Sunday, October 25, 2009

Why The Baucus Bill Probably Won't Pass

For some time now, I have doubted that Obama would get ObamaCare. I did think, however, that he would get some face-saving version. The Baucus bill is that face saving version. But now I’m not so sure even that will pass. And even if it does, a Republican majority should be able to repeal it fairly easily. Let’s take this in two parts. Today is part one: why the Baucus bill might not pass.

There are five primary reasons that the Democrats might not be able to garner the support they need to pass this bill: (1) the lack of a natural constituency supporting the bill, (2) the cost, (3) disputes over how to pay for the bill, (4) disputes over the public option and (5) abortion.

1. The Lack Of A Natural Constituency Supporting The Bill

Before we delve too deeply into the Democrats’ errors, it is important to point out that legislation does not pass on its merits. Legislation passes when enough Congressmen/Senators think it is in their interests to support it.

It is difficult to support a bill that the public hates, and the public hates the Baucus bill: only 42% support the bill. Yet, widespread public opposition can usually be overcome in the legislative process by a motivated constituency. The Baucus bill, however, has no such constituency. Indeed, each of the attempts to create a constituency have failed:
(1) The Public. From the beginning, the Democrats promised to subsidize the cost of health care for nearly everyone in the country. They intended to undercut the public’s fears that this legislation would increase the cost of their health care. But they made two mistakes. First, while the Baucus bill promises subsidies to approximately 67% of Americans, individuals won’t see that money -- it will go directly to the insurers. That makes this a meaningless bribe because the public doesn’t know they will be getting it.

Secondly, the public does not believe this will help. They believe the subsidy (likely less than $200 a year) will not offset the increase in insurance cost (several thousand dollars a year). In fact, they don’t believe any part of the bill will be good for them.

If you examine the chart below, from Gallup, you will see that only 19% of the public believes this bill will improve the quality of the health care they receive, whereas 39% think it will make it worse. Only 22% think it will control the health care costs they pay, whereas 49% think it will make them worse. And only 20% think it will improve their coverage.
Even the bill’s supporters don’t think it will work:
Those numbers are guaranteed to scare every Democrat who faces reelection in the next cycle -- most of whom are already skittish.

(2) The Insurance Lobby. The Democrats blamed the insurance lobby for killing HillaryCare in 1992. So this time, they set out to make the insurance lobby an ally by promising insurers they would get to write policies for another 46 million Americans. This worked at first, until it became clear that the Democrats intended to create a public option or health care co-ops. This would be a disaster for most insurers.

Indeed, according to Republican Paul Ryan (R-Wisc.), who gave an impressive interview about this bill, this bill is likely to lead to the collapse of all but the largest insurers. He notes that the Baucus plan prevents insurers from using underwriting techniques to set rates (e.g. they can’t adjust policies to account for certain conditions). Because insurers need that flexibility to account for different expected costs, he reasons that most of the nation’s 1,300 insurers will be unable to issue profitable policies. Thus, they will be forced out of the business, leaving only a handful of large insurers to occupy the field.

Because of this potential disaster, the insurance industry has now abandoned their support and turned against the plan. Consequently, the Democrats are now threatening to attack the insurers with anti-trust laws, thereby guaranteeing the vehemence of the insurers’ opposition.

(3) Hospitals. The Democrats wanted to get hospitals on board (i) by increasing federal reimbursement for the “unreimbursed expenses” hospitals incur in treating the poor and illegal aliens and (ii) by cutting hospitals’ medical malpractice costs.

In 2008, hospitals provided $35 billion worth of uncompensated care (for the uninsured); 80% of this was reimbursed by the government. Most of this went to cover illegal aliens. But illegal aliens won’t be covered by Baucus, thus nothing will change for the hospitals. What’s worse, in July 2009, the White House announced (supposedly after reaching an agreement with hospitals) that it would be cutting the amount it reimburses hospitals under Medicare/Medicaid by $155 billion, to pay for ObamaCare. That’s a $190 billion loss from what hospitals had expected.

Moreover, while the GAO now confirms that medical malpractice reform could save $54 billion over 10 years, and while hospital groups including the American Hospital Association have been shopping malpractice reform plans, the Democrats have offered nothing more than a minor “demonstration project” to study the issue.

(4) Doctors. Democrats hoped to get doctors on board by promising increased reimbursements. But that has turned into a disaster. Here’s why. Medicare/Medicaid do not pay doctors enough to make it worth their time to treat those patients. Indeed, there are thousands of stories of doctors literally going broke trying to treat Medicare/Medicaid patients, and many now refuse to take such patients. In 2003, Congress tried to fix this by providing a temporary boost in the payment amounts until the system could be reworked. That boost runs out next year. If nothing is done, doctors (who already can’t afford to take such payments) will have their reimbursements cut by 21%, with a 40% cut following the year after. To prevent this happening, i.e. not fixing the problem but merely keeping the current reimbursement scheme, Congress must spend another $247 billion over the next 10 years.

However, if that amount is added to the bill, the budget promises made by the Democrats will collapse. So the Democratic leadership tried to sneak this change through as a separate bill. But that was voted down last week. It is not clear whether or not the Democrats will be willing to include these amounts in the current bill. Either choice could kill the bill.

(5) Old People. The Democrats proposed increasing the prescription drug benefit in Medicare to win over seniors. But they ended up scaring the heck out of seniors instead. And things are only going to get worse. Obama and Baucus have proposed cutting Medicare Advantage to save $10 billion. But this would cut the benefits of nine million seniors. Moreover, to pay for this bill, the Democrats are proposing an estimated $250 billion in Medicare/Medicaid cuts, which threatens the existence of both programs. Seniors remain very angry. . . and they vote.

(6) Big Business. The Democrats wooed employers, particularly big business and their union friends, by promising that the cost of employee health care would suddenly be covered by the government and that their smaller, more nimble competitors would be required to pay for benefits. None of that happens in the bill. At best, this bill will be neutral for employers.

(7) Illegal Aliens. This group was treated like a punching bag by the Democrats and gets nothing out of the bill. They are annoyed.

(8) The Hard Left. The hard left has been agitating for the Democrats to socialize medicine since forever. This bill doesn’t even come close to making them happy. In fact, this bill isn’t even a down payment on that. They are very upset.

(9) The Winners. There are only two groups that win under this legislation. The first group are people in the income range between 100% and 133% of the poverty level. They will now be eligible for Medicaid. This is approximately seven million people. The other group are the nation’s five million uninsurable persons. However, these groups lack financial muscle and already are loyal Democratic voters. Thus, their support is not comforting to the Democrats -- it’s like having your mom tell you that she likes your bill.

With no real constituency to support this bill, it will be difficult to pull together the votes needed to pass it.
2. The Cost

In addition to a lack of support among the rank and file, the bill is hemorrhaging support in Congress. The first cause of this falling support is the cost of the bill.

To get political cover, the Democrats have been working to convince everyone that the bill will cost less than one trillion dollars. Obama even set that limit in his daffy health care speech. But the Democrats now admit privately that the bill is understated by at least $150 billion. Moreover, the bill includes assumptions about cost cuts that won’t occur -- particularly the $247 billion in cuts to reimbursements to doctors under Medicare/Medicaid mentioned above. If these things are added back in, the bill will cost $1.268 trillion.

Going above the $1 trillion figure will lose the Snowe Rino and may lose many of the Blue Dogs.

More importantly, the bill was priced using the new (post-$247 billion cut) Medicare/Medicaid rates. Factoring those back out will cause the price tag to creep toward $2 trillion as the Republicans have been claiming. That would be a public relations nightmare, as it would have been cheaper just to buy everyone in the country private health care.

3. Disputes Over How To Pay For The Bill

In addition to the problem with the bill’s cost, there is a serious dispute among Democrats over how to pay for the bill. There is a currently a $200 billion shortfall, even in the fantasy numbers. To cover this, the House wants an income tax surcharge on the rich. The Senate, on the other hand, wants an excise tax on “Cadillac” benefits. And according to Paul Ryan, this could be the biggest problem for the bill because the surcharge “cannot” pass the Senate and the excise tax “cannot” pass the House.

Moreover, neither of these plans has strong support. In the House, the Democrats kept having to cut the rates to keep nervous Democrats in line. In the Senate, Baucus had to carve out exceptions to the excise tax for coal miners to get the support of Sen. Jay Rockefeller (D-Deliverance), unions to get the support of Sen. Debbie Stabenow (D-UAW) and John Kerry (D-Masshole), and for people in certain “hard hit states” to get the support of Sen. Chucky Schumer (D-Wall Street), Sen. Ron Wyden (D-Forrest Industry), and Harry Reid (D-SEIU), with others now demanding their own exemptions.

This could become the greatest challenge.

4. Disputes Over The Public Option

The most public dispute between the Democrats is whether or not (and to what extent) to include a public option. The Democrats furthest left have stated that they will not vote for a bill that does not include a public option. The Snowe Rino will not support a full public option, but will support a triggered public option. Sen. Ben Nelson (D-Neb) strongly opposes the public option. A few others have refused to commit.

This issue is significant because of the 100% (minus 1) Republican opposition, which means that Democrats will need Snowe and 59 of 60 Democratic Senators to pass this thing. It is unclear whether the current proposed solution of a public option that states could opt-out-of will satisfy enough Democrats to get that. I suspect it ultimately will, but it will be close.

5. Abortion

The Democrats also need 217 of the 256 Democrats in the House to support this bill. That’s where abortion comes in. Apparently, House Democrats have hit a wall on the issue of abortion. Rep. Bart Stupak (D.-Mich.) claims that he has organized a group of “about 40 likeminded Democrats” who will vote to kill the health-care bill over the issue of abortion. He says that the bill’s language that specifies that someone obtaining an abortion must use their own money, not money from federal subsidies, does not go far enough because it is impossible to segregate funds in that way. He wants to bar federal money from going to insurers who cover abortion. But other Democrats say they will not compromise any further on this issue. This standoff could kill this bill.


This bill faces widespread opposition in the public. There is no interest group left that supports this bill, most now angrily oppose the bill. The bill costs more than the magic number stupidly established by Obama, and the Democrats can’t agree on how to tax us to pay for it. All of this may make this bill impossible to pass. Add in the dispute over the public option and the abortion standoff, and this bill is rife for a surprise failure. The only question is, will the Democrats be more afraid of not passing this bill than they will be of passing it? Right now, I suspect they gut it deeply before passing it, i.e. they will pass a face saver version of the face saver bill.

Next time, why this bill can be repealed.


LawHawkSF said...

Andrew: Great analysis. This thing stinks like a fish in the sun. I particularly love the "fiscally responsible" Democrats claiming that doctors will lose nothing, then by the use of creative accounting and legislative subterfuge tried to pass a separate $30or $40 billion dollar "payoff" to the doctors so it wouldn't be included in the final version, thereby allowing them to keep lying about it "not costing a single additional cent."

MegaTroll said...

Cool article, thanks for the info. I hope you're right. I don't want to see this happen.

It's funny when you think about it, but the Dems do have a really hard time getting their agenda in place. They have huge majorities in both chambers and the presidency, and they still can't get anything done. Good.

StanH said...

This is indeed a cluster f*#+ of monumental proportions. But, as you say the democrats must pass something or Barry’s goose is cooked. If they go to far their goose is cooked, what fun. This will be the classic “Pyrrhic Victory” many politicians will be dead on the political field either way. Go Barry, …and take the House and Senate with you.

AndrewPrice said...

Stan, I'm betting that the Democrats are wishing right now that Obama never brought this up.

Still, they need to do something. The smart move would be to trim this thing down to be really small and really cheap and then declare victory. But when have they ever done what's smart?

AndrewPrice said...

Mega, Thanks. It really is telling that they can't pass this thing. I think it all goes back to them not having a real philosophy at this point. If they did, they could have rammed through a series of laws to implement that agenda and then fought over the fringe stuff. But as it is, all they've done is fight and stall and whine.

I think they've messed up everything from the get go by not either (1) choosing to govern moderately, or (2) choosing to ram through their entire agenda and face the consequences. As it is now, they're just angering everyone.

Can't say this bothers me though.

AndrewPrice said...

Lawhawk, that the $247 billion in Medicare/Medicaid that is going to cause them so many problems.

Writer X said...

Andrew, your post does an excellent job of showing how the Baucus bill makes the health care situation even worse. You hit the nail on the head when you said "Legislation passes when enough Congressmen/Senators think it is in their interests to support it." So disgustingly true.

As an aside, I spent the day with my parents--two people in their 80's who are very concerned and angry about this bill and the way the "reform" has been handled. And I don't think either one has missed a vote in six decades. Angry is an understatement.

AndrewPrice said...

Thanks Writer X,

This thing was very poorly put together both on the merits and in terms of the politics. They've angered all the wrong people without getting the support of anyone. That will make it very hard for anyone to push this through against public opposition because there is no one to promise anything for taking that risk.

Sadly, you can never underestimate the fear of being labeled as the politician who didn't fix a problem, so the bias will be toward passing this thing. But it's going to be a mess.

As I said above, I suspect they will eventually pass a stripped down version of this and then declare victory.

Seniors are religious about voting and the Democrats have done a lot to scare and anger them. Huge mistake.

LL said...

Andrew, another thoughtful analysis and well argued points.

The ObamaNation bet the farm on socialized/nationalized medicine. By all accounts the "Bogus Bill" should be voted down - for all the reasons you cited plus one -- it's wrong for America and even for the poorest Americans (subjective, not objective reason).

Should it pass, it must be repealed before it guts the healthcare industry. There would be a window, but not an endless one.

AndrewPrice said...

Thanks LL. You're right that they bet the farm on this, and that's what really makes the whole thing unpredictable. I'm sure they feel they have no choice but to pass something. Whether this is that thing remains to be seen.

In any event, you're right that this is not consistent with the American spirit, nor is this going to be good for the poor (or anyone else).

I'm going to talk about repealing next time. I think this bill is eminently "repealable". But you're right, we can't wait forever if we have to repeal it.

Jocelyn said...

I very much enjoyed your article Andrew, I enjoy reading all of them.

Both my parents are in the healthcare field and are in their early 60's. My Dad just retired to get away from the unions (Kaiser). And my Mom currently works with Hospice. And she says that there are two that there isn't a lot of government regulation in which is Hospice and Psychiatry.

But they are both angry about ObamaCare and how it won't solve anything worth anything.

Why is it so hard to just do whats good for the people? That's the point of them being elected.

AndrewPrice said...

Thanks for the kind words Jocelyn! :-)

You certainly asked the trillion dollar question. Unfortunately, I think the answer is all about self-interest. Too few politicians do what's right for the country, they do favors for their biggest contributors or their biggest supporters. That's why these bills so often end up as give aways to various groups.

I think it takes a special kind of leader to cut through that. In theory, that's what Presidents are for. But obviously, this one isn't up to the challenge.

FYI, According to the polls, right now, the group that likes Obama least is seniors. I can't blame them.

CrispyRice said...

Hey Andrew, your mom called - she likes your article. ;D

Seriously, though, great article, as usual. Very informative and well-thought out.

I was thinking about the "opt-out" provision, and it strikes me that it's going to be meaningless. Won't the Feds likely make it so onerous to opt-out that no state will be able to do it? Like when they used to say, "Sure, you can set whatever speed limit you like, but if it's over 55, you won't get highway funds?" So, sure a state can opt out as long as they provide an equivalent plan of their own and don't expect federal money for anything ever again, right?

Grumble grumble grumble...

AndrewPrice said...

CrispyRice, Thanks!

I'm told my mom is very proud! :-)

I fully expect that the opt-out provision will result in everyone opting in fairly quickly.

Not only would there be huge pressure on states to opt in (just like there was pressure to take the stimulus money), but it wouldn't make sense to stay out. Since your taxes will be going to subsidize those who have opted-in, why not grab your own piece of that pie?

Tennessee Jed said...

I appreciate the fact that you do the job our so-called journalists don't do (whether out ideology, laziness or lack of talent.) More people need to access this stuff.

patti said...

i wait, impatiently but expectantly, for why this bill can be repealed. from your blog to god's ear...

AndrewPrice said...

Jed, It would be nice if journalists did look into these things, but it's easier to just repeat party line and then go cover the latest celebrity to get arrested.

AndrewPrice said...

Patti, I'm working on it -- it's been a busy Monday. I'm with you though, I hope the Republicans are up to repealing this thing if it passes!

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