If Everyone Hates Baucus' Plan, Does That Mean It's Good?

Howls of complaints from the left and the right might make you believe that the Baucus health plan is downright good.  I mean, if it aggravates both sides that much – it must be good, right?
The Congressional Budget Office has already weighed in –and there are some surprises here.  The Baucus plans lowers (that’s right, lowers!) the federal deficit over the next 10 years – while cutting the number of uninsured by over half.  How does it do this?

The Baucus plan does not offer especially rich subsidies for the middle class, and includes a flawed employer mandate (maximum penalty, $400, framed so that employers who hire low wage workers might be disproportionately penalized) and a robust individual mandate (penalties up to $3800 per family, which could scare many supporters off). 
What does the Baucus bill say about managing health care costs?
Here is the CBO ten year estimate of impacts of the Baucus bill. As always, the CBO’s focus is the impact on the federal deficit.
New costs (subsidies, etc)                                    $774 billion             
Excise taxes on high premium plans                 $215 billion
Other revenue                                                     $59 billion
Spending changes                                              $409 billion
Other taxes                                                         $139 billion           

That $409 billion is the actual decrease in federal spending on health care – whereas all the other changes represent only shifts of costs.

The CBO estimates cuts of $182 in fee schedule payment updates, $123 billion in cuts to Medicare Advantage programs, $48 billion in cuts to hospitals that care for a disproportionate share of the poor, $23 billion in cuts based on recommendations of a future Medicare Commission, and $33 billion in other spending cuts. 

The Washington Post estimated that the total cuts to hospitals are $155 billion, to nursing homes is $40 billion, and cuts to other providers are smaller.  

How would this work?

The Massachusetts experience with cuts to “disproportionate share” hospitals is troubling – the government subsidies evaporated more quickly than insurance for the impoverished kicked in.  The insurance industry  has been vilified by the Obama administration in recent weeks, and it’s likely that pushback against Medicare Advantage cuts will continue.   Hospitals, as I’ve mentioned before,  are the largest employer in most communities –and these kind of cuts will really hurt.  I see a lot of community nonprofit trustees making a pilgrimage to talk to their congressional representatives.

There is a lot of good in this bill - including consumer protections, a pool for those difficult to insure, and value-based Medicare purchasing for starters.   There is a lot that’s mediocre in the bill too – such as support to start up health cooperatives – which is unlikely to make much difference in the insurance market. There are some real worries - like the potential that cross-state health plans could undermine meaningful consumer protections currently available in states like Massachusetts which have had activist consumer-friently Divisions of Insurance.

The Baucus plan (with 0/3 Republican cosponsors) is off to a rocky start in Washington today.   Hopefully, the ultimate bill will include more provisions that are likely to actually diminish the rate of health care inflation.