BaucusCare Proving Just As Taxing As HR 3200

Democrat Max Baucus has floated an alternative plan to the House plan (H.R. 3200), which contains a multitude of taxing ideas to raise revenues to fund the massive adjustment to the health care delivery system in the United States. It may appear to cost less than the plan floated in the House (although Baucus now says that it is over $900 billion), but both are taxing credibility of its sponsors who claim that it will save taxpayers money in the long run.

In fact, many of the provisions in Baucus' bill and the House bill are filled with improbable assumptions and dubious math.

But the cost estimates in Baucus' bill, like those attached to many of the more than 500 amendments lined up for Finance Committee consideration, are full of magical math and budgetary sleight-of-hand designed primarily to serve political ends.

As a scaled-back alternative to liberal proposals, the Finance Committee bill is probably the Democrats' best hope for getting a health care overhaul through the Senate. It will also establish a benchmark for final negotiations, coming in well below the $1 trillion-plus price of the pending House bill.

Nonetheless, with cost shaping up as a deciding factor for the most important elements of a health care makeover, the top priority for many lawmakers has become generating politically palatable numbers, not focusing on what the actual costs turn out to be for consumers and businesses.

Despite the soaring cost of health care, for example, and the need for federal subsidies if lower-income Americans are required to buy medical insurance, the Baucus bill projects that by 2019 it will have a surplus of $49 billion.

And Baucus announced Monday evening that he would use this projected surplus to pay for added provisions to make health care more affordable for low- and middle-income consumers.

"Baucus learned a lot of lessons about how you have to construct the bill to get what you want," said Douglas Holtz-Eakin, a former chief of the Congressional Budget Office.

The CBO provides cost estimates that lawmakers use to tout the frugality of their proposals.

Baucus holds down the total cost of his proposals by assuming that there will be cuts in Medicare reimbursements to doctors. Yet Congress has repeatedly blocked those cuts in recent years and is widely expected to do so again. Not making the cuts would cost the government more than $200 billion in health care spending.

Then, there's the fact that it's filled with many of the same taxing ideas and a few new ones that tax credibility and taxpayers seeking care.

Another element in the bill being considered Tuesday involves revenues from a proposed 35 percent excise tax to insurers who offer "Cadillac plans," policies with a yearly premium cost of $8,000 for an individual and $21,000 for a family. The tax is estimated to generate $215 billion over 10 years.

How exactly does that bring the cost of care down? It appears to penalize those plans that are more comprehensive and forces insurers to either pass the cost on to the insureds, or to eliminate coverages to avoid paying the penalty provisions.

Of course, a far cheaper alternative to this taxing proposal would be to demand that insurance plans that are approved by any state be allowed to be accepted by any other state. If one can find a cheap plan from Utah in New York, one should be able to buy that coverage, instead of being forced to accept one of the plans that New York requires with its multitude of coverages that may or may not be in the best interests of a person seeking basic coverage.

Then, there's proposal to tax medical device manufacturers. Republicans raised a stink on the fact it would tax everything from condoms to pacemakers, and Baucus thereafter amended the cutoff for where the tax would be imposed to items costing $100 or more.

But Finance Committee Chairman Max Baucus, D-Mont., left intact a $4 billion-a-year levy on the medical devices industry — keeping the controversy alive. The industry makes some 80,000 different products from heart valves to imaging machines to tongue depressors. The Congressional Budget Office said Tuesday such industry fees could eventually raise insurance premiums by roughly 1 percent.

Baucus' last-minute switch came as his committee considers sweeping legislation to remake the health care system. It means that contact lens solution, scented maxi-pads and home pregnancy tests — among many other items — will not be taxed. (It's not clear if Q-tips were ever on his list.)

But more expensive consumer medical goods, from power wheelchairs to insulin pumps and hearing aids, would still get hit.

The difference is those are paid mostly through insurance, so the full cost doesn't come out of the household budget.

"He's trying to avoid the perception that the middle class is going to be taxed," said Dan Mendelson, president of Avalere Health, an information company that serves the health industry and government. "The trick is to get funding for the bill but not to have anything that smacks of a middle-class tax."

How exactly does that curtail costs of health care? It means that items that save lives, from automatic external defibrillators to pacemakers, will be hit by the tax. That means the cost for those items will necessarily increase, and such costs will be passed on to the consumer - the person seeking the health care.

It would affect everyone seeking care, not just those who are wealthy, but anyone in need of such items.

That compares with the sales tax treatment of medical items by some states, where some exempt health care related goods precisely because they are deemed to be critical to the health of taxpayers. Others, like Utah impose sales tax on sales of durable medical equipment or prosthetic devices without a prescription or when paid by Medicare or Medicaid. The rush to raise revenues actually costs those seeking health care treatment by taxing those items. How is that exactly sound health care policy when you're taxing the very items you're seeking to make more cost effective.

The real issue is one of perception, and Baucus is attempting to obfuscate the fact that the tax will hit items all across the board, and that everyone will feel the pinch of this tax proposal in the form of higher premiums. So, instead of doing something that will reduce costs of health care, this actually increases it.

Meanwhile, the Congressional Budget Office reported that ObamaCare is going to result in Medicare benefit cuts, contradicting what President Obama has repeatedly claimed in speeches and news interviews. As Ed Morrissey points out, Obama's claims that he can cut $414 billion in Medicare costs over 10 years without affecting benefits is pure bunk.

We budgeted $413 billion for this year, which makes a $50 billion “savings” target about 12% of its budget. Obama keeps talking about how efficient Medicare is compared to private health insurance, but how efficient can it be if he can slice 12% out of the budget without affecting benefits? In comparison, private health insurers spend 96.7% of all income on care and administrative costs, with only a 3.3% average profit margin.

The other possibility is that those billions in cost savings would come from a crackdown on fraud and waste in the system, but that's something that can and should be achieved without resorting to a massive overhaul of the entire health care delivery system. We don't need a massive overhaul of the system to eliminate waste and fraud.