1. Seniors have nothing to gain and everything to lose. The Baucus bill pays for itself largely by shifting hundreds of billions of dollars out of Medicare. The last thing seniors want is to have their representatives steal from Medicare to pay for Baucuscare. Seniors were surprisingly loud at the August town-hall meetings, and that was before anyone took such clear aim at them and their coverage. The Baucus bill would gut Medicare Advantage and would cut a total of $404 billion from Medicare and related federal health programs in its first ten years alone. And if it didn’t actually follow through on these cuts, then it would be a colossal deficit bill, and the New York Times’s green light would turn to red.
2. It would raise Americans’ taxes dramatically. The tax numbers are not yet getting out there widely, but the bill would raise taxes and fines by $507 billion in its first ten years alone. Crossing the $500 billion barrier is a lot like crossing the $5 barrier for a box of cereal. People are generally reluctant to go there. The Democrats have done so, but the American people may not bite.
3. It would raise Americans’ insurance premiums dramatically. The bill would require people to buy government-approved insurance and would fine them if they don’t. That’s not a terribly politically appealing message in a free country, particularly among younger voters — who would also be required to subsidize the premiums of older Americans under the bill (as insurers would not be allowed to vary the rates between policies sold to those of different ages as much as the true economic costs of those policies have generally caused them to do).
But that’s just the beginning of the bill’s destructive effect on private insurance. With characteristic understatement, the CBO writes that under the bill, insurers “would have to meet several requirements.” The CBO proceeds: “In particular, insurers would have to accept all applicants, could not limit coverage for preexisting medical conditions, and could not vary premiums to reflect differences in enrollees’ health.” The result of these requirements would be to make premiums skyrocket.
If you were an insurer and the bill were to pass, I suspect you’d do one of two things: You’d either raise premiums dramatically for the vast majority of people who are generally healthy — knowing that you’d have to charge the same premium to those who aren’t, or you’d find a new line of work.
But worse than just this, the bill’s requirements would provide a huge incentive for people to stop carrying insurance year-round. Why buy insurance when you can just wait until you need it for something in particular, and then get it — no questions asked, no higher tab to pay? It’s like the FastPass at Disneyland. You don’t have to join everyone else in line. You can just decide to enter whenever you want and then go to the front. The fine for an individual who doesn’t carry insurance would be $475 a year. That’s $39.58 a month. That’s the cheapest insurance policy anyone could hope to find. And, again, if you got diagnosed with a horrible illness or suffered a major injury, you could just sign up for the private insurance then. Insurers couldn’t refuse to take you, they couldn’t charge you retroactively, and they couldn’t charge you any more in the months to come — as you receive your expensive treatment — than they would charge someone who had been a loyal and healthy customer for years. The great question is, “Who would have to pay for the FastPasses?” The answer, of course, is everybody else.
The folks at the CBO are taking none of this into account. They apparently don’t think that people are clever enough to jump on and off of insurance plans if they’re allowed to do so. They think people will stay on them year-round, when they could pay $39.58 a month and just get on them whenever they choose. Clearly, the folks at the CBO have never been in sales.
As a result, the CBO’s estimate that Baucuscare would cover 94 percent of American citizens at the mere cost of nearly $1 trillion in spending, more than half a trillion dollars in tax-hikes, and 400 billion dollars shifted out of Medicare and related programs, is probably significantly off. Keep in mind that ninety percent of American citizens are already insured today. Even President Obama is now using a figure of 30 million uninsured in a nation of roughly 300 million. That number could actually decline under Baucuscare, as its perverse incentives kick in. But even if it doesn’t, one must ask: What price are the American people willing to pay for that projected 4 percent gain?
This blog post originally appeared on National Review’s Critical Condition.