Lowballing Health Reform

Lowballing Health Reform

Progressives need to be as concerned about insurance coverage affordability as we are about a public option.

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Many progressives were disappointed that President Obama failed to take a nonnegotiable stand for a public health insurance option during his speech to a joint session of Congress on September 9. Less noticed was the fact that he dropped the target cost of the reform package 10 percent, to $900 billion, from the $1 trillion Congress had been aiming for. But this difference should greatly alarm those who care about providing all Americans with healthcare coverage.

When it comes to this debate, size does matter: within the framework Congress is pursuing, money trimmed from a package will mean lower subsidies, weaker coverage and fewer people with affordable care. And that will be true even if progressive legislators manage to win the increasingly uphill battle for some form of a public option.

The most important fight right now, as the Senate Finance Committee is considering an anemic proposal from its chair, Max Baucus, is to ensure that Congress spends the amount necessary to make coverage affordable. This plan clears Obama’s $900 billion threshold–unlike the $1 trillion proposal pending in the House–but its savings come at a cost to modest-income Americans, especially those who do not get insurance from their employers. Baucus accepted some amendments to his initial proposal to make care modestly more affordable. But limiting the cost to $900 billion makes it impossible to provide adequate assistance to those who cannot afford care. They will be required to buy coverage at higher rates, and their policies will still leave them vulnerable to exorbitant out-of-pocket costs. According to an analysis by the Center on Budget and Policy Priorities, the House would ask a family of three with a household income of $24,352 to pay only 1.5 percent of their income in premiums. With help from federal subsidies, that $365 would buy them insurance that would cover 97 percent of typical health costs. (They would pay the remainder from their own pocket.)

That is still a financial burden for families near poverty, but it is a lot more manageable than what Senator Baucus has proposed. Even as amended, his bill would require families near the poverty level to pay more than twice as much for insurance. That $889 each year buys a policy that covers only 90 percent of typical health costs. Their out-of-pocket expenses would be capped, but at almost $4,000. Altogether, these near-poor families could wind up spending around 20 percent of their income on healthcare in a single year.

And if the near-poor would fare badly, the middle class would be squeezed even harder without adequate subsidies. Families of three living between 300 and 400 percent of the federal poverty level–$54,930 to $73,240–would be required to pay up to 12 percent of their income for policies that cover only 70 percent of typical costs, and they could still face additional out-of-pocket costs totaling nearly $8,000. A family at the low end of this bracket could wind up paying almost $15,000 in a single year, or more than one-quarter of their income. The bill exempts people from the mandate if they can’t find a plan that costs less than 10 percent of their income–but since it doesn’t provide enough support, the result is that, according to the Congressional Budget Office, millions would remain uninsured. When it costs so much to buy such limited coverage, families on tight budgets may not agree with Congress that they can afford to spend 10 percent of their income on premiums alone. And those who cannot scrape together the money to buy insurance will be fined.

In addition, even wealthier Americans who could afford to spend 10 percent of their income on premiums won’t be guaranteed an affordable plan under Baucus’s proposal. True, insurance companies would no longer be able to charge more for those with pre-existing conditions, but older Americans not yet old enough to quality for Medicare could face premiums costing several times as much as the cheapest plans in their part of the country. They would not be fined for going without insurance, but they would still be uninsured.

Health reform is, at least in part, about equity–no one should go without care because of an inability to pay, nor should families be impoverished by illness. Fortunately, there’s a relatively easy and nonideological fix for the shortcomings in a plan like this: spend more on subsidies. Even Republican Senator Olympia Snowe has raised concerns about the stinginess of Baucus’s original proposal. The bill shows why the president’s $900 billion suggestion is too low, and Congress should disregard any cap imposed for political reasons if it stands in the way of making coverage affordable to all Americans.

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