Baucus Bill: Health Reform That Isn't

With the long-awaited release of the Baucus health plan, which is said to have Obama's approval, the fix is in. Billions of taxpayer dollars will be thrown at the insurance and pharmaceutical industries, much of it diverted from Medicare and Medicaid (despite Obama's protestations that he would not raid Medicare to shore up the private system). We'll simply pour more money into a system that's already shown itself capable of absorbing whatever we put into it without providing anything like commensurate health care.

Look at the bare bones of the plan. Americans will be required to buy health insurance at whatever price the companies choose to charge, many using government subsidies. Businesses will have to contribute or be fined. Drug companies will still be able to charge whatever they like for drugs, and continue to jack up prices at several times the inflation rate. In short, the government will deliver to the insurance and pharmaceutical industries millions more paying customers, with virtually no curbs on their profiteering. The "public option" was first gutted, then all but dropped.

The only savings will come from stopping over-payments to the private Medicare Advantage plans (certainly a worthwhile reform), and from limiting some services now covered by Medicare and Medicaid, presumably on the basis of effectiveness studies. (Few experts believe there are significant savings from preventive care or computerization of records.) Insurers will be prohibited from denying coverage on the basis of pre-existing conditions or reducing benefits when customers have the temerity to get sick, but these prohibitions are easily circumvented.

So what will happen? First, the medical-industrial complex will consume an ever greater fraction of our GDP, at the expense of other social needs, like infrastructure and education. Second, American businesses that compete in the global market, already reeling from the costs of providing health insurance to their workers, will be even less competitive. Third, we'll see the growth of huge bureaucracies to make sure everyone buys insurance and penalize those who don't, and to monitor insurance companies for violations of the regulations against creaming off the most profitable customers. Finally, health care itself -- the ostensible purpose of the exercise -- will progressively deteriorate. We'll see not only rapidly rising premiums, but shrinking benefits and higher co-payments, until even those who have insurance will not be able to use it when they're sick.

We can get a glimpse of what lies in store from Massachusetts, which three years ago adopted a plan similar to the Baucus/Obama plan. Premiums in the state are rising at double-digit rates, benefits are often skimpy, co-payments are rising, and subsidies are costing the state far more than originally predicted. Die-hard advocates now say that universal insurance was always the first goal, to be followed by cost-control and increased benefits, but that hope is belied by the fact that things are moving in the opposite direction. Moreover, Massachusetts offers a best-case scenario, since the state already had a very low rate of uninsurance and was able to tap into a large pool of money set aside to provide free care to the indigent. The lesson is that there is not much sense in expanding coverage if it will quickly become inadequate and unaffordable.

All of this assumes that Baucus/Obama will eventually make its way through Congress in its present form. That is unlikely, but it is probable that some remnant of it will survive. It is now clear that the essential element in whatever passes will be publicly financed expansion of the insurance and pharmaceutical markets. Indeed, the purpose now seems not so much to provide universal health care as to win the heart and minds -- and wallets -- of these industries. They give copiously to Congressional campaigns, and with this health plan, the Democrats are positioned to take the lion's share of their donations. They've rolled right over the Republicans, whose health plan pretty much consists of, "Go out and buy insurance, and lots of luck." While that is good for the industries, it's not as good as the market expansion the Democrats now promise.

Insurance and drug companies will have plenty of opportunities to show their gratitude to the Democrats in the elections of 2010 and 2012. Moreover, since reform is not scheduled to be implemented until 2013, any public disillusionment won't be felt until after those elections.

Those of us who believe that advanced countries should provide universal and comprehensive health care as a matter of course, and who support a single-payer system as the most efficient way to do that, are faced with two unpalatable options: the Democrats' short-sighted and, I believe, cynical proposals to pour more money into a dysfunctional system, and the Republicans' clueless disregard for people not shrewd enough to be rich. In my next blog, I will suggest a practical proposal that would move us toward universal care, while containing costs. But it would take an aroused public to force the Democrats to stop wooing the health industries. Maybe real reform will have to await the emergence of a third party.