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Baucus Health Care Proposal Excludes Public Option

Source: WSJ

Posted on 16 Sep 2009

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Senate Finance Committee Chairman Max Baucus formally unveiled a 10-year $856 billion bill that would extend health insurance to tens of millions of Americans not now covered, moving an important step forward on President Barack Obama's top domestic priority.

The sweeping measure is designed to steer a more moderate course on health policy than other major bills moving through Capitol Hill, and it doesn't propose to create a new government insurance plan to compete with private insurers, as proposed in rival House legislation and favored by many liberals. Instead, the Montana Democrat is proposing to expand coverage by creating a network of nonprofit health-insurance cooperatives. The cooperatives would be seeded with $6 billion in federal money, enough to cover start-up costs and meet insurance solvency requirements.

More than a year in the making, the bill would overhaul the nation's health-care system and has sparked a sharp battle between Republican leaders and the White House over the size and role of government in the nation's economy. (Read the full text of the Baucus plan.)

The bill was swiftly denounced by Senate Minority Leader Mitch McConnell, who complained it would cut Medicare, which provides insurance to the elderly, and impose new tax burdens on families and small businesses.

Only in Washington would anyone think that makes sense, especially in this economy," he said, adding taxpayers don't want "yet another thousand-page, trillion-dollar government program."

The measure would broaden eligibility for Medicaid, the existing federal-state health program for the poor, and it would create a new national insurance exchange, where individuals and small businesses can purchase insurance. Individuals and families would be required to purchase insurance and would face penalties ranging from $750 to $3,800 for not complying.

However, those at the lower end of the income ladder and who aren't on Medicaid would receive federal tax subsidies to defray the cost.

Under the bill, the subsidies – in the form of a refundable tax credit -- would flow to individuals and families with incomes up to 300% of poverty. For those with incomes from 300% to 400% of poverty, the bill would cap annual insurance premiums at 13% of income. Liberal critics say that level is too large and would expose middle-income families to big new expenses.

The bill wouldn't require employers to provide insurance, a break with the more aggressive House bill. But it would require businesses that have more than 50 workers and don't offer insurance to reimburse the government for part of the cost of any taxpayer-backed insurance subsidies the workers receive.

Insurers would be barred from using a range of practices that critics say have created economic turmoil for millions of families. Among other things, the measure would bar them from denying health coverage to individuals with pre-existing conditions or imposing annual or lifetime limits on coverage.

Senate Majority Leader Harry Reid intends to convene a caucus of Senate Democrats Thursday to discuss the legislation. Mr. Baucus is intent on bringing the bill before the influential Finance panel next week.

Mr. Baucus has hoped to win over Republican Sens. Olympia Snowe of Maine, Chuck Grassley of Iowa and Mike Enzi of Wyoming, arguing a bipartisan bill has the best chance of ensuring passage on the Senate floor. For now, the senator is pressing forward with his own bill. He still has hopes of winning bipartisan support, either in committee next week or on the floor next month.

"This is a unique moment in history where we can finally reach an objective so many of us have sought for so long," Mr. Baucus said in a statement. The senator stressed he "worked to build a balanced, common-sense package," and vowed to press forward on the floor. "Now we can finally pass legislation that will rein in health care costs and deliver quality, affordable care to the American people."

Mr. Baucus stressed the bill wouldn't add to the federal deficit. The bill is financed by some new taxes and by holding back the rate of growth in programs like Medicare.

Among other things, the bill would levy a new 35% excise tax on high-dollar insurance plans. The tax would fall on insurers offering plans with values above $8,000 for individuals and $21,000 for families. The premium tax would take effect in 2013 and raise $215 billion over 10 years, according to a preliminary estimate from the Joint Committee on Taxation.

The bill would also levy a total of $93 billion in fees on health-care-related industries over 10 years, to help offset the bill's price tag. Pharmaceutical companies would face an annual assessment of $2.3 billion, medical-device manufacturers $4 billion and health insurers $6 billion, all apportioned according to a firm's market share.

Action in the Finance Committee will affect other versions of the health legislation. In the House, moderate Democrats have resisted moving forward, arguing they won't vote to create a public-health-insurance option if the Senate isn't going to support one.

In recent days, House Democratic leaders have signaled flexibility on the issue. And with Mr. Baucus moving forward, the pace of efforts to craft a compromise bill in the House are likely to gain steam.