Bascus Plan’s Middle Road

A quick quiz: Who authored a proposal that included an individual mandate to purchase health insurance, created markets through which the uninsured and employees of small businesses could purchase policies and used reductions in Medicare spending to finance subsidies for the uninsured?

Answer: the late Sen. John Chafee, a Rhode Island Republican, sponsor of the primary Republican alternative to the Clinton plan, in 1994.

Fifteen years later, the Baucus bill is similar to what was once viewed as a moderate Republican alternative. The Chafee plan was offered in response to Republican (and Democratic) charges that the Clinton plan represented a government takeover of health care. Chafee proposed placing the ultimate responsibility for insurance with the individual while seeking to develop a functioning insurance market.

The Baucus bill provides more generous subsidies to persons buying insurance and expands Medicaid to cover others. However, its striking similarities with the Chafee plan show that there has been bipartisan input into health-reform legislation this year. It has just taken place mostly within the Democratic Party.

There are three basic ways to address persons being uninsured:

  • Do nothing, either because it is not viewed as a large problem or because any fix may make things worse. Some believe that ending all insurance regulations is the only way for the market to work. There aren't many devotees to this approach left.
  • Cover persons via government insurance. Many liberals salivated with the election of President Barack Obama and large majorities in Congress. After all, the president had said he favored a single-payer system, even though he campaigned on a more incremental plan. And there has long been a vocal minority of persons who think that covering everyone via Medicare is the best approach. There are more of these folks than adherents to the first approach, but they don't constitute a majority of the country.
  • Expand coverage using private health insurance, viewing the problem as a failed insurance market that can be fixed. This approach most fundamentally rejects the first two approaches, but there are many ways to proceed under this regime.

The Baucus bill is a mixture of the last two approaches: Medicaid expansions along with increased regulation of insurance and setting up insurance markets for the uninsured and employees of small businesses.

Deleting a Tax Subsidy from the EquationThe insurance industry is supporting this approach, presumably because the individual mandate will provide them with customers they have been heretofore unable to attract. This merging of interests between the Democratic majorities in Washington and the insurance industry causes dismay among liberals in Congress. And they will have to choose between supporting a compromise not to their liking or working against it, making continuation of the status quo more likely.

There will be attempts to amend the Baucus bill if it is passed out of the Finance committee. The next time you hear someone hyperventilating about the dangers of adding a public insurance option to exchanges (which I favor), keep in mind that the CBO has said that only 8 million to 10 million persons would choose such a public insurance plan if it were available to them. This is out of 307 million Americans, over 100 million of whom are already covered by Medicare or Medicaid!

No Trojan horse is needed to sneak a single payer in through the back door. The Medicare program is the largest government-run single-payer insurance plan in North America. There are more Medicare beneficiaries (45 million) than Canadians (34 million). It is a simple program that could be easily expanded at any time.

The Baucus bill is quite moderate, especially as compared with covering all Americans via Medicare. The biggest question is whether it will control costs. The major source of uncertainty on this point is whether a robust market for insurance can be developed, whether individuals will prove to be good consumers of health insurance and whether market competition will actually drive down premiums, slowing health-care cost inflation. Our nation believes in markets -- we just don't have a lot of evidence that they work for health insurance.

Culturally then, the Baucus bill and the current direction of the debate is best understood as one last chance to see whether private health insurance can work for the good of the nation in covering all Americans and in a manner that is financially sustainable.

Donald H. Taylor Jr. is an assistant professor of public policy. His blog is available for discussion of this article and health care reform in general. This article was first published in The (Raleigh) News & Observer on October 10, 2009.  This is part of a weekly series of articles by Donald Taylor exploring aspects of the health care reform issue.