proposed.

I offer a suggestion:  Any health care bill should contain within it a trigger, whereby if at any time costs are incurred that would increase the federal deficit or place higher burdens on the states, the entire system will revert to the current status quo within one year and a new solution which we can afford will be implemented.  Maybe then they’ll be ready to propose a program that actually helps cut costs for the average American family and small business, while still keeping the government budget in check.  Any politicians ready to stand by their words?

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