How the Baucus Bill Guts Reform

Today, many in the media are making a special effort to report on what the Baucus bill does right.  I also am delighted to see provisions in the bill which follow suggestions in the House bill.

But I’m dismayed when I see a reform suggested by House Democrats—or by the White House – rendered toothless in the Senate Finance Bill. Here’s just one example:

Today, in Ezra Klein’s Washington Post column New American Foundation Health Care Policy Director Len Nichols praises a plank in the Baucus bill that would create an Independent Medicare Commission   charged with making sure that Medicare cuts costs in ways that are consistent with maintaining quality. The Commission would be appointed by the President and confirmed by the Senate. 

Sounds good—and very much like something that White House Budget Director Peter Orszag suggested, in July, in a letter to Congressional leaders. At the time, he outlined the administration’s support for “an Independent Medicare Advisory Commission (IMAC)–

a non-partisan body of doctors and other health experts, appointed by the President, confirmed by the Senate, and serving for five-year terms. "The IMAC would issue recommendations as long as their implementation would not result in any increase in the aggregate level of net expenditures under the Medicare program; and either would improve the quality of medical care received by the program’s beneficiaries or improve Medicare’s efficiency.”

IMAC would have the ability to set fees with an eye to how much patients benefit from particular services. Presumably, this means lowering fees for services that are of minimal benefit  to many patients– unncessary back surgeries, angioplasties, by-pass surgeries and diagnostic tests, for example—while raising fees for primary care, preventive care, palliative care and in other areas where providers are underpaid for effective care.

Today, powerful lobbies make it very difficult for Medicare to lower fees. In Congress, Medicare rates become a political football, with the most powerful specialties (already the best paid) almost always winning the game.

Politicians should not be making these decisions. As Senator Jay Rockefeller confided to Ezra Klein not long ago: “ if you really want to be honest about it, eight to 10 percent of the members of Congress understand health care. At maximum. I chaired the intelligence committee, and health care makes it look like riding on a tricycle it's so complicated. So what you have is lobbyists picking on congressmen who don't know health-care reform, and they say, you know what, you could get a lot more jobs in your state if you only put more money into oxygen or a certain medical device. If you're going to do Medicare right, understanding that the trust fund is going to go downhill in 2016, you can't have Congress making these decisions. You need professionals.”

Under Orszag’s plan, political meddling would be kept to a minimum: “As with the military base-closing commissions, this proposed legislation would require the President to approve or disapprove each set of the IMAC’s recommendations as a package. If the President accepts the IMAC’s recommendations, Congress would then have 30 days to intervene with a joint resolution before the Secretary of Health and Human Services is authorized to implement them.”

Orzag offers a tactful explanation: “This approach would free Congress from the burdens of dealing with highly technical issues such as Medicare reimbursement rates while rightly giving them . . .  a say in the matter." 

No surprise, surgeons  made it clear that they  "vigorously oppose" legislation that would give an “unelected executive agency” power to set Medicare rates, in a letter that the American College of Surgeons sent to House Speaker Nancy Pelosi in July. Several surgical-specialty societies also signed the letter. What’s wrong with an “unelected” group? They don’t need campaign contributions, so lobbyists have little sway over their decisions.

By contrast, the Baucus bill responds to the surgeons’ concerns. Nichols acknowledges the difference. Under the Senate Finance Committee’s proposal: “The commission’s ‘recommendations would not be implemented automatically, but they would take effect fairly quickly after recommendation if Congress did not promulgate equally effective proposals on its own.’”

As Kaiser Health News explains, the Senate Finance proposal would give Congress plenty of opportunity to meddle: “In years when Medicare costs are projected to be unsustainable, the Commission’s proposals will take effect unless Congress passes an alternative measure. Congress would be allowed to consider an alternative proposal on a fast-track basis.

Whoosh!  You can almost hear that fast track: there go the higher fees for palliative care that the Commission recommended. Here comes reinstatement of the status quo: top pay for useless back surgery, rock-bottom pay for the much dreaded “end-of-life counseling” that might allow a patient to make choices about his final treatment. Without a palliative care physician to protect him, the patient is left to the tender mercies of a physician who may well tell him: “This is the protocol.”  In other words,  you have no choice. The patient can only hope that this physician is as good at controlling pain as a palliative care specialist would be.

The Heart of Healthcare Reform

Meanwhile, by eliminating the public sector option, the Baucus bill has cut the heart out of healthcare reform.

As Bob Laszewski explained over at the HealthCare Policy and Marketplace blog  last week, “Health care reform will be very good for the healthcare  business  . . .  as long as a health care bill passes without a public option.  Hospitals, drug companies, device makers, and insurers will be in a terrific place.”

To help fund reform, each of these stakeholders put a fairly small amount of “savings” on the table "that amounts to only about 1% of what the group, as a whole, would have received over the next ten years,” Laszewski explains.  Meanwhile, the health care bills under consideration will deliver millions of new customers to the marketplace, government subsidies in hand, increasing “ the aggregate revenue of the key stakeholders by almost twice what they would give up."

Granted, insurance companies, drug companies, labs, and device makers would pay $88 billion in new taxes. Insurers would pay excise taxes on high cost health plans which would raise another $215 billion.”  But, Laszewski notes, “both the excise tax and stakeholder taxes would almost certainly be passed on to the customer as new premium or sales taxes.”


From the health care industry’s point of view, the only real threat to bigger profits is a public plan that might take the “money” out of “money-driven medicine”. As Jay Rockefeller recently told Ezra Klein: “The public health insurance option doesn't have to make a dime. It doesn't have to make Wall Street happy or shareholders happy. It just has to sell a product at cost. That will put pressure on private insurance companies to bring down their premiums.” The Commonwealth fund estimates that a family that picks the public plan would pay $2000 less for insurance than a family forced to buy a private sector plan.

Private insurers know that they will have a hard time competing with a plan that is less expensive both because its administrative costs are lower, and because it doesn’t have to deliver profits to shareholders. The fact that a public plan wouldn’t have Wall Street breathing down its neck, looking for quarterly earnings growth, means that it could set long-term goals, and reward providers who kept patients healthy over time, rather than simply treating them once they became sick.

Insurers are not the only ones opposed to a public plan.Hospitals, drug-makers, device-makers and some specialists are wary because they fear that a national public plan might use its clout to rein in health care inflation by squeezing some of the waste out of the system. The House bill would let Medicare negotiate discounts on drugs—and stipulates that the public plan would follow Medicare’s reforms.

By contrast, the small co-ops that the Baucus bill calls for would have no market power. Even if the final bill includes a “trigger” that would allow states to create public plans if insurance proves too expensive, those state plans would lack the market muscle that national Medicare E (for everyone under 65) would enjoy.

Some have argued that since only the uninsured, the self-employed and those who work for small companies   would be eligible to join the public plan in 2013 and 2014, it would be so small that it wouldn't really have any leverage in the market.   

This ignores the fact that anyone who is temporarily uninsured at some point during the year (up to one out of three Americans) could go to the Exchange and buy into the public plan. And the House bill specifically states that once you are in the Exchange, you can stay in the Exchange (where the public plan is available) even if your circumstances change.

The House bill makes it clear that the utlimate goal is to open the public plan to everyone—including employees of large companies—within a few years.

So yes, many in the for-profit health care industry have much to fear from a  public sector opotoin.

But  there is one other “stakeholder” in the health care system that Laszewski doesn’t mention until the end of his piece:– the patient:

"The President and Democratic leaders have done a masterful job of managing special interest politics. But they may have overlooked, or taken for granted, the most important special interest of all—the voter/patient.

"Whether the Democrats can pass a bill or not will depend on whether wavering Democrats ultimately see voters back home for or against all of this . . .."

Laszewski doesn’t offer a solution, but I will. 

President Obama should stay the course and continue to insist on a public sector option that would set a high bar for affordable, comprehensive care while forcing private insurers, drug-makers, device-makers and hospitals to deliver value to patients –quality at a lower price..

Without that option, too many Americans are going to find healthcare unaffordable.

22 thoughts on “How the Baucus Bill Guts Reform

  1. I’ll offer another “solution” to President Obama. It’s a simple question: “How many terms do you want to be President? Two…or one?”

  2. It’s good to be true, since many people need proper care and can not move especially if the case is of lower back pain or a terminal case, I think is the most advisable that this is so and benefit many people who happen thus, it must provide immediate solutions to the sick and targeted as does findrxonline with health issues.

  3. I fear you’re too quick to cut to the chase here. The important thing is that both houses send a bill to conference with a stronger mechanism to control medicare spending. similarly, that at least one bill sends a bill in with a public option. that all’s things to progress in a direction we all see as positive. remember that neither house ever voted on the Clinton reforms at all. the key here is to make sure that each votes on a plan and that the provisions we like get into conference. then we can worry about the other stuff.

  4. Maggie – As the complexity grows, so does my bafflement, and so I have a few questions.
    (1) To what extent would a floor on medical loss ratios, which I believe is included but without specific percentages in both HR3200 and the HELP bill but apparently not in the Baucus draft, provide a buffer against excessive costs?
    (2) How would a public plan (or for that matter, a non-profit cooperative) induce providers to provide equal or better service at lower cost? If we assume that pilot projects, comparative effectiveness research, and other innovations identify ways of doing this, how would either the public plan or co-op approach pressure providers into adopting them?
    (3) If either of a public or co-op insurance plan merely offered lower payments to providers, wouldn’t providers simply decline those patients, in a manner similar to the refusal of some today to accept Medicaid patients – particularly if the influx of new patients into the system via insurance mandates gave the providers additional leverage?
    (4) Is it conceivable that a public option, which I understand to be an insurance plan only, might suffer in comparison with a co-operative organization that managed not only insurance but also included its own providers within the organization? Would this flexibility on the part of co-ops offset disadvantages from the reduced leverage it suffered due to a smaller subscriber base?
    (5) In the long run, would an efficient non-profit plan, either government run or private, with its reduced costs, inevitably drive out of business any for-profit entity if the two competed to provide exactly the same services to exactly the same populations? This is, of course, the “government takeover”, that reform opponents warn about. As far as I know, no healthcare system elsewhere is characterized by completely parallel large-scale public and private insurers. Rather, in many countries, private insurers successfully occupy a separate niche from the public component – e.g., France. That would by no means be a bad outcome, nor is it the single payer outcome that gives opponents nightmares, but it doesn’t seem to be talked about. Proponents emphasize that the public option wouldn’t do that here because it would be available only to a fraction of the population, but I’m not sure that is an ideal arrangement, nor one that we wouldn’t want to improve on in the long run.

  5. Dr. Frankie, Jim & Ed, and Fred
    Dr. Frankie–
    If Obama fails to pass healthcare reform, he will be doomed to one term.
    On the other hand if he succeeds in getting healthcare reform passed and it implodes (because it is too expensive, both for taxpayers and for patients) he is doomed.
    Jim & Ed–
    I’m not saying “game’s over.” I agree with Jim– as long as the public option is in one of the plans that goes to conference–and it is–the public options is still alive.
    I’m just trying to warn people: the Baucus plan is really not acceptable. In my view, the House bill is.
    Fred–
    This isn’t a comment–it’s an outline for a new post.!
    But I appreciate it because your questions are all good ones and remind me of just how much well-informed people still don’t know about the public option.
    It is pretty complicated, but the media also hasn’t done a very good job of explaining it.
    1) The House bill says that private insurers have to pay out 85% of premiums in reimbursements for actual health care, keeping only 15% to cover adminsitrative expenses and profits.
    If they don’t pay out 85%, they have to give customers rebates.
    This wouldn’t make a huge difference– for-profit insurers now pay out 80% to 85% in reimbursements.
    The amount that private insurers keep adds to the cost of health care, but its not hte big driver of health care inflation.
    The cost of healthcare is spiralling so quickly becuause
    a) every year, Americans undergo more tests, more procedures, more surgeries, and take more drugs.
    b) And every year we pay more for most of the above.
    2) A national public plan would eventually be big enough to have quite a bit of clout in the marketplace. That means that it would have power when negotiating rates with drug-makers, hospitals and doctors.
    Some doctors would choose not to take the public plan–just as some choose not to take Medicare today–but probably the majority would.
    I doubt any hospital could afford to refuse to participate in the public plan, just as no hospital refuses Medicare.
    And drug-makers wouldn’t want to give up the marketshare that the public plan represented.
    On the other hand, if the public plan offered docs, hospitals and drug-makers too little, the best would refuse to make a deal, would advertise about that and the public plan would shrivel.
    It’s worth noting that 75% of doctors now favor a public plan–because, despite all of the complaints that Medicare pays too little–they prefer Medicare to most private insurers.
    Medicare pays on time and doesn’t play games. They assume (rightly) that the public plan would do the same.
    At first the public plan would be relatively smalll– people who work for large companies where they have employer-based insurance would not be eligible to apply. But within a few years they will be.
    3) Yes, any provider could decide not to participate. This is why a public plan isn’t going to pay Medicaid rates (which are 70% of Medicare rates).
    A public plan would like to pay Medicare rates to most providers, while followingMedicare in paying primary care physicians more (this is built into the Medicare reforms in the House bill and, I think, in the Baucus bill).
    Paying for quality rather than quantity, Medicare and the public plan would probably pay specialists less for certain servcices that are of little or no benefit (such as PSA tests) and pay sub-par hospitals less for too many preventable re-admissions, etc.
    4) To qualify for federal funding,the co-ops would have to be brand new. So we’re talking about fledgling tiny co-ops.
    They would have no market power in a market with Aetna (which is a national insurer). If a co-op began to gain market share, Aetna could wipe it out in one price war (paying providers more and lowering premiums.)
    5) In Germany, private plans and a public plan co-exist. The private plans are more expensive and offer “extras” like private rooms in hospitals, a shorter wait for elective surgeries (knee replacement etc.) and other frills.
    (Many Germans view our hotel-like hospitals as way over the top– most Germans are willing to share a room. And their hospitals are quite spartan, but very good.
    A couple of years ago I met a 40-something pediatric oncologist from Germany. He had the public plan because the healthcare was just as good, and he didn’t care about what he saw as frills.
    In this country many people will refuse to sign up for a public plan because they distrust government, or becuase they see a public plan as “lower-class.”
    At the same time, I think some for-profit plans won’t be able to compete and will wither away.
    But the really good non-profit private sector plans (Kaiser, Geisniger, etc. will probably do very well.)

  6. Maggie,
    Frankly I agree that Health Care would be best reformed in the manner that you suggest. However, we have a little problem – it is called our Democratic form of Government.
    Your proposal could be stated as: “Since most members of Congress don’t understand Health Care, the President should appoint a panel to make recommendations, which can then be approved AS A PACKAGE by the President and Congress”.
    I suggest that virtually any aspect of public policy can be plugged into the above sentence: “Since most members of Congress don’t understand the War in Afghanistan (and most Americans can’t find Afghanistan on a map), the President should appoint a panel to make recommendations, which can then be approved AS A PACKAGE by the President and Congress”. And: “Since most members of Congress don’t understand Energy Policy, the President should appoint a panel to make recommendations, which can then be approved AS A PACKAGE by the President and Congress”. How about drug policy, reforming Social Security and reforms in financial regulation?
    The sooner we get rid of the “pesky meddling” of the people’s elected representatives, the sooner we can arrive at a good solution.
    “We have met the enemy and he is us”

  7. Maggie,
    I think you missed my point. What I am saying is that anything that comes out now will be a hog trough filling for money driven medicine.
    We are getting exactly the opposite of what we need and what is intended.
    I guess step one is we needed to address money driven politics first.
    I am loosing faith fast. We need some big events to galvanize the public on the need for reform and blow away all the smoke.
    What big events are there that could cause this?

  8. Fred:
    You asked if a not-for-profit insurer could drive out of business a for-profit insurer if they provided the same services to the same population?
    The IRS is concerned about this, too.
    One of the primary reasons that not-for-profits have to pay unrelated business income tax (UBIT) is for this very reason – so that not-for profits do not have an advantage over for-profits, unless the not-for-profit offers unique services and operates distinctly different from for-profits.
    Don Levit

  9. Don – I’m not a tax expert, but I don’t see how the UBIT, even if it applied, would eliminate the need perceived by a for-profit insurer to charge higher premiums than a non-profit in order to have some income left over for profit.
    Is the UBIT applicable here? The IRS code exempts an organization from a UBIT in regard to:
    “Convenience of Members: Any trade or business is excluded that is carried on by an organization described in section 501(c)(3) or by a governmental college or university primarily for the convenience of its members, students, patients, officers, or employees. A typical example of this is a school cafeteria.”
    What are the precedents here?

  10. Fred:
    The convenience of the members would not be applicable here.
    UBIT is a secondary step, a slap on the wrist.
    Too much UBIT, excessive commercial activity, could revoke tax-exempt status.
    This happened to many Blue Cross insurers.
    My point is that not-for-profits should not compete by offering similar products as the for-profit insurers.
    Maggie made the comment about Aetna conducting a price war by charging substantially lower premiums.
    This can be effective on a short-term basis, such as the current year.
    Not-for-profits can differentiate themselves from for-profits by taking a future-oriented, long-term approach.
    For example, building benefits over a period of years rather than providing defined-benefit plans for a current annual premium as is currently offered.
    Don Levit

  11. Legacy Flyer, Ed,
    Legacy Flyer–
    As Senator Jay Rockefeller indicated in a recent interview with Ezra Klein:
    medicine is far, far more complicated than any of the other issues he has dealt with in the Senate– and he has served on the Defense Commitee. ,
    There are many areas of social policy where we would like our elected reprentatives to weigh in (assuming we elect wise represenatives wisely, but that is our problem, not theirs.)
    But setting Medicare fees is all about understanding the medical science behind
    compartive effectivenss research and weighing benefits to patients.
    I wouldn’t want me on the panel making these decisions. I don’t have the appropriate education.
    I’m not an M.D.; more importantly I’m not a medical researcher/scientist/epidemiologist.
    But I definitely could wrap my mind aroudn issues that have little to do with science and much to do with social policy: the
    war in Afghanistan, Social Security (the economics of SS are much, much easier to udnerstand than the economics of healthcare ) , etc. etc.
    Ed,
    I have a feeling that you are focusing on the Baucus Senate Finance bill –which is not surprising because the media is currently trumpeting it as The Bill.
    This is becausee the eEnate Finance Bill is currently being debated–and newspaper companies need to sell newspapers.
    So they focus on what is happening TODAY–and blow it up as big news.
    But the House bill—approved by 3 House commitees– and the other SEnate bill, approved by the Senae HELP commitee (and very close to the House bill) are at least as important –if not more important than the Baucus bill.
    Someone who has been involved in Congressional politics for a long recently sent me this e-mail:
    “Everthing that is happening [in Congress] now is foreplay.”
    Let me add: It is only when we get to the point that the House and Senate bills are reconciled–behind closed doors– that we wil find out who is and who isn’t
    f____ed.
    I’m sorry to put this in such crass language, but I am afraid that is the way the system works.

  12. Maggie, paying for health care is “complicated” only because our bribed congressmen are spending gobs of time and money trying to avoid doing it right! And the insurance industry loves them for it.
    Single payer is not complicated at all. They simply have to allow people to sign into a system that already exists. Yea, add workers but don’t change the system. When people get sick, they get care and the caregiver gets paid.
    I know you did prefer mandates and opposed single payer. But now that it is to be put on the table by Weiner, would you support it now?

  13. Jack —
    As I have explained in the past, it’s a waste of time to debate single-payer at this point in time.
    It is not going to happen.
    But by continuing to insist that this is the “only way” to reform care, obsessive single-payer advocates try to divide progressives and undermine the Obama administration.
    In some quarters, undermining Obama may be their primary goal.

  14. As we walk deeper into the swamp (“waist deep in the big muddy”) that Afghanistan is becoming, I find it curious that Jay Rockefeller thinks he is competent to deal with Defense/Foreign Policy but is not competent to deal with Health Care. Perhaps he is equally competent in both areas but under fewer illusions in one.
    For its one, two, three what are we fighting for
    Don’t ask me cause I don’t give a damn
    Next stop Afghanistan

  15. Legacy–
    Jay Rockefeller is Not saying that he isn’t competent to draft healthcare legislation.
    He is saying that the vast majority of legislators are not.
    Healthcare–what we should cover, what we shouldnt’ cover– is a very technical subject that requires being able to evaluate medical reserach.
    Afghanistan is also complicated, but in a different way.
    It’s a matter of weighing how worried you are about terrorist attacks on the U.S., and whether you think that fighting a war against a country
    is a good way to fight terrorism.
    (Some would say that stalking and killing individual terrorists makes mroe sense; others would say that trying to improve our image in the Middle East by trying to help people in poorer countries–and fighting for rights for women in all countries–would be a better way.
    Some say that if we are going to send more troops overseas we should have a draft.
    I have opinions and good arguments on all of these issues.
    I don’t have opinions and good arguments as to whether we
    should cover medication X
    for disease Y , for patients who fit Z profile.

  16. Maggie,
    You say: “Jay Rockefeller is NOT saying that he isn’t competent to draft healthcare legislation. He is saying that the vast majority of legislators are not.”
    Yeah – Rockefeller is much smarter than the rest – and – “I have a bridge for you”.
    I watched a Senate hearing on C-Span last night it was a “markup session” on Health Care Reform Legislation and dealt with a number of issues, most notably – what the ratio of expenditures between young people and older people should be. I hate to say it, but from my perspective, the people that made the most sense were Baucus and Kyl. Massive cross generational subsidies for health care – as proposed by Kerry – are just disguised single payor and likely to cause significant problems with our younger citizens. And, although I am in favor of single payor, but please be honest about it and don’t call the subsidy of wealthy 50-60 year olds by poorer 20-30 year olds – “fair”.
    You say:
    “Healthcare–what we should cover, what we shouldn’t cover– is a very technical subject that requires being able to evaluate medical research.”
    You have it backwards. “What we SHOULD cover, what we SHOULDN’T cover” is not a technical subject, but a philosophical/moral/ethical question. There can be technical inputs, but at the end of the day the fundamental questions are not technical.
    Examples:
    • Should the government pay for abortion? (I don’t care if you have an MD, PhD and an MBA, this is not a question a medical “expert” can answer. n.b. I am in favor or Roe v. Wade)
    • How much of a cross generational subsidy is “fair”?
    • How much money should be spent in the last 6 months of an 80 year olds life vs. how much of that money should instead be spent on education, housing, other needs of younger people etc.
    Don’t pretend that you don’t have opinions on the above issues and that deciding them is just up to the “experts” – “experts” are available for hire. You and I both know what we think is right –then we find the “experts” that support us.

  17. Legacy–
    You are an intelligent person and have read widely about healthcare.
    So I know that you know that “poorer 20 and 30 year olds” Would Not be subsidizing healthcare for “wealthier 50-year-olds.”
    Only 50 -year olds who earn on average, less than half of all Americans would receive subsidies.
    And those subsidies would be funded by Americans who earned more than half of all Americans–including relatively affluent 20-somethings and 30-somethings who earn more than the majority of Americans, (including older Americans).
    This is how we pay for Social Security. We pay a percentage of our income , regardless of age.
    Then, when you become older, you benefit from contributions by younger taxpayers.

  18. Maggie,
    “So I know that you know that ‘poorer 20 and 30 year olds’ WOULD NOT be subsidizing healthcare for ‘wealthier 50-year-olds.’”
    In fact you are wrong.
    There was a debate in the Senate Finance Committee between a number of the members, mostly notably John Kyl of Arizona on one side and John Kerry of Massachusetts on the other. The debate was over what rules will govern healthcare insurance, specifically what the premiums will be for people of various ages.
    From an actuarial standpoint, the insurance rates for people in their 50’s and 60’s should be at least 6 times the rates of people in their 20’s and 30’s, particularly if pre-existing conditions are not excluded. This is because on average, people in their 50’s and 60’s use 6 times as much healthcare as younger people. The Baucus committee had set the ratio at 5:1, slightly below what the actuaries had calculated. This results in a slight subsidy of older people by younger people.
    (I am certain that you understand this concept but for illustrative purposes, let us suppose that you are a 50 year old woman who has a clean driving record and drives a mini-van and I am a 25 year old man with multiple speeding tickets who drives a Corvette. We both get car insurance from the same Insurer. To cover the difference in risk, I should pay an insurance premium at least 6 times what yours is. But because that premium would be so high and to make things “fair”, my premium is reduced to 2 times what yours is. In order to cover this price reduction to me, your insurance needs to be higher. In effect you are cross-subsidizing my insurance.)
    The problem is that this 5:1 ratio and non-exclusion of pre-existing conditions results in a large insurance premium for people in their 50’s and 60’s. A premium that some people in that age range will have trouble paying. A partial solution to the problem, that many members seemed to accept, was to reduce the ratio to 4:1, in effect making it cheaper for older people and increasing the cross subsidization between the young and the old. Yes, there are subsidies for people who have low incomes, but there are plenty of people who will not get the subsidy.
    John Kerry proposed reducing the differences in premiums between the young and the old to 2:1, like in Massachusetts. This increases the cross subsidization of older people by younger people – by a substantial amount. And as we have previously discussed older people are wealthier than younger people and have a higher income (you provided the census data to back this up in a previous post). Hence we have: “poorer 20 and 30 year olds subsidizing healthcare for wealthier 50-year-olds” just as I stated.
    This is not only a moral/ethical/philosophical issue (do older people in this country deserve not only Social Security and Medicare, but also contributions toward their health insurance from younger people), but it also raises practical problems. Young people, particularly those with children will be faced with health insurance bills that are much higher than what they would otherwise be if there was no cross-subsidization. Their incentive will be to “go bare” and only sign up for insurance if/when they get sick. Of course this has been anticipated and as part of the bill, the government will set up a mechanism to penalize people that don’t have health insurance. This is not likely to create a lot of joy in healthy young people who are either forced to buy “over-priced” insurance or pay the penalty (or find creative ways to scam the system).
    It you think the above scenario is made up, please look at some of the recent articles in the New York Times on what has happened in Massachusetts. The above scenario has in fact played out. The article told the story of a number of people who were too wealthy to qualify for aid, but couldn’t afford the premiums and had “gone bare” and paid the penalty.

  19. Legacy–
    I hope that, as a doctor, you understand that patients are not morally responsible for growing old, devloping cancer, arthritis, all the ills that flesh is heir to.
    By contrst,everyone does have a moral responsbility to drive safely. This is something you can control.
    Someone with speeding tickets should pay higher car insurnace rates both becaue I shouldn’t have to pay to cover the accidents that he is likely to have, but also as a reminder to him that he is going to have to learn to drive safely –if he ever hopes to earn lower auto insurance rates.
    It is immoral to punish older people for being older.
    Younger adults have a social responsiblity to take care of older people–just as adults took care of them when they were children. And,if they are lucky, these young adults will grow old– and others in the society will help them.
    The vast majority of older people are not wealthy.
    Only about 5% are truly wealthy. And we do not want to divide older people into the “wealthy” and not so wealthy. One reason Social Security and Medicare work -and are such popular programs– is because they treat everyone equally. If they were programs just for the middle-class and the poor they would not be nearly as generous or as good.
    The divisions in our soceity–young people not wanting to help old people, whites not wanting to help blacks, upper-middle-class people not wanting to help the poor.
    underline why we, as a society, are in so much trouble.
    There are many indications that like other successful civilizations (Rome etc.) we have reached a point of decadence and selfishness that the center may not hold.
    We are on a downhill slope.
    Many peple believe that in 20 years–perhaps sooner– we will no longer be a #1 or #2 global financial or political power.
    Standards of living in the U.S. will be declining . . . Already, real unemployement stands at 17% (Real unemployment includes people who have given up looking for work and people working part-time who need and want a full-time job. They are not included in the unemployment statistics you usually read in the paper. This Great Recession is far from over.
    Much depends, I think, on how those who are just beginning to gain some political power in this country–minorities, women, new immigrants — use that power.
    IF they strive to build a society that thinks collectively, if they strive to provide truly good k-12 education for all, then this country could turn around.
    If not, the downhill slide accelerates.
    We already have higher rates of crime than in other countires. And much dirtier streets, train stations, and public spaces. (Thinking in term of “me” means that Americans will spend a fortune on their own homes, hire cleaning people etc., but are perfectly content to litter public spaces and don’t want to pay taxes to maintain schools, train stations, subway stations, etc., becuase “those spaces” don’t belong to Me.)
    We also endure much lower rates of civiltiy. (Not that long ago I heard a young man who was walking behind an older man on the sidewalk say, “Old Man, Get Out of My Way.” (The older man was walking too slowly to suit the 20-something.)
    This happened in my supposedly elite Upper-West-side Manhattan neighborhood.
    In Europe, one rarely hears such disprect for older people. Younger people still get up to give a subway seat to an older person. They hold doors open, etc.
    And they pay taxes to provide a social safety net for the elderly–pensions as well as generous health care.
    Legacy, I genuinely hope that when you are older, you don’t find yourself in a U.S. nursing home, where you are taken care of (or not) by younger people.
    No matter how much money you have, it is very, very difficult to find truly compassionate, kind nursing home care in the U.S.

  20. Maggie,
    You say: “Younger adults have a social responsiblity to take care of older people–just as adults took care of them when they were children.”
    We have a social responsibility to each other. You seem to envision this responsibility as running from 20 and 30 year olds to 50 and 60 year olds. I see this responsibility running from the wealthy to the poor and to the truly old – who are not in their 50s and 60s. The numbers tell us (and you cited US Census data on a previous post), that 50 and 60 year olds earn higher incomes and are wealthier than the 20 to 30 year olds. And young people have added financial responsibility to their young children which people in their 50s and 60s generally do not. Therefore I find it odd that you are proposing a large subsidy of 50 to 60 year olds from poorer 20 to 30 year olds. And this subsidy is in addition to the subsidy that 50 and 60 year olds will receive when they turn 65 and begin to receive Social Security and Medicare. (There is no “Social Security Trust Fund” – we spent the money.) In essence, you have it backwards.
    “Legacy, I genuinely hope that when you are older, you don’t find yourself in a U.S. nursing home, where you are taken care of (or not) by younger people.”
    Both of my parents are in a nursing home and I visit them every week. In fact I just returned from visiting them this Saturday evening. The place my parents is in is pretty nice – and my parents are not/were not wealthy. The people who take care of my parents are not only younger, but predominantly foreign born. And for the most part they are nice people. The messages I take home from these visits are:
    1) For those who want to “shut the borders” think a little more carefully about who will be picking your vegetables, and staffing the nursing homes if you succeed.
    2) Try to develop bad habits (like smoking, drinking too much or flying experimental airplanes) that will shorten your lifespan so you do not end up in a nursing home 😉