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Tucked away among the numerous amendments to the Baucus bill is a provision that would automatically reduce the subsidies individuals would receive when purchasing insurance from the new exchanges. The CBO highlighted this provision as part of its analysis of the net costs of the Baucus bill.
The automatic cuts would kick in in any year in which the White House Office of Management and Budget determined that the bill would produce a net budget deficit. In analyzing this automatic provision, the CBO forecasts that budget deficits could result in years 2015 through 2018, resulting in average subsidy cuts of about 15 percent. If deficits were worse the projected, the reductions in subsidies would be even higher.
The idea of an automatic trigger for cost reductions emerged a few months ago when CBO first showed how reluctant it was to score hoped-for savings in Medicare/Medicaid programs. To overcome this reluctance and make the bills appear more budget neutral, think tanks recommended "fail-safe" mechanisms that would automatically kick in to raise revenues or impose cost cuts in the event that expected savings didn’t materialize.
But this particular automatic trigger could have a pernicious effect on making insurance less affordable for those required to purchase insurance in the exchange.
Here’s the discussion (p. 8) in the CBO analysis of the Baucus bill:
“Failsafe” Budgeting Mechanism
An amendment adopted by the committee would require that, beginning in 2012, the Director of the Office of Management and Budget (OMB) certify annually whether or not the provisions of the legislation are projected to increase the budget deficit in the coming year. If the Director determined that they were projected to increase the deficit, he or she would be required to notify the Congress, and exchange subsidies would be automatically adjusted to avoid the estimated increase in the deficit for that year.
The estimates presented in this preliminary analysis do notincorporate the potential effects of using this proposed failsafe mechanism, although CBO and JCT estimate that the amended mark would increase the deficit in fiscal years 2015 through 2018. Many of the budgetary effects of this proposal would appear as part of larger aggregates in the budget and would not be readily observable. Consequently, its overall budgetary impact could not be identified, and OMB’s estimating assumptions and procedures would determine whether and how this failsafe procedure was implemented. It is therefore difficult to predict whether the proposed failsafe mechanism would result in a budget-neutral impact in each year. If the mechanism was implemented to reduce exchange subsidy rates in some years, it would probably result in significant reductions to the dollar volume of such subsidies and associated reductions in coverage. Under CBO and JCT’s estimates of the deficit impact for the proposal, the failsafe provisions would require a reduction in exchange subsidies averaging about 15 percent during the years 2015 through 2018.
I don’t recall any previous coverage of this automatic trigger for cuts in premium subsidies. But since many Democrats are already concerned about insurance affordability and the inadequate level of subsidies in the Baucus bill, this seems a provision that deserves a lot more attention.
GoogleDocs link to CBO letter to Baucus
For examples of "failsafe" mechanisms, see Center for American Progess, Financing Health Care Reform
AP/HuffPo, report on CBO score for Baucus bill
Igor Volsky/Think Progress, compares CBO scores for original and amended Baucus bills
49 Comments
great catch scarecrow. thanks.
Hi selise. How’ve you been?
howdy ecahn!
The hidden meaning of the trigger:
You’re going to pay us insurance companies, what we want, when we want it.
Heh.
Dontcha think the Ds are gonna be in a lot of trouble in a couple of years when the voters find out how medical care “reform,” like the bailouts, is nothing more than another transfer payment from them to the rich.
Thanks for your reporting on the devils in the details of the draft healthcare legislation. It is very informative.
My take is that this is bad, and shows why all these fancy moving parts are counterproductive. Seems to me that it should be obvious to everyone by now, even talking heads on TV, that the only aim of the Baucus-Conrad crowd is to protect insurance company profits, that is more important than anything else with them.
On the other hand, this kind of trigger is standard operating procedure at this point in our mess of a healthcare system. A part of the Medicare funding formula has a trigger like this, and it causes a big problem every couple of years when it looks like it might be pulled. Also funding for post-graduate medical education (the internships and residencies after graduation from medical school that we need to keep world class training in medical doctors).
If the affected interest group (in this case standard issue ordinary income US peasants, indentured servants and debt slaves –excuse me, ordinary voters and citizens) have the political muscle that Medicare recipients have, then the triggers will be suspended or evaded before they are pulled. If the funding is for something that has no constituency, or its relationship to reimbursement for premiums or provision of care is not obvious, as in post-graduate medical education, funds are frozen or cut, purely for short term budgetary reasons, even it if doing so produces even bigger problems in the future.
Either way, healthcare reform is being stunk up, simply on the principle that corporations with lots of money can look out for the interests better than the voters can. That comes before genuine free market principles, equity, population health, productivity of the economy, before everything else.
I suspect you’re right that as each triggering event approached, Congress might intervene to prevent the pubic outrage. What’s interesting is that a lot of the “savings” planned in the bill and scored by CBO are of the same character. They call for reductions in payments to hospitals, clinics, doctors, medical devices, etc; but we’ve seen in the past that when automatic reductions in doctor payments are planned, the doctors protest, scare the heck out of patients, and there’s an uproar that convinces Congress to repeal the reductions.
So I view a lot of the CBO scoring as not credible; it assumes that Congress will just hold still, let the cuts take place, and no one will say boo. Fat chance.
True, but that’s about the only way the CBO can score anything — assume that the only changes between now and whenever are the changes spelled out in the bill.
You scenario could well come true. It all depends on the power of the constituency. The other hand of the other hand, is that if the enrollees in these coops are mostly lower income, they may not have the organization or cohesion to block pulling the trigger.
But the most important point is that, as other commenters have said, this healthcare reform process has shown the groteque corruption of this country. We truly live an a second Gilded Age of Robber Barons (except that at least the old Robber Barrons did build useful stuff, what the current Robber Barrons actually do to benefit anyone other than themselves by taking other peoples’ money is an open question).
Thanks for the comparison chart you gave in a later comment.
There seems to have been an indication of this in Obama’s speech to the joint session of Congress:
Yeah, we knew there would be fail-safe triggers, but this is the first I’ve read that one of these triggers would directly undermine affordability. There are lots of ways you could trigger additional cuts or revenues — e.g., a surtax on the wealthiest, but that would have been ruled off the table.
I think Grijalva is doing some great work with House progressives, but this is like a nightmare or a slow motion train wreck. We can see what is happening but there was never much we could do about it. The fixes were in and the process rigged from the beginning. The only surprises have been Grijalva and some of the Democrats in the House and Rockefeller in the Senate.
Describes my feelings very well.
Agree on Grijalva and his friends. They’ve been champs, and their under intense pressure from the WH and leadership to accept a weaker public option to accommodate the Blue Dogs — again. I think Jane and her commandoes deserve a lot of credit to seeing how that progressive block would change the entire dynamic. But it’s really frustrating to realize we’re having to fight for scraps of incomplete, sometime misguided reform against the WH and the leadership.
what’s really frustrating, to me at least, is that we chose to fight for scraps from the start instead of a policy that could actually work to provide universal health care and control costs.
Yes, he did say that. A deficit hawk on health care, education, energy, the environment, global warming, etc. But not on bank bailouts and the economic stimulus, of course.
It seems that the CBO has been driving a lot of the worst aspects of the bill.
Everything you wanted to know and were afraid to ask about CBO director Doug Elmendorf.
Oy. Thanks for the link. That explains a lot.
“But this particular automatic trigger could have a pernicious effect on making insurance less affordable for those required to purchase insurance in the exchange”
COULD HAVE????????
Sorry, I got a little shrill, there, didn’t I?
Geez, it just gets worse and worse.
This whole thing of making sure it doesn’t cost any more — it’s at the bottom of some of the worst provisions of these “plans.” It’s insane.
The whole point, economically, of going to single payer is that it would save soooo much money for everyone! They twist themselves up, down, and backwards to not “add to the deficit” and avoid the god-awful-terrifying-socialist-”single payer” that what they’re coming up with is absolutely horrible and not worth voting out of committee.
You’ve got it. At bottom, their efforts are ideological, even religious. They just can’t acknowledge that socialized insurance could be better in a domain where free market principles can’t apply because people have no choice about health care. When they need it, they need it.
So much for the vaunted “pragmatism” of Obama.
If this had been included in the original Medicare legislation, the program would have disappeared years ago.
Think of the incentive this would give a president who is opposed to this kind of health care program. “Let’s see . . . if we run up the deficit, it kills this program. Are there any small countries that need invading? That certainly screwed up the budget under GW Bush.”
Just to be clear: the trigger “deficit” is measured within the confines of the bill’s provisions, not the total federal budget. So if the bill itself isn’t neutral in a give year, that’s the trigger.
Thanks for that clarification. It’s not obvious from the slice of the bill above, but that makes a helluva lot more sense.
Welp, if this means balancing the HCR program budget on the backs of those absolutely least able to pay for that — those who qualifying for a pipsqueak, high-risk-pool-only degenerate form of the public option, then that simply will not work.
This is an outrage.
What the “trigger” should do in case of forecasts of budget deficits is “trigger” an increase in the income tax rates applicable to the wealthiest of Americans.
Now, that’s a trigger we could believe in.
Full disclosure: The above comment was conceived and delivered during the rerun of Keith Olbermann’s full-hour Special Comment on health care. Keith didn’t say it, but I suspect he would agree.
Hear hear!
Igor Volsky at Think Progess does a side-by-side chart of CBO’s scores for the original Baucus proposal and the final amended version. Only a few changes, and no real increase in the amounts dedicated to subsidies, though the subsidies go to 23 million in the exchange instead of 25 million people. So after all the talk about improving affordability, the amendments in Senate Finance don’t seem to have accomplished much.
http://wonkroom.thinkprogress&…..ew-baucus/
The whole Bill just sucks. Anyone can write a bill under 900bil if it does nothing to help the people. This is welfare for insurance companies and shafts the people more than no bill at all. Let’s call it what it is, a betrayal of the people and his oath of office.
To put a number to that 15% cut, take a look at page 1 of the exhibit at the end of the CBO letter. The average subsidy for 2015 is $4600, and it goes up $200 per year after that. Cutting 15% means an average loss of $690 in 2015, which will fall on the people participating in the exchange. That will happen after there was a full subsidy in previous years, so it will look like a big tax to those people.
Exactly.
So you can have the public option to reduce your costs if you want, but it might cost ya more some years. Frickin’ brilliant, Max.
Am I correct in stating that this bill has in it a requirement to purchase insurance with a penalty for not doing so. If this is true then all that goes before this and all that follows is pure bullshit..?
It’s true about the penalties, both to individuals and employers. The numbers aren’t that big in the context of this bill: $4bn for individuals and $23bn for employers through 2019.
This bill is a disgrace to this Nation, so is the person who’s name is on it. Disgussing it as if it were a piece of valued legislation is also a disgrace. Until we realize that these pompose asses in the Senate are not out to solve healthcare problems, only feed the beast of the insurance industry. We are like sweet molly in the cartoons tied to the tracks, with the train approaching. We are like lemmings waiting to follow what ever our leaders take us into, blindly with no thought, common sense, sense of well being, or even self preservation. We are 300 milion suckers, who won’t even stand up for themselves. We all should have been demanding single payer healthcare, with our money. WE love what we got, like the wars, like the Government handouts to the rich, the waste, corruption, and still think we Have the best Government on Earth. WE believe we have the best Healthcare, are the greatest Country in the world, are a super power, and have the most powerful Military. Yet all of this and we can’t take care of our people, our Country, and our own good as a Nation and People.
This is NOTHING but Corporate wellfare for insurance companies. This will do nothing to improve things but will make it worse. Republics can say, see the government can’t do anything right…blah blah. I would rather have nothing than this piece of shit bill.
The question is, if this is too unpalatable to pass, then what comes next? Will there be a second chance at the apple? Can it really be any better, or is this one as good as it gets?
Whether this reform is killed, or the current proposed mess passes, then what comes next is to press on for more reform.
I think any reform bill that passes, will be too weak and piecemeal to last more than a few years before the systems starts self destructing again.
May need to attack from another angle. A big problem is that the system for deciding how many doctors and other health professionals should be trained is dominated by obscure short run federal budget fights that no one notices (and that meaans funding is always either frozen or cut for more docs), and small closed off committees of the AMA.
Any bill that depends on market forces in any way to solve the overall problem of adequate health provision in the country will fail, because there is there is no market based supply for doctor training at all. Postgraduate medical education mostly is paid for by the feds through Medicare, and big federal deficits mean, basically, frozen funding for more docs. Criminey, even the UK, with its top down truly government run system is more responsive to popular desire for more docs than the US is.
The current Democratic party will be useless, no matter what some bigshot candidate promises before election. So healthcare reform, as everything else that won’t be done by this gang of corrupt drones, will have to be done by electing more progressives to Congress through grassroots money and effort.
Some European countries had a very difficult time getting universal care and a sensiblly organized healthcare system. But there was a consituency that demanded it, and kept pounding away, sometimes implementing one or two reforms every couple of years until they could get real reform. Switzerland is an example.
Sure there can be a second chance. If we can get a movement going with big demonstrations they’ll have to take it up again next year whether they want to or not. And next year we can stop talking about the PO BS and get right to HR 676.
Come to think of it, I do believe that only a few countries got good and stable systems through one shot comprehensive reforms. Germany, UK, Portugal (with the coup of the Marxist generals that toppled Salazar). I will have to check. But for many it was a decade long struggle, one piece at a time.
The corrupt and cowardly politicians will want to whine that a failure now was so traumatic, that the topic cannot be touched agains for, I don’t know, x-ty-x years. Which is nonsense because by then we will be broke. Need to elect a better Congress and make them press for reform, starting next year, no excuses.
Edit: should have said ‘toppled Salazar’s regime”, he already was out of it from a stroke when the Generals took over, or maybe he had already died.
masaccio October 7th, 2009 at 7:59 pm@33
seems to be the right amount eh. In my neighborhood that is a fortune only dreamed of. Why can’t we just raise the taxes of those paying in the 28% bracket to what they were pre Reagan. Would pay for it all. I know, I know, we don’t want to upset anyone now do we. Maybe I should go back to my playpen and behave myself.
Scarecrow thanks for the post, I think these words from one of my mentors still hold up, I apologize to anyone I offend but I just get so sick and tired of being sick and tired of these criminals, I offer this from Mr. Zappa as dark comedic relief.
Flies all green ‘n buzzin’ in his dungeon of despair
Prisoners grumble and piss their clothes and scratch their matted hair
A tiny light from a window hole a hundred yards away
Is all they ever get to know about the regular life in the day;
An’ it stinks so bad the stones been chokin’
‘N weepin’ greenish drops
In the room where the giant fire puffer works
‘N the torture never stops
The torture never stops
The torture
The torture
The torture never stops.
Slime ‘n rot, rats ‘n snot ‘n vomit on the floor
Fifty ugly soldiers, man, holdin’ spears by the iron door
Knives ‘n spikes ‘n guns ‘n the likes of every tool of pain
An’ a sinister midget with a bucket an’ a mop
A sinister midget with a bucket an’ a mop
A sinister midget with a bucket an’ a mop
Where the blood goes down the drain;
An’ it stinks so bad the stones been chokin’
‘N weepin’ greenish drops
In the room where the giant fire puffer works
‘N the torture never stops
The torture never stops
The torture
The torture
The torture never stops.
Flies all green ‘n buzzin’ in his dungeon of despair
An evil prince eats a steamin’ pig in a chamber right near there
He eats the snouts ‘n the trotters first
The loin’s ‘n the groin’s is soon dispersed
His carvin’ style is well rehearsed
He stands and shouts
All men be cursed
All men be cursed
All men be cursed
All men be cursed
And disagree
Hey, nobody would disagree with him!
No-one durst
He’s the best of course of all the worst
(He’s the best of course of all the worst)
Some wrong been done, he done it first
(Some wrong been done, he done it first)
An’ he stinks so bad, his bones been chokin’
‘N weepin’ greenish drops,
In the night of the iron sausage,
Where the torture never stops
The torture never stops
The torture
The torture
The torture never stops
Torture time now!
Flies all green ‘n buzzin’ in his dungeon of despair
Who are all these people that he’s locked away down there
Are they crazy?,
Are they sainted?
Are they zeros someone painted?,
Well, it’s never been explained since at first it was created
But a dungeon just like a sin
Requires naught but lockin’ in
Of everything that’s ever been
Look at her
Look at him
That’s what’s the deal we’re dealing in
That’s what’s the deal we’re dealing in
That’s what’s the deal we’re dealing in
That’s what’s the deal we’re dealing in
Oh-oh-oh-oh-oh-oh-oh-oh-oh-oh-oh-oh!
Thank YOU for Zappa! My thought, too. It is incredible the sheer tonnage of slime and lies lie festering in Baucus’ opus. I couldn’t believe what I was hearing, like Hatch’s sweet chunk designed only for certain people who live in a state that begins with the letter U. I had to look it up, to see if it really says that. Here it is:
bit.ly/18lPUH (a *.pdf of the Finance Committee’s amendments to Baucus’ (expletive deleted.)
Amendment #497
Hatch F7
Summary: Add transition relief for the excise tax on high cost insurance plans for any State with a name the begins with the letter “U”
Do check out # 564, Cornyn’s oh-so-special gift to the lobbyists.
-bleuz
we keep fighting
words are powerful
And these little minions are truly a meal cooked in hell.
The subsidies are inadequate as it is. This failsafe will never be allowed to happen. Which makes a mockery of the whole process of CBO scoring.
For instance, I could have a failsafe that says if everybody doesn’t get free health care then the whole bill sunsets. And I could call this the “Free Health Care for Everybody Act of 2009″ and it would cost $0. What a joke!
Anyone recall what the triggers were for cutting back the defense budget when Iraq mercenary contracts, “pacifying the countryside” efforts, and faux rebuilding projects became too expensive? I didn’t think so.
There are over $485 Billion in Corporate subsidies. Of course they are going to cut individuals subsidies not the corporate graft.
Congressional Budget Office (CBO) score’s the baucus plan at $829 Billion over a 10 year period, that is paid for. The CBO also states that it will lower the deficit by $80 Billion and it would be much lower if there was a public option.
Criminally corrupt politicians are the reason the U.S. is ranked near the bottom of every catagory when ranked next to other modern, industrialized nations. Time for publically funded elections.
lieberman $12.6M, mcconnell $7.8M, baucus $7.7M, cornyn $6.7M,
kyl $5.6M, grassley $5.4M, ensign $5.2M, conrad $5.1M, cantor $4.9M,
nelson $4.9M, burr $4.8M, boehner $4.4M, hatch $4.4M, lincoln $4.1M,
vitter $3.9M, carper $3.6M were paid by the Medical Industrial Complex to kill Health Care Reform. (Source: OpenSecrets.org, Aug. 09)
Follow the Money: Link
Call Congress and demand, Single-Payer Health Care for All!
(Toll Free # House and Senate)
1-866-338-1015 _____ 1-866-220-0044
1-800-473-6711 _____ 1-866-311-3405
Sign Single-Payer Petitions: Link Link
Don’t let the Medical Industrial Complex steal your Health Care from you and your family by donating huge sums of money to Crooked Politicians in order to maintain the Status Quo. Keep up the good fight.
SEMPER FI!
We really have to marvel at the utter cynicism and contempt for the truth of those opposed to the PO, even as facts stares them in the face. The established fact is that the adoption of the PO, with reimbursement fees tied to Medicare scales, will save the government at least $85 billion as compared to a plan which excludes this option. That fact relies on CBO scoring.
This fact applies to the proposed Baucus bill as well, if you were to attach the PO as an option in an exchange within the bill. For this reason and others the Baucus bill as it stands is an atrocity. For instance, this bill leaves one no choice but to opt into private insurance plans, while requiring that an additional 29 million currently uninsured buy into these private plans. And the government,(the taxpayer), would subsidise those not able to afford the premiums. This is trillions of dollars directed to private insurers in part using public money.
As an example of this disdain for facts, on the Dylan Ratigan morning show today a graph showing that the HELP committee bill which has a PO is the cheapest among the 5 bills being proposed while it also extends coverage to the greatest number of the currently uninsured. The cost of the HELP bill being 600 and some Billion and covering 34 million uninsured, while the Baucus bill costs 800 and some billion and covering an additional 29 milion currently uninsured.
Now you would think that these numbers spoke for themselves but still many commentators in spite of these facts persisted in touting the Baucus bill as the best next step in reform. These people either wittingly or not simply are in favor of directing trilions of dollars into the hands of private companies using in part public funds.
Lastly, as stated by the CBO, the reason the PO realizes these savings is that it requires lower premiums than a private plan, an utterly obvious fact. One of the principle lessons from all this is that the ways to reform health care at heart is not complicated and that an indispensable element of this reform is the PO. We should not give in to ill informed and ill intentioned groups advocating for it’s exclusion.
It’s even more obvious that any bill, including one with a robust PO, are far more costly for the American people on the whole than either of the Medicare for All bills, HR 676 and S 703. My recent estimate suggests that if Medicare for All were operative this year it would have resulted in annual savings in Health Care Costs of $712 Billion to $905 Billion in annual savings. Over a 10 year period, that’s more than $7 Trillion Dollars, which is the cost over 10 years of not ending the private insurance system for essential health care for all Americans.
In other words those supporting the PO are every bit as guilty of ignoring facts that are staring them in the face as are its right-wing opponents. It’s just a different set of fact that they choose to ignore.
Ignoring facts is about “reflexivity”. Once we support a political position, all of us find that facts that refute our position are “inconvenient truths.” For PO supporters it’s an inconvenient truth that Medicare for All is a better way and that their support for the PO is weakening the chances of getting the better way passed, and even weakening the chances of getting the PO-itself passed. I hope PO supporters will eventually abandon their contempt for this truth, and get back to supporting where the movement for health insurance reform ought to be.
Careful in comparing CBO scores for the HELP vs Finance bills. The HELP Committee had no jurisdiction over the $$ for Medicare/Medicaid, so those costs are left out of the HELP CBO score. The Baucus bill includes $345 billion (ten years) in additional costs for expanding access to Medicaid and SCHIP — so you’d need to add that (and other items) to the HELP score.
Also, the CBO scores for House bills showed that the PO with Medicare rates + 5% creates about $110 bn in savings; the PO with negotiated rates creates about $25 bn in savings. So the $85 billion you hear talked about is the difference between these to assumptions about how the PO pays providers.