I’m too sleep-deprived to do a careful analysis of the Baucus plan tonight, but as I was reading over the CBO analysis of the proposal, a familiar feeling came over me. I realized the Senate Finance chairman’s health reform plan feels a lot like the Bush tax cuts did when they were first proposed, in these ways (that I can think of tonight–maybe you can think of more):
- The Baucus proposal contains a lot of “bipartisan” elements that (theoretically) should attract Republicans and not just Democrats to the bill. It expands health insurance coverage (a crucial feature for the Ds) but offsets some of the gross cost of expansion with a revenue increase (excise tax on high-end policies) that removes some of the distortion caused by the current tax exclusion of employer-provided health care (hence, this gets prices a little more right–an idea that Rs, including Senator McCain, probably like more than the Ds). The $500 billion net cost of the expansion of health coverage is offset with a mix of spending cuts ($409 billion, which Rs should prefer) and revenue increases ($139 billion, which Ds should prefer). That “bipartisan” feel to the proposal reminds me of the Bush tax cuts, which had a mix of marginal tax rate reductions which appealed to the Rs, with refundable tax credits which the Ds wanted.
- The Baucus proposal assumes cost savings that would occur under current law even though Congress routinely backs away from that commitment. This reminds me of the assumption of a growing alternative minimum tax (AMT) under the Bush tax cuts: that assumption–that current tax law would be honored and AMT revenues would rise dramatically–held down the officially-scored cost of the Bush tax cuts below what their true cost turned out to be with the repeated (deficit-financed) extensions of temporary AMT relief. The Baucus bill achieves deficit-neutrality–even likely over the second ten years according to CBO–largely due to what the proposal assumes would happen to Medicare payments to providers over time. As CBO explains (on page 9 of their letter, emphasis added):
These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the sustainable growth rate (SGR) mechanism governing Medicare’s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments. The projected savings for the Chairman’s proposal reflect the cumulative impact of a number of specifications that would constrain payment rates for providers of Medicare services. In particular, the proposal would increase payment rates for physicians’ services for 2010, but those rates would be reduced by about 25 percent for 2011 and then remain at current-law levels (that is, as specified under the SGR) for subsequent years. Under the proposal, increases in payment rates for many other providers would be held below the rate of inflation (in expectation of ongoing productivity improvements in the delivery of health care). The projected savings for the proposal also assume that the Medicare Commission is relatively effective in reducing costs—beyond the reductions that would be achieved by other aspects of the proposal—to meet the targets specified in the legislation.
Of course, even though I say the Baucus proposal contains a lot of “bipartisan” elements, the fact is that it doesn’t have bipartisan support–not presently at least. In fact, even the Democrats aren’t all that crazy about it; it’s not just that the Republicans won’t buy it. And that’s all the more reason that I worry that the same thing that happened with the Bush tax cuts will happen to this health reform bill: to win the support of more members of Congress you have to keep adding more costly elements to the proposal (–the mentality is: “if you get what you want, then I get what I want” rather than “I’ll give up this part if you give up that part”). And if a bill eventually passes that hands out a lot of gain and very little pain, then even those who originally opposed the bill for its unaffordability might have a hard time voting against its extensions later on. Don’t you think so?
UPDATE Friday morning: Just check out this story in today’s Washington Post (by Shailagh Murray and Lori Montgomery) to get a strong hint at what I mean. The only “bipartisanship” seems to be in complaints that the Baucus bill has too much “pain” and not enough “gain”:
Democrats and Republicans alike worry that a bill intended to address one source of financial hardship — the skyrocketing cost of health care — could lead to another, in the form of hefty premiums…
Some Senate Democrats, along with a key moderate Republican, Sen. Olympia J. Snowe (Maine), are now discussing ways to increase assistance for individuals and families who could face premium costs of up to $15,000 per year by 2016. Sen. Charles E. Grassley (Iowa), the ranking Republican on Baucus’s committee, is suggesting government assistance to insurance companies to help them control premium costs. And lawmakers in both parties are questioning whether Baucus’s main revenue source, an excise tax on insurance companies for their most generous insurance policies, would simply be passed on to consumers…
Kind of reminds me of how climate change policy’s going, too. Folks are always in favor of the desired outcome of the policy (making things better) as long as you can get there without actually having to ingest the active ingredient (bitter medicine?) in the policy. If we can reduce global warming without raising energy costs, better control health care spending without reducing the subsidies to health insurance, improve our fiscal outlook without raising any taxes or cutting any non-wasteful spending…it’s all pretty much the same story (a fantasy).