Current Events Public Policy

The Baucus Plan: Increasing Access…to the same old Healthcare System

Many people have asked me, what do you think about the Baucus health reform plan?  Taking the bird’s eye view, the Baucus plan does a very good job at expanding insurance coverage.  Eligibility limits for public plans (i.e., Medicaid and SCHIP) are more generous.  Lower middle class and middle class individuals qualify for health insurance subsidies to purchase private insurance.  The Health Insurance Exchange should diminish the fear of losing one’s insurance when you switch jobs.  Overall, Baucus has built on existing health infrastructure to expand health access.  

By building on existing infrastructure, what he will do is basically expand the same health care system–that everyone is now complaining about–to more people.  There is little sincere effort to reform Medicare.  Although a white paper claims that he would cut physician compensation in Medicare, Baucus unsurprisingly decided to raise Medicare physician payment rates.  Pledges to reduce ‘waste and fraud’ are uttered by every President and Congressman in recent history but this is difficult to accomplish.  What about the promise to “reward Medicare providers who deliver care more efficiently and penalize those who don’t.”  This is good in theory, but difficult in practice.  Can we adequately risk adjust to make up for the fact that some physicians have sicker populations?  Will physicians have an incentive to not treat the sickest patients in order to improve their bonuses from Medicare?

Other points

I am not in favor of an individual mandate.  Most people want insurance and will buy it if they can afford it.  Will the government really fine lower middle class individuals for not buying health insurance?  What if they are using their limited income towards shelter, food, or their children’s education?

The “free rider” problem is a serious problem and has been addressed nicely here.

The Health Insurance Exchange is an interesting idea.  On the one hand, standardizing health plans makes comparison shopping between insurers easier.  However, the standardization may hurt innovation in the health insurance industry.  Further, how will these standard evolve as new technologies are invented?  I would guess that these ‘standardized’ plans will be slower to cover newer technologies.

Taxing ‘cadillac’ insurance plans does not make sense to me.  Let us say that two people earn $50,000 per year.  One person decides to buy a fancy flat screen TV while the other buys a small TV and saves the rest.  Should we tax the person who likes TV more than the a non-TV loving person?  Similarly, some people will prefer to spend more money on comprehensive health insurance.  Others might forego a cadiallac plan and instead buy exercise equipment, organic food, cars or any other item.  A progressive tax to fund health insurance for poorer individuals makes sense.  Taxing those who want comprehensive health insurance does not.  In fact, Baucus is reconsidering the excise tax on high-end insurance plans.


  1. I don’t understand your argument. Aren’t we already taxing people who prefer to buy the TV more than those who prefer to spend the money on health insurance, since health insurance benefits are not taxed? Getting rid of the tax exemption completely is probably not politically feasible, but this goes towards fixing the problem, not creating one.

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