Baucus Messes Up Wyden's Amendment - Updated

A few days ago, I wrote  that the CBO screwed up Ron Wyden's amendment by failing to fully score it, after telling Wyden that they had.  As a result, Max Baucus wouldn't let it come up for a vote on the Senate Finance Committee.  Wyden is now threatening to vote against the entire bill, which could keep the Senate Finance Committee from reporting one.

So what actually happened?

FDL has obtained the two CBO letters that were sent to Wyden, one on September 22 (PDF) and another on September 29 (PDF), which indicate that Baucus was not correct when he told Wyden that the amendment had not been scored.  It had.   There was a "proposal variant," as the CBO calls it in the September 29 letter, that they indicated they could not score.  But that wasn't the amendment Wyden submitted, which was supposed to be voted on that night.

Here's what happened:

Sept 16:   Baucus introduces his America's Health Future Act.  Wyden submits his “free choice” amendment shortly thereafter, something he had be working on for several months.

Sept 22:   The CBO sends Wyden an email, saying they have fully scored amendment. As had been previously reported, they score the amendment as saving $1 billion:

From        [deleted] cbo.gov]
Sent:         Tuesday, September 22, 2009 9:03 AM
To:            [deleted] (Wyden)
Cc:             Sandy Davis
Subject:    free choice amendment

[deleted]

Below is our analysis of amendment #C1.  As I mentioned, we modeled this as giving all employers access to the exchange starting in 2015  The savings were a little smaller than Ihad anticipated but it is still a net saver.

Wyden # C1

• Relative to the Chairman’s mark, the amendment as modeled would reduce the net impact on federal deficits by about $1 billion over 10 years. There would not be substantial effects on the total number of people with insurance coverage or the sources of that coverage, relative to the Chairman’s mark.

According to sources familiar with the exchanges between Wyden and Baucus, an attempt was then made to create a modified compromise version of the amendment which could have a better chance of passing the committee, and it was submitted to the CBO.

September 29:  The CBO sent a another letter to Wyden.  They indicated they were unable to fully analyze this new modified version of the amendment, which they called the "free -choice proposal variant":

From        [deleted] 
Sent:         Tuesday, September 29, 2009 4:22 AM
To:            [deleted] 
Cc:            [deleted]
Subject:    Wyden free choice proposal variant

Unfortunately we will not be able to estimate the impact of the full-blown version of this proposal -- involving vouchers -- in the near term.  The complexities of working out how the voucher amounts would be determined, who would keep the savings, the tax treatment of those savings, the potential for favorable or adverse selection -- and how individuals and firms would resopnd to the resulting incentives -- would take some time to work out.

As we indicated to Senator Wyden's staff, amendment # C as drafted -- which involved setting up combined reinsurance pools for employer plans and exchange plans -- seemed most similar to us to allowing firms to purchase coverage through the exchange; that is, to let all of their workers choose among the exchange plans. Thus, we modeled the effect as allowing all firms to do so starting in 2015 (which is sooner than under the mark).  We assumed that there would be resulting reductions in tax-preferred health care spending that would be translated into taxable wages as a result of market forces -- without involving specific provisions for vouchers -- and that effect was factored into the $1 billion reduction in net federal costs that CBO and JCT estimated for the amendment.

So Wyden never introduced the "variant."  

October 2:  Shortly after midnight, Wyden introduces his original, fully scored version of the amendment -- not  the modified version which the CBO had not analyzed.  Baucus let Wyden bring it up as the last amendment on the last day of mark up.  Debate  started at approx. 1:00 am.  Roughly half an hour into it, Baucus surprised Wyden by declaring that he would rule it out of order (there would not be a vote on the amendment):

BAUCUS:  Now, the fact is CBO has not scored this amendment. CBO has not analyzed this amendment. I justs checked a few minutes ago with CBO.

A late night text message sent to Kent Conrad by someone at the CBO supposedly backed up Baucus's claim.

According to sources familiar with what transpired, the CBO never withdrew its score for the Wyden amendment before Wyden introduced it.  They confirmed this to Wyden the next day.

The big issue is that Baucus blindsided Sen. Wyden at 1:45 in the morning on the very last day of mark up. For reasons of protocol and simple good manners, Chairman Baucus had the duty to inform Wyden that he would be ruling his amendment out of order before doing it publicly at 1:45 am. Given the proper warning, Wyden would have had the chance to confirm with CBO director Elmendorf that his amendment was fully scored and should not be ruled out of order. Wyden did try to argue that he was indeed correct, but to no avail (I guess late night text messages sent to Conrad trumps logic). There was no one from CBO present at the hearing to settle the matter.

You can watch the whole debate unfold at the C-Span Video Library, it starts at the 76:30 mark in the video. Baucus's blindsiding of Wyden beings roughly 30 minutes into the debate and is captured below:

Since it was to be the last amendment on last day of mark up, Wyden was left with no recourse, and was forced, unfairly, to withdraw his amendment. He was denied a vote on the amendment some policy writers considered the single most important possible change to health care reform.

Jane Hamsher reports that Wyden was asked to not criticize Baucus's terrible bill in exchange for getting a vote on his prized amendment. To promise Wyden a vote, only to declare the amendment out of order (when it should not have been) is a powerful slight to Wyden. If there was indeed such a deal, it makes the Baucus blindsiding a serious violation of trust.

This is the quintessential ending to Baucus's handling of the health care reform bill. It was defined by extreme secrecy, zero transparency, endless delays, back room sweetheart deals to industry, and a complete disdain towards other Democratic senators on the committee. It is the perfectly undignified end to a shameful committee process.Why is all this imporant?  Well, Wyden's amendment would have provided everyone with the ability choose their own plan on the new exchange -- and that means a public option, if one is available.  Which is why, even though it was supported by policy wonks, it was opposed by the Chamber of Commerce.

The Super New New Public Option “Compromise”

First there was the “level paying field” public option. Than there was Snowe's trigger. Snowe's trigger was followed by Conrad's co-ops. Only in the last few days we've seen the emergence of Carper's weird monstrous hybrid trigger/co-ops/small state-based public option idea.

Now we learn from the Politico that SEIU Chief Andy Stern is working with senators Schumer and Wyden on a new “compromise.” It sounds like the idea is a national public option with an "opt out" provision for individual states.

"I'm in the fourth way option," Stern said. "If Alabama doesn’t want a public option, they should consider that question. I don’t think the citizens of Alabama will want out. ... I think we need a public option. I don’t think it needs to be triggered. The question is if there are certain state legislators who think it’s not appropriate for their state, they should have a right in some fashion to deal with it.”

The fact that White House surrogates keep trying to sell these new “compromises” demonstrates that progressives have successfully entrenched the demand for a public option. Before the fight is finally over, there will be a dozen “compromises” like this from those who are trying to water down the public option and bring it into compliance with White House stakeholder deals. Stay tuned. . .

The Terrible Secret About The Wyden-Bennett Healthy Americans Act

Senator Wyden continues to promote his Healthy Americans Act. His biggest selling point is that the CBO claims the plan will save the government money. The problem is that the Healthy Americans Act saves money by quickly becoming useless.

It is Cinderella's pumpkin carriage of health care reform. At first it seems great, but after a few years it turns into a useless gourd. Its massive cost savings are nothing more than accounting illusions.

The Wyden-Bennett bill would eliminate the tax exempt status of employer-provided health insurance benefits. It would replace this with a standard tax deduction to help buy insurance and additional subsidies for low income wage earners. This all sounds good, but here comes the rub.

Neither the tax deduction nor the subsidies to make buying health insurance affordable are indexed to the cost of health insurance. According to the CBO:

First, the amount of the new health insurance deduction would grow at the rate of general price inflation and thus would increase more slowly than the value of the current tax exclusion. Second, the minimum value of covered benefits that all participating health plans had to provide would initially be set at the level of the Blue Cross/Blue Shield standard option offered to Federal workers in 2011 (we assume that the system’s inaugural year would be 2012); but under your proposal that average value would from that point forward be indexed to growth in gross domestic product per capita rather than growth in health care costs. Because Federal premium subsidies would be based on the cost of providing that level of coverage, the cost of those subsidies would grow more slowly over time.

There are several incredibly troubling problems with the bill. First, what qualifies as minimum health insurance is not based on a set of benefit requirements, it is based on a dollar amount which is indexed to the growth in the gross domestic product per capita.

Second, the government provided financial help for people to afford insurance will quickly become worthless. From 2000-2008 employer-provided health insurance “premium increases have been between 5 and 14 percent per year.” During that same time period the Consumer Price Index (CPI) increases by only between 1.6 and 3.8 percent per year. The cost of health insurance premiums is growing at twice the rate of CPI. The tax deduction to help people buy health insurance will therefore grow at half the rate of the cost of the insurance.

The subsidies to help low income Americans buy insurance would grow only at the rate of the gross domestic product per capita. From 1997-2007 the average annual growth rate was only 1.8 percent. So the subsidies would grow at a rate of only about 1/5 the rate of increase for health insurance.

At first the Healthy Americans Act would probably work well, but it would quickly fall apart moving forward. The cost of buying insurance would rapidly outpace the tax credits and subsidies provided by the government. Within a decade health insurance would quickly become unaffordable for millions of Americans. And within several years the minimum qualifications for health insurance benefits would cover almost nothing.

I don't believe that Congress would allow the tax deduction and subsidies to buy insurance to grow at a rate so much slower than the cost of insurance. Congress would probably eventually index them to the growth rate in health insurance (either permanently or on an annual basis). Of course if they do that, it will erase almost all of the Healthy Americans Act's much celebrated cost savings for the government. The Wyden-Bennett bill looks fiscally responsible but only by using accounting tricks that would eventually make health insurance prohibitively expensive to many Americans. The bill is only cheap because it does a terrible job of providing affordable health insurance in the long term.

Wyden's Free Choice Proposal + Strong Public Plan = Half Trillion In Savings For Businesses

Senator Wyden's new “Free Choice Proposal” has recently gotten some positive attention (Ezra Klein, Jonathan Cohn). His idea is interesting but politically very problematic. There are also several important policy issues that would need to be worked out.

Basically, it would destroy the employer provide insurance system. Technically it would allow all employers to continue to provide health insurance or they could give their employees a voucher equal to at minimum “70% of the lowest cost Exchange plan.” Employees would use these vouchers to select any plan they wanted to on the Exchange. I'm sure a few companies might continue to provide insurance, but the vast majority would switch to providing vouchers. Wyden's plan would be politically problematic, because it would result in millions losing their current coverage.

Interestingly, he links the size of vouchers to the lowest cost plan on the Exchange. A new Medicare-like public plan would almost always be the lowest cost plan. The more robust the public plan, the cheaper the lowest cost plan will be.

Wyden's Free Choice Proposal would give businesses a huge incentive to fight for including the strongest possible public plan. If all businesses choose to provide a minimum voucher instead of insurance, simply including a strong public plan as part of reform should save them around $500 billion over a ten year window.

Single Payer: Not Going to Happen (Part 1)

Health care reform will be one of the top issues facing the new administration. Many people on the political left have already started pushing hard for a government-run universal single payer system, similar to the systems in Canada or the UK. Some have named the program "Medicare for All." Given the current economic, cultural, and political climate, there is no chance that such a health care system will be adopted in the near future.

The most important problem is the current economic recession. The major short term problems with adopting a single payer system is that it would literally bankrupt some of the country's largest companies overnight. Regardless of how you feel about the health insurance industry, they still employ millions of Americans across the country. It is inconceivable that during these economic times Congress would pass any bill that would put so many people out of work. Ironically, the economic downturn could make it easier to pass universal health care reform but make it almost impossible to adopt a single payer system. Layoffs and rising unemployment is going to create millions of more uninsured Americans. With trillions being used to help struggling corporations, the demand for money to help the nation's struggling working class pay for health care should be strong.

The next problem is cultural. Universal single payer would be a huge government takeover of a large segment of the economy (although through Medicare, Medicaid, the VA, and coverage for federal employees, the government already controls much of the health care sector). The idea of massively increasing the size of the federal government is not a popular one in this country. Groups opposed to health care reform have been very successful at turning single payer health care into a scary bogeyman. When they attack universal health care plans, they almost always go after either Canada's and/or the UK's. Countries with private yet highly regulated systems that ensure universal coverage are never mentioned. So far I haven't heard of anyone in America attacking the health care systems of Japan or the Netherlands.

Finally, there is just no political weight behind the single payer system. Neither Barack Obama nor Hillary Clinton ran on a single payer health care plan. None of the top political players--Senator Baucus, Senator Kennedy, Senator Wyden, Senator Bennett, or Tom Daschle--currently support a single payer system.