Saturday, May 30, 2009

Kennedy's 12-Page Proposal: Why the Devil Is In the Details

Note: This is a cross-post from my group blog The Realignment Project and DailyKos.

So, if you've been following the day-to-day drama over the health care bill - Baucus says he'll fight for public option! Ben Nelson backs off opposition! Schumer tries for some weird single-payer/trigger double play! - then you've probably heard about Senator Kennedy's attempt to push the emerging bill to the lift by getting his HELP Committee's version of the bill out first and pushing Baucus to the left.

Well people have been asking about the details of what this 12 page proposal that's been circulating are.

Well, look no further!


So for people who haven't maybe been following the back and forth over the health care bill, the basic elements of the legislation being covered are these:

  • Insurance Reforms - guaranteed issue, community rating, and banning pre-existing conditions exclusions have been mentioned here, along with some sort of minimum standards as to coverage and services.
  • Mandates - both individual and employer (so-called "pay or play") mandates have been central elements of the deal, in order to achieve universal coverage, and in the case of employers, additional funding.
  • Health Exchanges - state-level purchasing pools where insurance plans would have to compete for clients, overseen by some kind of board that would set minimum standards, and the like.
  • Sliding Subsidies - probably using some sort of refundable credit, the idea is to construct a subsidy to pay for premiums that "slides" up or down depending on income, to deal with the "affordability" question.
  • A Public Plan - details unknown as to how Medicare like this would be, but some form of public plan available for individual and group purchase has been a central part of the debate.

The Kennedy Memo:

The key purpose of the Kennedy memo (which you can find here) seems to be an effort to shift the terms of the debate, and the eventual legislation left-wards. Not quite in the same way that single-payer advocates are hoping to do, but in a more traditionally moderate liberal fashion, focusing on the expansion of public programs.

Kennedy accomplishes his aims in a number of ways.

Private Insurance Reforms:

  1. Guaranteed Issue and renewal - this is quite clever, because not only does it include the basic concession that insurance firms have made in return for individual mandates, but it also closes a potential loophole by making sure that you couldn't later get dropped.
  1. Banning Pre-Existing Conditions Denial and Underwriting - this is also quite clever, because it tackles both the denial of care, but also the increasing of premiums due to an existing medical conditions, which often creates cost-related uninsurability.
  1. Community Rating - "Premiums charged by health insurers should vary only by family composition, geography, and age, within clear and reasonable limits," a little bit vague here, but it seems to be pointing to allowing some regional variation.
  1. Mandatory % Spent On Care - called rather sneakily "ensuring value in health insurance purchasing," this would require a certain percentage of every premium dollar to go to care as opposed to administration.

Sliding-Scale Subsidy:

Here's the big one, and it's snuck in via a short paragraph. The Baucus bill being drafted assumes some kind of sliding-scale subsidy to help pay for premiums, but a rather limited one. Kennedy's memo calls for "sliding scale premium assistance for individuals and families with income up to four times the federal poverty level to help them purchase quality health insurance policies."

This is crucial, both in the policy and the politics. Policy-wise, this means that the money involved is likely to be substantial, bringing people's medical costs down substantially (which would have beneficial ripple effects on living standards and consumer spending), and ensuring that people lower down on the income scale really can afford the premiums. However, politically, it's very important that a family of 4 making $88,000 a year would be eligible for subsidies. That means that the subsidy provision would be a relatively universal benefit that the middle class would enjoy. This builds a huge potential coalition for this benefit, which is crucial for turning it into the future equivalent of Social Security or Medicare, rather than the future equivalent of AFDC. It also makes the overall bill more of a political winner for politicians - who doesn't want to pass a bill giving millions of middle-class voters unsubstantial checks?

Health Exchange:

Nothing particularly new here, although it's very explicit that "To ensure that fiscal discipline and full accountability are built into this new structure, one health insurance option available to participants will be a publicly sponsored and guaranteed plan." I think the guaranteed is quite important - it means that the public plan in question could not be a spun-off Amtrak like affair, but something that had the financial support of the U.S government, and thus would be as sound as the rock of Gibraltar.

Individual Mandate:

Boilerplate here, although the phrasing "national health reform requires that everyone who can afford to must sign up for coverage," is important, putting emphasis on ensuring affordability front-and-center.

Not Included in the Memo:

Although this was in a separate email, according to Politico, two important key elements of the Kennedy plan should be included in this discussion: "in an e-mail summary that began circulating this week, Kennedy was described as considering a public insurance option that would pay providers slightly more than Medicare rates...He would also expand the Children’s Health Insurance Program to cover individuals up to 26-years old – up from 18."

These two details are crucially important. First, the payment rates - this is important for several reasons. It means that doctors and the AMA will have more of an incentive to back Kennedy's version than Baucus' version; it also means that the resulting public insurance plan would actually be widely accepted and usable, and hence worth purchasing, as opposed to something like Medicaid where it's very hard to find doctors who accept it; it also means that costs should be closer to the Medicare model than the private insurance model. Second, the CHIP expansion - if, as I suspect, this is paired with an expansion of Medicare down to 60 or maybe 55, this is an important step in gradually moving us in the direction of single-payer. People like Medicare a lot, they like CHIP a lot as well, and moving people away from insurance-based-on-employment to insurance-based-on-citizenship is a crucial intermediary step.

So there you have it. Now, Baucus' plan is significantly to the right of this, and Schumer's weird thing is to the right of that. However, by putting this plan out there as the HELP committee's bill and the bill that's on the table, it changes the terms of the debate by establishing a positional bargaining point that's significantly in the direction of more leftward alternatives, which in turn shifts the middle ground away from industry's preferences.

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