CBO on Co-Ops

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Ezra has posted the CBO’s initial estimates on the costs of MaxTax–some of the assumptions for which seem to pretend that insurance companies will not react in any way to the new rules imposed by MaxTax.

But before I get into what CBO’s assumptions, here’s what CBO thinks of Baucus’ crappy co-op option.

(The proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments.)

That is, as designed, the co-ops would not be more attractive than the private insurance options, nor would they bring down subsidies (which means they wouldn’t bring down costs to us, either).

As designed, the co-ops are totally worthless.

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The REAL Worst Policy in the Bill

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Ezra continues to claim that the worst employer incentive in MaxTax is the way it fines employers for not covering employees.

Max Baucus’s bill retains the noxious "free rider" provision on employers. Rather than a simple employer mandate that forces every employer over a certain size to provide health-care insurance or pay a small fee, the free rider approach penalizes employers $400 for hiring low-income workers who are eligible for subsidies.

[snip]

This isn’t just the worst policy in the bill. It’s one of the worst policy ideas I’ve ever seen. It creates a huge incentive to build a workforce that entirely excludes low-income workers.

Now before we get into whether this really is the worst incentive or not, let me correct something Ezra said. He said:

The employer doesn’t just pay $400 per low-income employee. He pays "$400 multiplied by the total number of employees at the firm (regardless of how many are receiving the state exchange credit)." The bill actually gives an example of how this works: Employer A has 100 employees and does not offer health-care coverage. Thirty of the employees receive subsidies on the exchange. Employer A doesn’t pay $400 x 30 employees, but $400 x 100 employees, for a total of $40,000. 

But that’s not what the MaxTax does or says. Here’s what MaxTax says [update: Ezra has now amended his post to reflect this difference.]

The employer would pay the lesser of the flat dollar amount multiplied by the number of employees receiving a tax credit or a fee of $400 per employee paid on its total number of employees.

For example, Employer A, who does not offer health coverage, has 100 employees, 30 of whom receive a tax credit for enrolling in a state exchange offered plan. If the flat dollar amount set by the Secretary of HHS for that year is $3,000, Employer A should owe $90,000. Since the maximum amount an employer must pay per year is limited to $400 multiplied by the total number of employees (for Employer A, 100), however, Employer A must pay only $40,000 (the lesser of the $40,000 maximum and the $90,000 calculated fee). [my emphasis]

So Ezra’s (and Baucus’) hypothetical employer would pay just $40,000. But say Employer B had just 5 employees who were subsidized, out of the same 100 employee firm. Employer B would pay $15,000, which brings it closer to the costs an employer might incur trying to preferentially hire an employee who might already have health care.

Ezra’s point still holds–to a degree. Both employers have an incentive to avoid hiring low income workers for whom they might be fined.

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Affordable for Individuals Versus Affordable for Wal-Mart Employees

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Here’s a scary part of MaxTax, if I understand it correctly. MaxTax still screws employees but rewards Wal-Mart as I’ve laid out in this post and this post. Here’s the language in question:

As a general matter, if an employee is offered employer-provided health insurance coverage, the individual would be ineligible for a low income premium tax credit for health insurance purchased through a state exchange. An employee who is offered coverage that does not have an actuarial value of at least 65 percent or who is offered unaffordable coverage by their employer, however, can be eligible for the tax credit. Unaffordable is defined as 13 percent of the employee‘s income. For purposes of determining if coverage is unaffordable, salary reduction contributions would be treated as payments by the employer. The employee would seek an affordability waiver from the state exchange and would have to demonstrate family income and the premium of the lowest cost employer option offered to them. Employees would then present the waiver to the employer. The employer assessment would apply for any employee(s) receiving an affordability waiver. Within five years of implementation, the Secretary must conduct a study to determine if the definition of affordable could be lowered without significantly increasing costs or decreasing employer coverage.

A Medicaid-eligible individual can always choose to leave the employer‘s coverage and enroll in Medicaid. In this circumstance, the employer is not required to pay a fee.

But note how affordability is defined: 13% of "income."

Now look at how MaxTax defines "affordable" for individuals having to buy insurance via an exchange.

Exemptions from the excise tax will be made for individuals where the full premium of the lowest cost option available to them (net of subsidies and employer contribution, if any) exceeds ten percent of their AGI.

The individual definition of affordable uses 10% of Adjusted Gross Income. Whereas the employer’s definition of affordable uses 13% of (apparently) total income.

Now, it’s a good thing (sort of) that the affordability rate for individuals is 10% of AGI. That means a family would be able to opt out if there were no health care available at even a lower rate than I thought (for example, it might mean a middle class family could opt out if health insurance cost them $6,000 a year, as opposed to $8,000 a year). Read more →

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MaxTax: Working Thread

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Fatster found Max Baucus’ health care plan here. Use this thread to post what you find.

I’m about 1/10 of the way through. My favorite detail so far is that the Health Exchanges would take your MaxTax–your mandated payment to shitty insurance companies–as a payroll deduction.

For employed individuals who purchase health insurance through a state exchange, the premium payments would be made through payroll deductions.

This really is a tax to benefit Baucus’ donors.

This is interesting:

Individuals between 300-400 percent of FPL would be eligible for a premium credit based on capping an individual‘s share of the premium at a flat 13 percent of income. For purposes of calculating household size, illegal immigrants will not be included in FPL. Liability for premiums would be capped at 13 percent of income for the purchase of a silver plan. The share of premium enrollees pay would be held constant over time. The premium credit amount would be tied to the second lowest-cost silver plan in the area where the individual resides (by age according to standard age factors defined by the Secretary of Health and Human Services) plan.

This is the cap for premiums for some middle class people, remember. What I’m interested in is that they cap the subsidy to the second lowest-cost plan that qualifies for subsidies. The insurance companies will be gaming that system, to direct consumers into precisely what model they want to pay for, because they know that strapped middle class families will only get what they can get a full subsidy for.

I’m on page 21 now, and already there have been 3 discussions of how to make sure undocumented workers (Baucus calls them illegals) will be prevented from buying into insurance in this program. They may have reprimanded Joe Wilson, but they sure kowtowed to him.

Here’s another way Baucus is incenting employers to pay their employees shit wages:

A qualified small employer for this purpose generally would be an employer with no more than 25 fulltime equivalent employees (FTEs) employed during the employer‘s taxable year, and whose employees have annual fulltime equivalent wages that average no more than $40,000. However, the full amount of the credit would be available only to an employer with ten or fewer FTEs and whose employees have average annual fulltime equivalent wages from the employer of less than $20,000.

McJobs: It’s not just for WalMart anymore.

There’s a whole bunch of language making sure Read more →

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We Can’t Afford the MaxTax

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The newspapers (and some Senators) have apparently discovered what I pointed out a week ago. The MaxTax is completely unaffordable for the middle class.

Near the top of the list for the panel’s Democrats is worry that health insurance subsidies will not be sufficiently generous nor available to enough people despite the fact that the bill would legally require most people to obtain coverage. Beyond premiums, some Democrats are concerned that Baucus’s proposal would not do enough to protect middle-class families from high healthcare expenses.

"It’s very clear, at this point in the debate, the flashpoint is all about affordability,” said Sen. Ron Wyden (D-Ore.). “I personally think there’s a lot of heavy lifting left to do on the affordability issue.”

The healthcare bills already approved by three House committees and another Senate committee offer more generous subsidies – but at a higher cost to taxpayers.

“We’re doing our very best to make an insurance requirement as affordable as we possibly can, recognizing that we’re trying to get this bill under $900 billion total,” said Baucus, who has been courting Republican support for his measure in an attempt to guarantee that a healthcare bill can achieve the 60 votes or more needed to avoid a Senate filibuster.

“I’m going to work even harder to address any legitimate affordability concerns. I knew they were there,” Baucus said.

Just as a reminder, here are the numbers I came up with last week–showing that if a middle class family had a significant (but not catastrophic) medical event under MaxTax, it might be left with as little as $7,215 to pay transportation, utilities, school, clothing, and debt.

Here’s a very rough budget for that family making $67,000 (I’m not an accountant, so tell me where my assumptions are wrong).

Federal Taxes (estimate from this page): $8,710 (13% of income)

State Taxes (using MI rates on $30,000 of income): $1,305 (2% of income)

Food (using "low-cost USDA plan" for family of four): $9,060 (13.5% of income)

Home (assume a straight 30% of income): $20,100 (30% of income)

Bad Max Tax: $20,610 (31% of income)

Total: $59,785 (89% of income)

Remainder for all other expenses (including education, clothing, existing debt, transportation, etc.): $7,215 (or 11% of income)

(Note, there was a lot of discussion about the Federal tax figure–including whether it would be lower once you account for writing off these medical costs. Since it’s a CBO number that accounts for that kind of deduction now, Read more →

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Race and the Public Option

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MoDo has discovered that racists are upset they have a black President.

I’ve been loath to admit that the shrieking lunacy of the summer — the frantic efforts to paint our first black president as the Other, a foreigner, socialist, fascist, Marxist, racist, Commie, Nazi; a cad who would snuff old people; a snake who would indoctrinate kids — had much to do with race.

I tended to agree with some Obama advisers that Democratic presidents typically have provoked a frothing response from paranoids — from Father Coughlin against F.D.R. to Joe McCarthy against Truman to the John Birchers against J.F.K. and the vast right-wing conspiracy against Bill Clinton.

But Wilson’s shocking disrespect for the office of the president — no Democrat ever shouted “liar” at W. when he was hawking a fake case for war in Iraq — convinced me: Some people just can’t believe a black man is president and will never accept it.

Now, frankly, I think MoDo was partly right in agreeing with Obama advisors that Democratic President will always attract nuts. As Glenn Greenwald argued yesterday:

I have very mixed feelings about the protests of conservatives such as David Frum or Andrew Sullivan that the conservative movement has been supposedly "hijacked" by extremists and crazies.  On the one hand, this is true.  But when was it different?  Rush Limbaugh didn’t just magically appear in the last twelve months.  He — along with people like James Dobson, Pat Robertson, Bill Kristol and Jesse Helms — have been leaders of that party for decades.  Republicans spent the 1990s wallowing in Ken Starr’s sex report, "Angry White Male" militias, black U.N. helicopters, Vince Foster’s murder, Clinton’s Mena drug runway, Monica’s semen-stained dress, Hillary’s lesbianism, "wag the dog" theories, and all sorts of efforts to personally humiliate Clinton and destroy the legitimacy of his presidency using the most paranoid, reality-detached, and scurrilous attacks.  And the crazed conspiracy-mongers in that movement became even more prominent during the Bush years.  Frum himself — now parading around as the Serious Adult conservative — wrote, along with uber-extremist Richard Perle, one of the most deranged and reality-detached books of the last two decades, and before that, celebrated George W. Bush, his former boss, as "The Right Man."

It’s also why I am extremely unpersuaded by the prevailing media narrative that the Right is suddenly enthralled to its rambunctions and extremist elements and is treating Obama in some sort of unique or unprecedented way.  Read more →

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MaxTax Is a Plan to Use Our Taxes to Reward Wal-Mart for Keeping Its Workers in Poverty

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I made this point in this post, but I’m going to repeat it over and over and over until it sinks MaxTax, the Baucus health care plan.

MaxTax is a plan that will use your and my tax dollars to reward companies like Wal-Mart for keeping its workers in poverty. Here’s why.

In most cases, the MaxTax fines employers up to $400 per employee if it doesn’t provide its employees with health care. The fine is absurdly small (less than half of what individuals, themselves, would be fined if they didn’t get insurance), but it could mean a company like Wal-Mart would have to pay up to $560 million if it refused to provide insurance to any of its employees.

The other option is to provide crap insurance for your employees. MaxTax gives very few requirements for this insurance (and it allows you to charge employees up to 13% of their income in premiums). But assume Wal-Mart decided to provide incredibly crappy insurance at a cost of $2,500 an employee. It would then pay $3.5 billion a year to meet its obligations under MaxTax. 

So Wal-Mart chooses between paying $560 million or $3.5 billion right?

There is another option.

The MaxTax offers this one, giant, out for corporations.

A Medicaid-eligible individual can always choose to leave the employer’s coverage and enroll in Medicaid. In this circumstance, the employer is not required to pay a fee.

In other words, the one way–just about the only way–a large employer can dodge responsibility for paying something for its employees is if its employees happen to qualify for Medicaid. Under MaxTax, Medicaid eligibility will be determined by one thing: whether a person makes less than 133% of the poverty rate. And who has the most control over how much a particular person makes? Their employer!

So if Wal-Mart wanted to avoid paying anything for its employees under MaxTax, it could simply make sure that none of them made more than $14,403 a year (they’d have to do this by ensuring their employees worked fewer than 40 hours a week, since this works out to be slightly less than minimum wage). Or, a single mom with two kids could make $24,352–a whopping $11.71 an hour, working full time. That’s more than the average Wal-Mart employee made last year. Read more →

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Letting Insurance Write the Bill: How Bad Is That?

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Ezra has written a thoughtful follow-up to my complaint that discussions of the role of insurance company in writing our legislation neglect to discuss profit. I agree with parts of it and disagree with others. The most important point Ezra makes–which explains his focus on providers to the exclusion of insurance companies–is this passage:

The insurance industry is not a particularly profitable industry. To be more specific, they’re the 86th most profitable industry as measured by profit margins, with an average margin of 3.3 percent. That’s lower than drug manufacturers (16.5 percent), health information services (9.3 percent), home health care (8.4 percent), medical labs and research (8.2 percent), medical instruments and supplies (6.8 percent), biotech firms (6.7 percent), generic drug manufacturers (6.6 percent), and much else. That’s not to pretend that 3.3 percent is nothing, but it’s hard to see how that’s a primary driver of health-care spending, much less the growth in health-care spending. 

With that in mind, let’s take a step back to the question that started this series of posts–Matt Yglesias’ question, "how bad is that?" if the insurance industry writes our health care reform bill. With now several bills on the table along with the Max Tax framework and the President’s framework, how bad is it to let corporations necessarily motivated by profit maximization write the bill?

Short of our entire political system changing tomorrow such that single payer became feasible (which would make Ezra, Yglesias, and me all very happy), what we’re going to do instead is put tens of millions of people into the health insurance system who aren’t currently there. The question is, how to do it for the best outcome at lowest cost to taxpayers and individuals. Some of those people will be put into the system via Medicaid, though a great many will be put into the system directly via insurers. Importantly, those put into the system via insurance will be mandated to buy insurance. Some will be subsidized by the government, though others will not.

So the insurers will be getting tens of millions of new customers, and those new customers with financial constraints will be subsidized by the government but others will not.

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Why Don’t Big Media Matt and Ezra Ever Use the Word “Profit”?

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I got to this Matt Yglesias post and this Ezra Klein post via this Joke Line post (which sends you on a wild goose chase in search of this Ezra post) via this Lawyers Guns and Money post. I’ll return to Joke Line if I get a hankering to whack a piiñata.

But in the meantime, I’m wondering why Big Media Matt and Ezra don’t ever use the word, "profit"?

Both, you see, struggle to talk about how cool insurance companies are and how they could be the route to huge cost savings. Matt, apparently taking issue with this post (which never claimed identifying Liz Fowler’s role in the Max Tax was a "big scoop"), uses two farcical hypothetical examples to suggest that it’s not a bad thing for our public legislature to be proposing legislation written by private industry. First, he argues that a plan that uses public funds to improve bus routes would make both bus riders and bus drivers happier, which would be a good use of tax dollars.

Well, for starters you would want the buses to run more frequently. That would require, among other things, additional buses and additional bus drivers. That’s something the union representing bus drivers would like, and also something that companies that build buses would like. You could even imagine such a plan being hatched in close collaboration with the Transit Worker’s Union and the insidious forces of Big Bus. That, however, wouldn’t make the plan bad for New York City bus riders. It would be good for New York City bus riders. The city would be using tax dollars to give more buses to bus riders—it’s win-win for bus riders and bus drivers and bus makers all.

Note, first of all, how hilariously in-apt this analogy is. He’s talking about NY Transit–run by the public benefit corporation MTA and ultimately accountable to elected  officials (the private parts of which, though, have a history of paying bus workers less money for the same work). He’s talking about a highly regulated monopoly. So it’d be a great example to use if we were discussing implementing a government health service, or at the very least a public plan. But of course we’re not. So in Matt’s first analogy, he can avoid discussing whether "Big Bus" (as he calls it) would have objectives that might differ from those of both the riders and the workers, as well as the clout to piggyback those objectives on top of the plan to increase route frequency.

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The Max Tax Distribution List

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Well, this is interesting. Not only did Bad Max send the MaxTax plan out with the name of WellPoint’s former VP still on it, but he distributed it to the industry hacks too. Only the industry hacks.

QUESTION: The Finance Committee — well, actually, Senator Baucus’s draft has been, now, bouncing around for a few days on Capitol Hill.

First, has the president seen it (inaudible) his outline?

GIBBS: I don’t — I don’t believe — I don’t believe anybody here has — I’m — we’ve seen what we’ve read in the paper, but I do not believe that we’ve seen paper on the plan.

QUESTION: I understand it’s bouncing around K Street.

GIBBS: Not surprisingly, but I have not seen it here.

[snip]

QUESTION: What did you just mean…

(CROSSTALK)

QUESTION: I’m sorry. What did you just mean by it’s bouncing around K Street ?

GIBBS: I was told that — that K Street had a copy of the Baucus plan, meaning, not surprisingly, the special interests have gotten a copy of the plan that I understand was given to committee members today.

QUESTION: And…

GIBBS: It wasn’t cryptic. It’s who…

QUESTION: I mean, who is that a…

(CROSSTALK)

QUESTION: Are you impugning somebody here? I mean, it sounded like you were impugning, like, well, K Street has it. I mean, what…

BTW, it was none other than Chuck Todd worried that mean Robert Gibbs was "impugning" the parasites from K Street. I’m glad you’re looking out for the important issues, Chuck.

And, as Kagro X added, Bad Max didn’t share a copy with Harry Reid, either. 

Senate Majority Leader Harry Reid (D-Nev.) said he had not seen Baucus’s draft either, when asked during a briefing at the White House after a meeting with Obama, Vice President Joe Biden and Speaker Nancy Pelosi (D-Calif.). 

Now, I know that Obama and (particularly) Reid have made a career of letting people walk all over them. But this is the kind of thing that might really piss them off–particularly the control freaks at the White House. 

I mean, embarrassing the President like this, regarding the plan he’s been pitching since June? And Rahm’s lackey (and Bad Max’s former lackey) Jim Messina didn’t tell his bosses about this?  

Bad Max released this without sharing–I mean, sharing with any but his clients on K Street. I’m not entirely sure what that means, but I get the feeling that the White House was none too happy about that. 

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