THE OBAMA-BAUCUS-WYDEN-BENNETT PLAN?

Health care policy consultants Lewin and Associates have just released a new working paper, “Harmonizing the Obama, Baucus and Wyden/Bennett Health Reform Proposals: Technical Feasibility,” pointing out the common features of the various proposals.

Given Senator Baucus’ hope for seventy votes for reform in the Senate, there is obviously political appeal in trying to combine two purely Democratic proposals with one that has achieved a degree of bipartisan support. However, while emphasizing the commonalities has obvious merit, it is disappointing that the working paper doesn’t quite live up to its billing.

Despite the title, there is no discussion of the plan that President Obama proposed during his campaign (although this now seems to be a dead issue). More importantly, there is no analysis of the major differences between the Baucus and Wyden-Bennett proposals, and certainly no suggestions for “harmonizing” them. These differences include:

Insurance exchange role – The exchange concept is central to the Wyden-Bennett bill, offering coverage to everyone, but in the Baucus plan is only an add-on to the present structure, serving individuals and small groups without other coverage. The weakness of Wyden-Bennett is the potential destabilizing of the insurance system due to the changeover to individual coverage, while the Baucus plan perpetuates many of the problems of today’s system.

A harmonized solution might take the Wyden-Bennett approach as a starting point, allowing self-funded groups and other large employers (as in the Netherlands) to arrange their own insurance, consistent with national standards, with all other employees and other individuals purchasing coverage through the exchange.

Financing – Wyden-Bennett provides for a mix of employer levies and personal income taxes, coupled with removal of the tax exemption for employer-paid insurance. Baucus proposes to continue the tax exemption (and enhance it through Section 125 plans), to offer tax credits to small employers, and to impose levies on employers not providing coverage. One problem with Wyden-Bennett is in the transition from (mostly) employer-paid coverage, requiring employers to increase wages by the value of prior coverage, while the Baucus plan has the disadvantage of perpetuating the unlevel playing field of non-taxed benefits.

A harmonized solution may be impossible, given the differences between these approaches. Wyden-Bennett offers a much simpler structure that would remove a burden from employers and make for fairer tax treatment, but could be further simplified by requiring only that employers report the value of employee benefits during the transition period, leaving it to employees to determine if their wages were fair.

Medicaid – Wyden-Bennett would incorporate Medicaid coverage into the exchange mechanism, with subsidies for deductibles and co-pays. Baucus proposes to expand Medicaid and to make it more consistent across states. The problem with Wyden-Bennett is that although it would allow individuals to remain in the same health plan if they become Medicaid eligible, and would provide more budget stability for states, it could create insurance instability and high premiums if all Medicaid eligibles are channeled into the exchange structure.

A harmonized solution might be to enhance the present Medicaid program for an interim period and then to transition eligibles to the exchange structure.

Public Plan – Wyden-Bennett includes no provision for a public plan option, while Baucus would allow individuals aged between 55 and 65 to buy in to Medicare during a transitional period.

A harmonized solution could allow some form of temporary Medicare buy-in, but provided that Medicare provider payments are more tightly controlled.

While the similarities noted in the Lewin paper are valid, philosophically the two proposals are very different. The Baucus plan accepts most of our present system and attempts to fix the biggest problems, while Wyden-Bennett attempts to create the health care system that we might have if we could start with a clean sheet. The weaknesses of the two proposals flow from these two philosophies: the transition to Wyden-Bennett is a risky one, while Baucus leaves us with many of the problems of the present system. Consensus (or at least compromise) may lie in trying to incorporate features of the Baucus plan into the Wyden-Bennett model, rather than the other way round.