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The Congressional Budget Office Scores Ted Kennedy's Bill And Finds Disappointing Numbers Alongside a Very Bad Idea

tedkennedy.jpgThe Congressional Budget Office's preliminary analysis of Sen. Ted Kennedy's Affordable Health Choices Act is out. This is, remember, the liberal alternative to the Finance Committee's coming health reform bill. And it is, of course, still somewhat incomplete. But the basic stats aren't terribly encouraging: It'll cost $1 trillion over 10 years, which is less than some feared, but increase insurance coverage by only about 16 million people, which is a lot less than some hoped. The key bit of analysis comes here:

The proposal is assumed to require most legal residents to have insurance (though the draft language is not explicit in this regard). In general, the government would collect a payment from uninsured people, but individuals with income below 150 percent of the federal poverty level (FPL) would be exempt and the payment would be waived in certain other cases. The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) assumed that the annual payment amount, which would be set administratively, would be relatively small (about $100 per person).

In other words, there's an individual mandate, but not very much of one, and so it's not projected to get us all that much closer to full coverage. It's a trillion dollars to cut the ranks of the uninsured by about a third. That's a bit disappointing. Currently, however, the analysis doesn't include any expansion of Medicaid, the creation of a public plan, or the implementation of an employer mandate, because the Health, Education, Labor and Pensions Committee's draft legislation punted on those issues. As those policies get added into the mix, these numbers might well change.

But I'm quite concerned about another aspect of the bill: The legislation, as written, appears to cordon the health insurance exchanges off from people receiving employer-provided insurance. This means that if The Washington Post offers me health insurance, but I want to purchase my own plan on the health insurance exchange (which is where, among other options, the public plan would be), I'm barred from doing so. This is a bafflingly terrible idea, and directly contradicts a promise Barack Obama made in his speech to the American Medical Association this afternoon. “If you don’t like your health coverage or don’t have any insurance," he said, "you will have a chance to take part in what we’re calling a Health Insurance Exchange.”

That should be a key principle in health reform, and it's directly violated in the HELP Committee's draft. More worryingly, sources on the Hill say that the Finance Committee might be following HELP's lead on this. I'll be writing much more on this tomorrow.

(Photo of Sen. Kennedy by Chip Somodevilla)

By Ezra Klein  |  June 15, 2009; 6:26 PM ET
Categories:  Health Reform  
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Ouch. Great fodder for the Republicans. $1 trillion for 16%.

And the limited exchange is a bad idea as well.

Is HELP trying to kill reform?

Posted by: scott1959 | June 15, 2009 6:41 PM | Report abuse

The Democrats, from Kennedy to Wyden, are screwing this up. They are so focused on making Kent Conrad and Ben Nelson happy that they are going to deliver a solution that will be still-born from the moment that Obama signs it.

It is frustrating beyond belief that when Conservatives want something - war in Iraq, restrictions on the civil rights of gay people - they get it. When Progressives want something we get nothing.

Would be great if I had representation in the US government. Ralph Nader, though an egomaniac, is right. There is only one party in the US. There are real Republicans, and their is Republican-lite. And Republican-lite includes Ted Kennedy.

Posted by: choskasoft | June 15, 2009 6:51 PM | Report abuse

I suspect that if you have employer health insurance you will still be able to buy insurance on the exchange, but neither your employer or the government will help you buy it. You would need to cover the complete $8,000 a year or whatever it cost.

Posted by: JonWa | June 15, 2009 6:59 PM | Report abuse

Welcome to the pathological fear of crowd-out (and adverse selection) that animates these discussions. Exact same thing happened in CA in 07.

Posted by: Mike_Russo | June 15, 2009 7:29 PM | Report abuse

JonWa -- you're right - the HELP bill is not clear about whether or not you could forsake your employer based health insurance and buy from the exchange. But it is likely that if employers were allowed to move employees into the exchange, they would have to pay at least 50% of the costs. The Dems are not going to let ers just drop coverage without paying something, either to a central location to provide subsidies or to their employees in the form of a voucher to take to the exchange. So before anyone thinks they would want to drop out of their employer coverage, read the fine print. There is an interesting "reinsurance" provision in the HELP bill that is an incentive for employers to stay in the game, by helping to cover the catastrophic costs of individuals a la the Kerrey proposal in 2004.

Posted by: LindaB1 | June 15, 2009 7:56 PM | Report abuse

This is very worrisome...

If Democrats in Congress screw this one up, they'll have to contend not only with Republicans coming at them with a vengeance, but with a furious and much more jaded democratic consituentcy.

Democrats weren't just voted into power by wide margins so that they could play footsie with the other team. They were elected to pass good progressive legislation.

If Obama doesn't step in and rescue Health Care (and who knows, maybe that's the plan), I can guarantee that the Democrats will have lost a great deal of support and turned off a large portion of the newer generation of voters. We won't support them later if they can't prove they can get things done now.

"Yes We Can" doesn't translate very well to "Yes We Can -- pass bad legislation that's watered down in the name of the worthless empty shell that we call bipartisanship".

You don't go to the Superbowl to play nice, you go to win. Maybe that's the difference between Democrats and Republicans. Republicans play to win, Democrats don't. Democrats are just happy to have made it to the finals...

Posted by: JERiv | June 15, 2009 8:22 PM | Report abuse

The legislation, as written, appears to cordon the health insurance exchanges off from people receiving employer-provided insurance.

I've been worried about that from the start.

Posted by: eRobin1 | June 15, 2009 8:25 PM | Report abuse

There is no practical reason to cordon off those in employer plans. There is no reason why someone in an employer plan shouldn't be allowed to go to the exchange and buy a plan there. Now why they would want to do it is another thing altogether....why would I want to drop a subsidized employer plan for a plan in the exchange that I pay 100% of the cost of? For the vast majority this would make no sense. Hence the cordoning off makes no sense.

Posted by: scott1959 | June 15, 2009 8:56 PM | Report abuse

A bill that is bloated, makes extravagant promises, and delivers almost no results despite spending taxpayer money like water. No wonder it is named after Kennedy.

Posted by: sourcreamus | June 15, 2009 10:14 PM | Report abuse

Preventing those who have access to employer-sponsored health plans might be a bad idea, but it isn't an obviously bad idea unless you build in a lot of assumptions. Letting employees who have access to coverage through their employers go to the exchange undermines the ability of employers to get health coverage for their employees. For one thing, those most likely to leave could be (depending on how this is designed) the healthiest members of the population. That would skew the employer's risk pool For another thing, insurers won't offer group coverage to employers in many cases unless a certain percentage of their employees sign up. If employees can turn to the exchange, this could create a lot of uncertainty and instability for a lot of employers.

Of course, if part of the point of the exchange for you is to undermine employer-based group coverage, then you'll think it's a good thing.

Posted by: jdhalv | June 15, 2009 10:55 PM | Report abuse

In Massachusetts, the first stage was to only allow people buying individual coverage and without access to employer coverage to use the Connector, the insurance exchange.

But the second stage, now under a pilot test, is to allow employers to designate the Connector as their insurance system. The employer decides on tier of coverage, picks a benchmark plan, and designates how much of an employer contribution the employer will provide to all employees.

The workers are then free to take that contribution and pick any plan within the Connector at that tier. If the worker picks a plan cheaper than the employer's benchmark choice, the worker pays less. The worker can also choose a more expensive plan, and pay more. In either case, the worker takes the same employer subsidy to any choice.

This was tricky to set up in practice, because hidden in employer coverage is the fact that older employees actually get a larger subsidy from their employer, and younger ones get a smaller subsidy. The Connector is running a pilot, to make sure the mechanics works, and its attractive to employers and employees.

If this scheme were part of the federal bill, employers could sign up with the Gateway (what the HELP bill calls the exchange) and their employees would have the choice of a public option or private plans.

Posted by: BriRosman | June 15, 2009 10:59 PM | Report abuse


Great point.

I also have been wondering if pwople who have employer-baed insurance will be able to drop it if they think the public-sector plan is better I agree that this is important. And right now, it's very much up in the air.

But I took what Obama said today in the speech to the AMA means that the answer is "yes"-- people will have that choice.

And I suspec that, in the long run,(by the end of the president's first term) we are going to wind up with health care reform that meets almost all of Obama's objectives.

Posted by: mahar1 | June 16, 2009 1:29 AM | Report abuse

JERiv wrote:

"Democrats weren't just voted into power by wide margins so that they could play footsie with the other team. They were elected to pass good progressive legislation."

Actually, Democrats were voted into office because so many people were sick of Bush, fed up about the economy, and turned off by McCain. Don't mistake the disgruntled voter for a progressive mandate, less voters soon be disgruntled toward progressives. This was the same mistake that Clinton made in the early '90s when he swept into office on a weak economy and then started to attempt health care reform, which it turned out that many Americans didn't want. At the mid-term elections, Republicans took over all of Congress for the first time since just after WWII, and they held this power right up until Bush's last mid-term elections. Perhaps America has shifted slightly on this issue, but if a botched attempt at health care reform helped put Republicans in power in Congress for a decade and a half when supposedly Democrats had just gotten a mandate, then touting a mandate now might be a little overly optimistic.

Posted by: blert | June 16, 2009 2:17 AM | Report abuse

Isn't it absolutely amazing what $46 million in insurance industry bribes can do? Our privatized congress has survived.

Jack Lohman

Posted by: jlohman | June 16, 2009 8:56 AM | Report abuse

I think Mr. Klein is missing the insight that the central purpose of the Kennedy Plan is to reenforce the employer-based health insurance system. Hence the awful idea to limit consumer choice even more.

At this point, I wouldn't mind a public option that was budget neutral and guaranteed issue. This way, we could test once and for all exactly how efficient and effective the government is at providing health care for the mass populace.

Posted by: Dellis2 | June 16, 2009 10:16 AM | Report abuse

true, but I'm not sure you'd want to buy into those plans anyway as it'd probably be more expensive. Look at those graphs from whatzit showing the 20%-30% less the public option would be; those were prices lower than the average individual or small group prices. Those prices are 'really' expensive so 20%-30% less than those is still much more than you're currently paying through working for a larger corporation.

As BriGrosman said, Massachusetts is piloting alternatives. This is a piece that's probably on hold because no one knows for sure what the actual cost will have to wait (like MA did) to see where the actuarial dust settles.

Posted by: ThomasEN | June 16, 2009 10:39 AM | Report abuse

-additionally, note that the quasi-cap on community rating (from your previous post) creates another unknown as that's a different actuarial model than is currently used to predict rates.

Posted by: ThomasEN | June 16, 2009 10:42 AM | Report abuse

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