Free Markets, Free People

The Baucus Plan For Expanded Health Insurance Coverage

This is the culmination of a “year of work” by Sen. Max Baucus. And the cost? Well much less than the House version if you’re to believe the Senators who put it together. Instead of 1.5 trillion, this one will only cost us 850 to 900 billion over 10 years – another sum we cannot afford.

Why is this version less costly than the House version? Well they’re going to tax insurance companies.

Yes, I hear you. I know you know what it really means. But for the benefit of those on the left who stop by here to troll instead of taking the time to learn basic economics, we’ll again restate what should be obvious.

Corporations don’t pay taxes. Their customers do. The buck doesn’t start or stop with them – they just pass them along.

A recent report by Oppenheimer & Company, the investment bank, said, “It will be very difficult for the Senate Finance Committee to structure the fees in a way that they won’t be immediately passed on to customers in the form of higher premiums.”

Of course it will be difficult for that committee to structure them that way since it has no desire to do so:

Mr. Baucus’s plan, expected to cost $850 billion to $900 billion over 10 years, would tax insurance companies on their most expensive health care policies. The hope is that employers would buy cheaper, less generous coverage for employees, thereby reducing the overuse of medical services.

The separate new fee on insurance companies would help raise money to pay for the plan. The fee would raise $6 billion a year starting in 2010, and it would be allocated among insurance companies according to their market shares.

So it is a redistribution of your money (once the insurance company raises its fee to offset the “tax”) back to the very same insurance companies to subsidize the effort to insure everyone.

If this doesn’t catch the eye of union employees and pensioners and turn them completely against this version, then they’re totally impervious to reason. They are prime candidates for newer, cheaper and less generous coverage if this were to be passed into law.

To make the misery equal for all, Baucus and crew hope your employer, union, pension fund will drop the health care you’re now satisfied with for a cheaper, less generous policy and thereby reduce “the overuse of medical services”. And the money taken from you will be given back to the very insurance companies which it previously “taxed” to subsidize the uninsured.

But mind you, it’s all for your own good. And no, this isn’t at all government intrusion in a market to a level sufficient to change behavior – quit saying that. Because we all know that Jay Rockefeller is right, don’t we?

Mr. Rockefeller said the fees were justified because insurance companies were “rapaciously, greedily and unstoppably making money by underpaying the patient, by underpaying the provider and by overpaying themselves.”

Who again sets the standard for medical reimbursement in the US? It darn sure isn’t private insurance companies, is it? To bad that White House email address for fishy health care info isn’t still functioning.

And of course, when Chuck Schumer says something like, “The health insurance industry should pay its fair share of the cost because it stands to gain over 40 million new consumers under health care reform legislation,” you know its a bad idea. Schumer has never once demonstrated he has a grasp on the economics of anything. And this is no exception. But he does understand the political ramifications of such a bill.

In fact, the devil is found in what Schumer doesn’t say – “40 million new customers, no pre-existing conditions, no option to deny coverage, no lifetime cap on payouts”. Yeah, sounds like a heck of a bargain, doesn’t it? 40 million new consumers and guaranteed bankruptcy leaving what?

Well good old Chuck Schumer and the government to fall back on, huh? And, after neatly rigging the game in such a way as to effectively eliminate private coverage, they’ll also offer up a hearty “we told you so” and blame it on a “market failure”.

Who needs a public option or a trigger when you can set things up this way? Yup, as is apparent, there are all sorts of ways to skin that single-payer cat, aren’t there?

~McQ

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37 Responses to The Baucus Plan For Expanded Health Insurance Coverage

  • This brings to mind a great line from Mad Men last night uttered by a very wealthy man in reference to his well-meaning but misguided son:

    “He lives in a cloud of success, but it is my success.”

    I immediately thought of this in the context of government. These folks live in a cloud of success that is not theirs, but that of every working man and woman and, yes, company in America. But they think the spoils of that success are theirs–theirs to dole out at their caprice.

    We need to continually set them straight on this notion.

  • Somebody needs to report Baucus to flag@whitehouse.gov. After all, Obama said we could keep our insurance if we want to, but here Baucus is claming that employers could (and probably will) override our decision.

    Stop spreading “disinformation”, Baucus! What are you, racist?

  • Michigan Blue Cross is a perfect example of the failure of government intervention in the health care market.

    http://www.freep.com/article/20090906/COL06/909060568/1002/business/Blue-Cross-hits-customers-with-22–rate-hike.

    Next year 25%???

  • I could have sworn Obama said we could keep our insurance if we wanted to.

  • If this doesn’t catch the eye of union employees and pensioners and turn them completely against this version, then they’re totally impervious to reason.

    Proposal: unions exempt from health taxes.

    • Even with that exemption, unions often have some of the best healthcare available. They should not be supporting any of these measures if their leadership was working for its membership.

      That’s one problem with unions today. Their various leaderships are self-interested political entities.

  • The “Baucus Plan” is not plan – it is a blueprint…nothing more, nothing less.

    And, as all should notice, there is NO “robust public option.”

    That means that this thing is dead in the House. The leftwingloonies will kill it as sure as it a fetus in the womb. And, if somehow the Demmies slip a “robust public option” into a conference bill somewhere, the entire thingy will drop dead in the US Senate, because it does not have the votes, even if the Demmies were to try for reconciliation and only 51 votes.

    I have been saying for two weeks now that this health care crappola is dead, dead, DEAD as a doornail, however dead that that is. And when it croaks, The Clown’s™ JARs will drop into the mid-40s. And then the Demmies will panic, meaning that 2010 is looking more like 1994 than 1994 did at this point in that cycle.

    PS. If I hear one more dimwitted liberal say that they support “a robust public option” one more time, I will take a tire iron and throw it through my television set. I have never seen one party so stuck on one phrase until it is repeated ad nauseum.

  • Corporations cannot pass all tax costs to the public because the law of supply and demand in the market place will set the price. While taxes usually (though not always) increase cost to the customer, in many cases it will simply eat away at corporate profits because the market in a globalized economy will not allow the taxes to be simply passed on. Anyone who says that all taxes get paid by the customer is ignorant of basic economic logic!

    That said, the new post-tax equilibrium will almost certainly have some of the costs passed on to consumers. The key will be mechanisms to keep total health care costs down. Right now health care costs are skyrocketing to unsustainable levels. Any effective plan has to keep those costs down, and in a best case situation use this as a first step in cutting entitlement costs, which will also become unsustainable in not too long.

    • Corporations cannot pass all tax costs to the public because the law of supply and demand in the market place will set the price. Thank goodness. That way, we wise leftists have a convenient way to force those nasty corporations to cut profits, which are usually exhorbitant anyway, and the only people who suffer are rich shareholders. Anyone who says that all taxes get paid by the customer is ignorant of basic economic logic! Not to mention ignorant of wise leftist thought that understands that it’s perfectly fine to stick it to those wicked capitalist investors.

      That said, the new post-tax equilibrium will almost certainly have some of the costs passed on to consumers. We just can’t keep those wicked corporations profit down to zero, and for some reason when we force them to lose money they eventually go out of business.

      The key will be mechanisms to keep total health care costs down. That’s not either a meaningless, trite statement, so stop saying that! Right now health care costs are skyrocketing to unsustainable levels. They’re unsustainable because we and other wise leftists decree that they are, and you dense righties really ought to shut up about how a free market could actually keep those prices to something sustainable, because markets don’t adjust themselves. There’s no reason to believe they do. Besides, we wise leftists have decreed that too, and if you don’t believe us that’s even more evidence of your economic ignorance.

      Any effective plan has to keep those costs down. And the fact that subsidizing things always seems to drive up the demand which then drives up the total cost doesn’t matter, because it’s not going to happen this time. I decree it. Obama thinks like me and he will come up with an effective plan. Stop laughing! He will! You’ll hear it in his wonderful speech tomorrow, and you’ll all swoon with wonder when he announces his glorious plan for healthcare salvation.

      And in a best case situation we wise leftists will use this as a first step in cutting entitlement costs, which will also become unsustainable in not too long. Yes, that’s right – creating a brand new entitlement is the key to lowering entitlement costs. Stop laughing, I said! It is! I decree it!!

    • Considering health insurance is not global and not even national wrt to the marketplace, there is no pressure to not pass these taxes on almost intact.

      Yeah, people will react to increased costs by buying less. That’s the only mechanism to control cost right now.

      So, sure there will be a new equilibrium where it both costs more and less is bought. Which is the whole point of McQ’s article. Putting a cost burden on private health insurance until the industry fails.

      • The new equilibrium could be costing less. For instance, uninsured using ERs creates a huge drain on the system, if they were covered, their care would be much less costly. All of the industrialized world has some kind of health care system which guarantees coverage, they also have higher life expectancies and lower infant mortality rates than us. We can do better.

        • We can do better.

          I can agree with this. As a proponent of smaller government units, can you describe how this should happen? What’s being proposed by government right now appears to enlarge the federal government.

          they also have higher life expectancies and lower infant mortality rates than us

          In the context of health care, if the US had higher life expectancies and lower infant mortality rates would you still be calling for a healthcare system overhaul?

          • I personally believe that the current system will collapse, as will current entitlement programs, as the boomer generation retires while the country is awash in debt and high deficits. The best system would be something done at the individual state level, with adequate funding (money given to states from federal income taxes, or a shift in tax burden from the federal to the state level). I’d say states could experiment, some could go more free market, others more single payer, others try a mix. Then we could learn by comparing. When I do that looking at Europe, I think the German system fares pretty well, the British system does poorly.

          • Now that’s a position I can get behind. It’s a reasonable start for a debate. For example, I’d prefer the tax at the state level only rather than federal, as federal taxes would be more hidden and easier to abuse, tainting the experiments. I think if Obama had come out saying we need to address health care improvements at the state level and asking states what the roadblocks are, we’d all be having a much different and more productive national discussion.

            If I may make a suggestion, you should clarify that you mean state-level adoption when advocating for government health care programs. Nearly every time you’ve brought up European health systems, like Germany’s, it appeared you believe the US should adopt a similar system at the federal level. This is probably because the European examples are national systems and the current context of the US debate is at the federal level. Many people who balk at federalized health care would have no problem with a state deciding for itself to adopt a system like Germany’s.

        • All of the industrialized world has some kind of health care system which guarantees coverage, they also have higher life expectancies and lower infant mortality rates than us. We can do better.

          That’s sad. The calibre on this site is better than this talking point. The differing life expectancy has nothing to do with the quality of healthcare or coverage and everything to do with crime and cars. The infant mortality has nothing to do with children’s healthcare. WIC cover pregnant women and children. So unless your point is that government run and funded health insurance isn’t good enough, you’re not making one.

          The new equilibrium could be costing less. For instance, uninsured using ERs creates a huge drain on the system, if they were covered, their care would be much less costly.

          Those using the ER will be covered by an overt tax instead of an indirect tax is going to change anything in a big way? Or do you mean those uninsured misusing the ER for non-emergency care? Or basically illegal aliens. The illegal alien problem can be solved by enforcing immigration law.

    • As usual Erb it is you who show your ignorance of economics. Over time all such tax costs are pushed on to either workers or consumers. Because of equilibrium.

      You see companies have to maintain a certain level of profitability commiserate to the level of investment or they will cease to be in that market. So over time the least efficient companies will either go out of business or leave the industry, but the ones left will have economies of scale and less competition, in time they pass on all the new tax costs.

      In this case however, the cost will be passed on IMMEDIATELY since there is no global market in health insurance, it is strictly controlled by the various states. So, since all companies allowed to operate in a state will face the same additional costs, then they will pass on all of those costs almost immediately.

      Once again you show that your ideology is greater than everything except your ignorance.

      • Kyle, you are showing your ignorance of the political economy. The only way what you wrote could be true is if you had an absolutely perfect market. That doesn’t exist. Companies can earn excess profit and do. I guess I’ll have to work hard in my political economy classes to assure students are immune from your kind of ignorant ideology-driven claims.

        • How utterly silly, it has nothing to do with perfect markets, it has to do with observed phenomenon. There is no such thing as excess profits, (talk about an ideologically charged term) There is merely profit and loss.

          Companies will over time pass on all extraneous costs or leave the market. They might exist for a while with marginal profits, but eventually something comes along with a better potential return on profit.

          Insofar as you can temporarily get companies to bear the costs of big government it begs the question of why you would want to. Hidden taxes are the worse sort of taxes, and hurting business hurts employment, investment and pensions.

          You left wingers would be laughable if you were not so dangerous.

    • Corporations cannot pass all tax costs to the public because the law of supply and demand in the market place will set the price.

      In a free market that may be the case, but the health insurance market isn’t a free market. In any event, even if they’re passing along only part of the costs, their customers suddenly get hit with an “arbitrary” increase in premiums. When that happens, a taxpayer-subsidized public option becomes more attractive. Why do you think that there is such resistance to removing the public option from any health care legislation?

      • Insurance costs are expected to rise to over $25,000 for a family of four by 2016. Even if nothing is done, by then you may see overwhelming support for a single payer system as well to do families and companies drop insurance. It is going to happen, if not this year, within a decade or so. The current system is unsustainable.

        • The current system is unsustainable because the insurance market defies basic economics. Heck, it defies basic math. Demand that everyone be allowed to pay less for a service than it costs to provide it, and cover the shortfall by asking everyone else to subsidize it.

          Why do you think that systems like Medicare and SS wind up becoming unsustainable? At some point we’re asking too few people to fund the needs of too many people. In the case of health care, both of those groups are the very same people!

          Politicians are telling us that if we don’t reform the system, it’ll collapse. But the reform that they propose doesn’t change anything! It’s simply mind-boggling.

          • That’s a good point. Ultimately I think reality is going to force major changes no matter what is adopted. I’m not convinced anything being advocated now is going to fix things.

    • “Anyone who says that all taxes get paid by the customer is ignorant of basic economic logic!”

      It must be fun to live in your universe. Are the moon ponies pretty?

    • Corporations cannot pass all tax costs to the public because the law of supply and demand in the market place will set the price. While taxes usually (though not always) increase cost to the customer, in many cases it will simply eat away at corporate profits because the market in a globalized economy will not allow the taxes to be simply passed on. Anyone who says that all taxes get paid by the customer is ignorant of basic economic logic!

      Oh, there is just so much wrong in that paragraph, I scarcely know where to begin.

      First, all taxes do indeed get paid by the consumer. Consumers provide companies with operating income, and it is from the operating income that companies get the cash to pay their taxes. That’s just common sense, and to claim otherwise is rank stupidity.

      Second, while a company may not be able to pass on an added expense (such as a new tax, higher overhead, etc.) because consumers don’t want to pay more than $X for whatever widget the company is selling, don’t think that companies must therefore eat a higher tax imposed on them. If they can’t make enough of a profit after the new expense is imposed, they will simply cease operations. Have you noticed how few slide rule manufacturers are around these days? People stopped buying slide rules, so manufacturers stopped making them.

  • McQInstead of 1.5 trillion, this one will only cost us 850 to 900 billion over 10 years – another sum we cannot afford.

    By congressional logic, that means that Baucus has saved – SAVED! – $100 – $200 billion over the next ten years. PAR-TEEE! Now, where can we spend these savings?!

    I hope that James Marsden is right, and that health care takeover is dead and we’re seeing its last twitches. But I’m afraid that there are still plenty of members of Congress who are more than willing to reach a “compromise” on a “scaled-back version” that will “only” cost about $500 billion THAT WE DON’T HAVE.

    Mr. Baucus’s plan, expected to cost $850 billion to $900 billion over 10 years, would tax insurance companies on their most expensive health care policies. The hope is that employers would buy cheaper, less generous coverage for employees, thereby reducing the overuse of medical services.

    Can’t these people make up their minds???? First, we were told that people are dying in the streets because 44 million Americans don’t have health insurance. Next, we were told that health care is so expensive that people are going bankrupt trying to pay their medical bills. Then, we were told that insurance is so expensive that it’s bankrupting the whole economy. Now, we’re told that the real problem is that people are “overusing” medical services.

    So, which is it, Einstein?

    And who is “overusing” those medical services? And what shall we do about it? The obvious answer, it seems to me, is some sort of rationing. This should scare the h*ll out of senior citizens and people with chronic diseases.

    And Baucus is one of the most senior, powerful members of the Congress.

    Heaven help us.

  • “Wolf” very interesting comment. I saw that episode as well and was thinking the same thing.

  • As a person looking for health care, I would be scared that I wasn’t getting the right treatment or able to get the care I needed. From the nursing perspective, I would be tired of the constant changes and never knowing what procedures I was able to perform, etc.

  • Re: “Why is this version less costly than the House version”

    It isn’t, or at least it isn’t if spending isn’t less.

    Even if the insurance companies DID effectively pay the taxes rather than passing it off to their customers (or employees or others), it still wouldn’t be cheaper. Making someone else pay the cost doesn’t reduce the cost it just transfers it.

  • A few years back Massachusetts had a little problem with automobile insurance. The state ‘solved’ it by increasing the costs of the insurance companies. The insurance companies, unable to raise their rates, responded by trying to stop selling auto insurance in Massachusetts.

    If insurance companies cannot make an adequate profit selling health insurance they will simply stop selling health insurance. Technically speaking they do not pass the cost of increased taxes on to their customers; they just get rid of the customers. I guess one way of solving the problem of too-expensive health insurance is just to do away with it.

  • New York has mandated that there be no low cost plans sold in this state. Well, my youngest kid got her college entrance physical “free”, but that doesn’t come close to making up for the premiums I pay above what those in more emancipated states do.

    Government to the rescue, again. What could possibly go wrong?

    Until the Congress and their families are forced into the scheme they are concocting, I’m opposed.

  • Baucus also wants to fine those of us that don’t have insurance. We have to pay our “fair share”. So, if there’s no public option, how will he collect from 12 million illegal aliens?

    And since I get my care at the VA, and pay cash there, am I eligible to be fined or not?

    Where again is all this found in the Constitution? At least they amended it to take our money through income tax. Now, they just pass a blank check that says “pay to the order of the government”.

  • I do not agree with the fee.