Baucus’s Bad Bill

November 19, 2008 • Commentary
This article appeared on Cato​.org on November 19, 2008.

Given the problems facing our health care system—high costs, uneven quality, millions of Americans without health insurance—it seems that things couldn’t get any worse. But they can, and they would, if the health care plan being proposed by Sen. Max Baucus were to become law, with Americans facing higher taxes, rising insurance costs, and, ultimately, government‐​imposed rationing.

Sen. Baucus would require every American to buy health insurance, but not just any insurance. A panel of government bureaucrats, the Independent Health Coverage Council, would get to define what benefits your insurance should have. You may be perfectly satisfied with the insurance you have today, but that wouldn’t matter. If the bureaucrats didn’t think it was good enough, you would have to give up your current policy, and buy the one they wanted—even if it was more expensive or contained benefits you would never use and didn’t want.

Sen. Baucus also supports an employer mandate requiring “all except the smallest” businesses to either offer health insurance to all their workers or pay an additional tax as a penalty. While the penalty would be lower for small businesses, and some tax subsidies would be available, an employer mandate would significantly add to the cost of hiring workers. Businesses will almost inevitably respond by reducing hiring or cutting back on wages or other benefits. Any proposal that is likely to make business less likely to hire workers is a particularly bad idea right now with the economy sliding into a recession.

Sen. Baucus would also impose a host of new insurance regulations that will increase the cost of coverage, including “community rating” which requires insurance to charge the same premium to everyone regardless of a person’s age or health. This might mean lower premiums for those who are older or in poor health. But it will force the young and healthy to pay significantly higher premiums to cross‐​subsidize those who are older and sicker.

Under the Baucus plan, private insurance would still exist, but it would largely be private in name only. Health insurance would be reduced to little more than a public utility, operating much like, for example, the electric company, with the government regulating and controlling every aspect of the operation.

At the same time, he would greatly expand existing government programs such as Medicaid and the State Children’s Health Insurance Program. Studies consistently show that as eligibility for these programs increases, unsubsidized coverage is squeezed out. Businesses are effectively encouraged to cease offering employer provided plans, shifting the cost of insurance to taxpayers. A Robert Wood Johnson Foundation survey of 22 studies of the relationship between government insurance programs and private coverage concluded that substitution of government for private coverage “seems inevitable.” Sen. Baucus would also expand Medicare to cover people aged 55–64. Allowing millions more Americans into a program already facing some $70 trillion in unfunded obligations is the political equivalent of crowding more passengers onto the Titanic. And, while Sen. Baucus promises that this would be accomplished in a “revenue neutral” manner, does anyone really believe that this is possible?

As bad as all this is, it will get worse. That is because Sen. Baucus would also establish a separate government‐​run health insurance plan that would operate in competition with private insurance plans. In theory, people would be able to choose between the government plan and private insurance. In reality, however, such a government‐​run plan would have an inherent advantage in the marketplace because it would ultimately be subsidized by American taxpayers.

The government plan could, for instance, keep its premiums artificially low or offer extra benefits since it can turn to the U.S. Treasury to cover any shortfalls. The lower‐​cost, higher benefit government program would naturally attract consumers, undercutting the private market. The result will be an inexorable slide toward government‐​run health care, with all that means in terms of rationed care and higher taxes.

Sen. Baucus is generally known around Washington as a man of moderation, judgment, and common sense. It is a shame his health care plan reflects so little of these qualities.

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