Baucus' Radioactive Compromise

The Washington Post has some details about where Baucus' “coalition of the willing” negotiations currently are, and it does not look good. I'm amazed that any politician would think what they are proposing is a good idea.

To start with, Baucus' plan reduces cost by simply leaving around 17 million Americans uninsured. Over a third of uninsured Americans would remain uninsured under his proposal. It would only extend coverage to 94 percent of Americans, compared to the House bill that would cover 97 percent of Americans. That is 9 million more uninsured.

To help pay for reform Baucus wants to squeeze money out of seniors on Medicare. His plan “would require wealthier seniors to pay more for prescription drug coverage under Medicare, and they would charge co-payments for clinical lab procedures.” Making seniors pay more for medication and lab tests seems like a very easy sell. (I'm sure that is going to sell so much better than taxing millionaires.)

The current state of negotiations would impose a 35% excise tax on insurance companies for providing insurance plans worth over $21,000 a year for a family. That would affect 7 percent of taxpayers' policies. That is around 20 million Americans who would very likely be getting less generous health care plans as a result.

Baucus' plan would also not include the extremely popular public option. His plan could easily be described as the anti-labor bill. It would impose a new tax on health insurance which would fall heavily on union members and would not provide them with a public option they strongly support. I would not be surprised if labor worked to kill reform instead of accepting what Baucus is offering.

The proposal has a “free-rider” penalty instead of an employer mandate. There are many who think it would be a nearly impossible bureaucratic nightmare to enforce. The “free-rider” provision is also strongly opposed by Wal-mart.

Let's have a quick summary of Baucus' plan. It would increase the price of drugs for some seniors, and make them pay billions in new lab test co-pays. It would impose a new tax on health care benefits. The tax would result in millions of Americans getting less generous health insurance (i.e. losing their current health care coverage). If passed, his bill would only reduce the number of uninsured Americans by less than 2/3rd leaving around 17 million still uninsured. The bill will piss off seniors, progressives, labor unions, and millions of people with good health insurance. Have fun selling that to the American people.

2 comments: said...

Part 1:

Walker- there is no wisdom in your reporting. Clearly you have no clue what running a business is all about. I suggest you purchase a lemonade stand or something similar which you are qualified to manage and learn about what its like to make a payroll before you start offering such insightful critiques of the health care plan, and more critically the impact of an employer mandate.

First, you site WalMarts support of an employer mandate as an implicit indictment of any businesses that oppose such. You fail to recognize that Walmart, with its vast size and financial strength, supports an employer mandate because it already can and DOES provide it to its employees, and recognizes it retail competition doesnt and cant afford it as Walmart can. In other words, they have a competitive advantage that they can use to secure more market share. Its the classic alliance between big govt and corporate America- they make strange but convenient bed fellows when its comes to stifling competition with increased costs of doing business that crowd out the smaller players. Funny you could be so blind to something so obvious when Walmarts behavior (for once, Im sure you'd love to see them uninonized wouldnt you) actually coincides with your agenda on this issue.

To your previous point that even a nominal employer mandate cost is affordable (I think you quoted math showing a 5% cost to higher a min wage employee), its clear you have no clue how competitive the niches are in which at/near min wage employers operate. They are frequently competing on very low price (fast food value menus, retail discounters, etc) under intense competitive sets business models that, IN GOOD TIMES, deliver after cash tax flows of sub 5%. Nevermind we are in the middle of a crushing recession, nevermind that min wage has in recent years been increased by over $2 (about 40%) and often indexed to annual increases. do you have any clue what this has done to the margins of low wage employers? Many (even the large ones) are suffering negative cash flow, and you have the genius idea to drive that more negative with even nominal health care cost increases as you put it? Also do you have any clue what the tax implcations of an income tax increase on flow through business entities (most) that pass their net incomes as taxable income to their underlying shareholders- despite the fact that these net incomes are calculated prior to an small business actually having paid all its bills (capital expenses, principal payments on debts, taxes, etc)?

Does someone as smart as you have any clue what happens when you raise the cost for a business to do business (in particular their labor)? Here is a very simple lesson in basic economics. As Milton Friedmann said there is no such thing as a free lunch. If you make labor more expensive on a business, a few different things could and a will happen:

1- Businesses that pay wages high enough over min wage will reallocate compensation from salary to benefits to afford the increase. Less take home pay for the employee, more money for the govt to run state healthcare in what is sure to be the most efficient manner possible- right? Just ask the Canadians, they are literally DYING to get access to American quality healthcare. said...

2- Businesses that compete with lower wage employees in niches that dont have pricing power or the means to cut costs will go OUT OF BUSINESS. Yes the weakest of the very businesses that you intend to make subsidize insurance costs will start shuttering and their goes all their generated tax dollars, employment payrolls, and insurance subisides- boy that was a smart move

3- Those low wage employers that have room to cut costs will CUT JOBS to stay solvent. That means reducing hours, reducing payroll, increasing unemployment, reducing quality of service. Similar to the impact of the closure but not as drastic, but certainly you can see that the free lunch idea is for economic fools only...

4- Finally, those that can will RAISE PRICES. That right genius, the AMERICAN CONSUMER will have the costs increased passed back on to them in the form of higher prices for goods and services. Like that $10 car wash- try 15. Like that $1 value menu sandwich, try $2. Like that $10 t-shirt, try 20. So at the end of the day, CONSUMERS PAY TAXES! Boy you are so clever.

And finally Genius, your claim that businesses have absorbed the latest min wage increase and therefore a little more wont hurt further solidifies your cluelessness. The ramfications of those increases have barely been felt you. I can assure you that businesses have reacted to these increases just as I explained above and have very personal experience. Most employers calculate the cost of the min wage increase and do the math- hmmm, we need to stay in business and pay our bills, my cost went up by say $100,000 as a result of this law, so how do I shave $100K in costs to stay solvent? Cut jobs, raise prices, reduce benefits, etc etc. The only difference with the health care mandate is that it will be an ADDITIONAL burden that causes steeper changes.

So Genius, please keep posting as if you have a clue. I wish you the best of luck in future business endeavors. Hopefully someday after a few years running a lemonade stand or something equally challenging you will actually be qualified to make an intelligent claim about the impact of health care reform and more specifically employee mandates will have on the broader business community. Until then I suggest you dont quit your day job...


Someone that Actually has a Clue about the Subject


Related Posts Plugin for WordPress, Blogger...