Why the Baucus Plan is Dead, Why Co-Ops Won’t Work, and Why You Should Be Happy About It.

anyone could have predicted weeks ago, the "alternative bill" Max
Baucus has presented is a complete and utter joke.  But don't be mad, progressives. Be happy.
Before this piece of crap appeared, there was all sorts of speculation about
what an alternative might be. Talk of “co-ops” actually sounded like a feasible
idea to a lot of people. Now, however, they can see them and read about them,
and now, we can demonstrate that the alternative Blue Dog plan is, well, a dog.
If we play this right, we can make a strong reform plan with a robust public
option a reality.

of all, it looks like Baucus wrote the damn thing over a weekend. I’m not sure if
he drinks. The markup paraphrases current law, and recommends changes to that
law. It seems kind of strange that he’s been making so much noise for so long,
and ends up creating something so basic. And frankly, he has to be high if he
thinks most of this crap will fly. In fact, he had to be giggling to himself at
the mere prospect that Republican Senators would climb on board. If he truly
thinks this is a “compromise” that Senate Republicans will go for, he’s
delusional. His legislative aides must have been asking "Are you
high?" repeatedly as they were reading the drafts.

of the provisions in this markup mimic HR 3200 and the other bills out there,
which means there's little revolutionary about this garbage. But many of the
additional provisions are laughable. It is such a pander to health insurance
companies, it makes me I've rarely seen such a wink and a smile to a major
industry. Most politicians at least attempt to make their kowtow a little

actually find it hard to believe that an experienced politician like Max Baucus
actually believes his own BS. He has to know this simply won't fly, and his
ham-handed approach to "compromise" virtually guarantees its failure.

are some of the highlights. Here's the Baucus Markup, if you'd like to read along:


out of the gate, on page 2, we have the most ridiculous "reform"
measure I've ever seen.  I've seen some
reporters claiming that it eliminates discrimination with regard to
pre-existing conditions.

not reading very closely.



Chairman‘s Mark would establish Federal rating, issue, renewability, and
pre-existing condition rules for the individual market. Issuers in the
individual market could vary premiums based only on the following
characteristics: tobacco use, age, and family composition. Specifically,
premiums could vary no more than the ratio specified for each characteristic:

Tobacco use – 1.5:1

Age – 5:1

Family composition:

Single – 1:1

Adult with child – 1.8:1

Two adults – 2:1

 Family – 3:1

could also vary among, but not within, rating areas to reflect geographic
differences. States would define geographic rating areas. Taking together all
permissible risk factors, premiums within a family category could not vary by
more than a 7.5:1 composite ratio.


Issuers in
the individual market would be required to offer coverage on a guaranteed issue
basis. Under guaranteed issue, if a plan has a capacity limit and the Secretary
determines that the number of individuals who elect that plan would exceed the
limit, the issuer would be allowed to limit the number of enrollees according
to specified rules. Also, issuers would be required to offer coverage on a
guaranteed renewability basis, and rate those policies on the same factors used
when initially issuing such policies. Issuers would be prohibited from
excluding coverage for pre-existing health conditions and from rescinding
health coverage.


has discrimination all over it, and it creates a truly unfair marketplace.
Instead of everyone paying the same premium, this gives insurance companies
carte blanche to charge  different people
different rates, based on their chosen family situation. Note that the only
actual health choice decision included is smoking.

start work with the company as a single healthy guy, and you pay $200 per month,
which is the base rate. Five years later, your premium goes up to $300, because
they can adjust rates based on age, even though you have only been to the
doctor once a year for a physical. You get married, the premium doubles to
$600, even if you’re still healthy, and haven’t had any health episodes. Five
years later, because of your age, your base rate goes to $400, which means your
premium goes to $800, even if you and your new wife are healthy as can be. The
next year, you have a kid, which raises it to $1200 per month, even though the
birth was uneventful, and you’re both healthy. A few years later, you turn 40,
your base rate goes to $500, so your premium rises to $1500 per month, even if everyone
is perfectly healthy, because they can. That’s the limit, of course, because Baucus,
being the kind gentleman he is, limits premiums to 7.5 times the base rate. And
all of this is assuming the base premium rate never rises from $200 for a
single healthy guy with no kids who doesn't smoke.  Does that sound fair to anyone? Seriously? A
single young guy with a heart condition pays $200 a month, while the healthy
guy with a family pays $1500?


an idea; everyone pays the same, based on the number of people covered. Family
coverage should be more than single coverage, but why should a healthy 60 year
old automatically pay five times more than an unhealthy 20 year old? I asked a
friend to show me an actuarial table that showed that health quality goes down
significantly based on age, if the person is receiving regular health care, and
I have yet to see it. And someone will have to show me proof that health care
60 year old will always cost FIVE TIMES more than a 20 year old, because I don’t
buy it. Higher risk, yes. But quintuple the risk? Not hardly.  


the above provisions sure will make the insurance companies a lot of money.
Once more, the healthy will be paying the bills for the sick. It's not
difficult to see why Max Baucus is being sponsored by so many health insurance
companies, is it?


why the qualifications to the "guaranteed issue" mandate? Where and
how does someone draw the line? Doesn’t that kind of defeat the purpose of creating
an exchange? I thought this was supposed to be capitalism. If one insurer is
offering a great deal, and most workers want to choose that plan from the
exchange, why cap membership? Isn’t that the equivalent of saying, “Wal-Mart
has too many customers, the rest of you will have to choose between Target and
K-Mart.”? Apparently, Baucus hasn’t gotten the memo, that one of the biggest
problems in the health insurance market is a LACK of competition, and reform
should restore competition.


that's only page 2, folks.


page 14, we see another significant difference between his plan and the main
bills, and that is in the creation of the insurance exchanges.  In this plan, exchanges are entirely
state-based. Under HR 3200 (Obamacare), it's also likely the insurance exchange
would be administered at the state level for the most part, but the main rules
and guidelines would be federal, and uniformity would be encouraged. In the
Baucus plan, states would set the rules for the exchange. This isn’t
necessarily bad in and of itself, because it could potentially allow states to
take the initiative to set up single-payer systems in the future. Unfortunately,
as you’ll see later on, other provisions of this plan make a state-run single payer
plan unlikely, if not impossible, in the future. It would also pretty much
spell death for any such impetus on the national level.


more than that, it ignores the reality that the problems with our health care
system are not state-based. This is a national problem, and any solution has to
be national. I know Baucus comes from Montana, which is one of those states
that likes to pretend to be heavily into "states rights," and thinks
of itself as “independent,” but there’s a reason the state takes in a lot more
federal tax money than it pays. A geographically huge state, with a population
that is almost entirely rural, and whose per capita income is among the lowest
in the country is not going to be self-sufficient on health care costs, no
matter how much he wishes it were so.


yeah, I haven’t gotten to that part yet. This section actually gets worse.


three years, it allows states to permit "other entities" to set up
their own exchange, meaning that, rather than one big statewide exchange per
state, or 50 separate exchanges with different rules nationwide, we could be
looking at hundreds of exchanges, and a system that is even more fractured than
it is now.


Baucus plan also REQUIRES that a state insurance exchange be self-sustaining
within a few years after establishment, with nothing in place to help a state,
should it be unable to do so. I wonder if the people of Montana understand that
this provision alone could end up dooming them to far higher premiums than,
say, the people of New York or New Jersey? Think Baucus will let them in on that?


don't have to go much farther into the bill to see more nonsense.  The section on abortion (page 25) is
priceless. Baucus manages to take a simple notion that is already a part of the
law; that no federal money can be used to pay for an abortion unless the
abortion is to save the life of the mother, rape or incest, to create several
pages that basically prohibits federal money being used for abortions. But hey;
it plays to the wingnut base, right. Not that they’ll support this plan,
anyway, no matter what’s in it.


we come to the silliest, most pointless portion of this plan, which is the section
on Cooperatives. It starts on Page 36.


provides $6 billion (wow! Can we afford that?) to provide grants and loans to
groups, in order to create non-profit co-ops. Seriously, you have to read this.
It's almost funny.  The co-ops are to be
organized at the state level, although they could eventually represent more
than one state. Of course, states have to be completely self-sufficient within
a short time. That means states will be under an amazing amount of pressure to
get these set up really quickly. Also, there is no mandate to set them up, and
I mean none.  But check out the restrictions
on who can create a co-op, or at least receive federal funds for that purpose.
It's laughable:


In order to
be eligible for Federal funds under the CO-OP program, an organization must
meet the following requirements.


1. It must
be organized as a non-profit, member corporation under State law.

2. It must
not be an existing organization that provides insurance as of July 16, 2009,
and must not be an affiliate or successor of any such organization.

3. Its
governing documents incorporate ethics and conflict of interest standards
protecting against insurance industry involvement and interference.

4. It must
not be sponsored by a State, county, or local government, or any government

Substantially all of its activities must consist of the issuance of qualified
health benefit plans in the individual and small group markets in each State in
which it is licensed to issue such plans.

Governance of the organization must be subject to a majority vote of its
members (i.e., beneficiaries).

7. As
provided in regulations promulgated by the Secretary of Health and Human
Services (HHS), it must be required to operate with a strong consumer focus,
including timeliness, responsiveness, and accountability to members.

8. Any
profits made would be required to be used to lower premiums, improve benefits,
or for other programs intended to improve the quality of health care delivered
to members.


participating in the CO-OP program would be permitted to enter into collective
purchasing arrangements for services and items that increase administrative and
other cost efficiencies, especially to facilitate start-up of the entities,
including claims administration, administrative services, health information
technology, and actuarial services. A purchasing council may be established to
execute these collective purchasing agreements. The council shall be prohibited
from setting payment rates for health care facilities and providers. There
shall be no representatives of Federal, state, or local government or any
employee or affiliate of an existing private insurer on the council. The
council would be subject to existing anti-trust statutes.


only does Baucus make it unlikely that anyone will be able to start a health
insurance co-op in the first place, but he actually manages to pretty much prohibit
the creation of a single-payer option. I get why you wouldn't want current
insurance companies from setting up co-ops; the anti-trust implications would
be huge, if the government ever actually starts paying attention to the Sherman
Act at some point in the future. 


what's the purpose for prohibiting ANY government involvement in a co-op plan,
if it's such a gosh darned great way of saving money, and you're presumably
trying to allow folks to maintain maximum health care choices? If a small town
with its own doctor and its own branch of the state's largest hospital chain
wants to set up its own co-op under this ridiculous plan, why would Baucus
prohibit that?


know the reason why, right? It's because if one town is able to enroll its
residents in a co-op, then two towns might do it, and then a whole county, and
perhaps an entire state will do so.  This
guy is trying to stifle any attempt to create a single-payer option, even if a
majority of the people in this country eventually want one. He’s absolutely
phobic about government having anything to do with health insurance, despite
the fact that Medicare is a major success. Meanwhile, he’s put all of his eggs
in the co-op basket, even though it’s never been tried. But then, he creates
restrictions that basically ensure the failure of the co-op idea.


anyone was giving Max Baucus the benefit of the doubt before, with regard to
his purchase by the health insurance industry, this should pretty much put that
to rest. He is jumping through hoops to prevent competition in the health
insurance industry.


can co-ops possibly work? Oh, I suppose there might be a few Wendell Potters
out there, who know about health insurance and might come forward to create a
co-op. But most other folks with health insurance experience are pretty well
locked out. How will a co-op handle risk? Under the above scheme, they have to
be completely self-sufficient, they have to compete on the same level as
insurance companies with billions of dollars in assets to fight them, and they’re
required to plow any profits back into the co-op; they can't save for a rainy
day. Even if there are a few brave souls out there, they’ll be at a major
market disadvantage.


there’s something else to consider here. Think Wal-Mart.


for the hell of it, that Joe and Mary decide to start a health insurance co-op
with some of that whopping $6 billion. They get it all set up, set their
premium rates, which are 20% lower, on average, than the major insurance
companies. They sign up some folks, and the major insurers don't like it. Keep
in mind, these co-ops will be tiny, by design, because Baucus has designed them
that way, being state-based. What's to prevent Aetna or Cigna, or any or all of
the private health insurance conglomerates, from taking a loss in the small
geographic area where Joe and Mary’s co-op appears, and putting them out of
business? The simple answer is nothing.


mentioned Wal-Mart. This is how Wal-Mart killed commerce in hundreds of small
towns all over this country. They’d pick a cheap plot of land just outside of a
small town, build a humongous store, carry every bit of merchandise that small
businesses in the town carried, including items unique to the areas, then
undersold them until they were all out of business. When the rest of the
businesses in town were boarded up, they'd raise their prices, and stop carry
the unique items altogether.


course, what if no co-ops form in some states? Well, Baucus has a hell of an
idea for that, as well. He'll instruct the HHS Secretary to encourage the
formation of co-ops.  And how does he
plan to encourage them? Grants, combined with an income tax exemption. Wow.


think about this. Say you have an idea for a co-op. Your group applies, takes a
couple of million dollars, tax free, to investigate it. After a couple of
years, your co-op idea doesn't fly. Then what? Well, he's covered that, too. He’ll
receive a 10% penalty. I can't see how anyone could possibly take advantage of
this plan, can you?


may get into this more in the following days, if I think this piece of crap
might have wings, but it's unlikely. I’m not in the least bit worried about


fact, if Baucus did anything, he's made the greatest case EVER for a public
option. See, before today, the "co-op" idea was but a germ, it
sounded plausible. Now that it's been placed before the public, I predict a
major thud.


plan is just plain pointless, and does more to undermine reform than anything I
could imagine. The only good points in this plan are already in the main bill,
HR 3200. There's an employer mandate, although it's somewhat watered down when
it talks about small businesses. It also kind of requires that insurance
companies take everyone, and kind of prohibits discrimination based in
pre-existing conditions and rescission, but it also unfairly tiers premiums
based on subjective criteria that have little or nothing to do with health, and
everything to do with maximizing profit.


original bill makes the system very simple. Everyone offers their wares in an
open, competitive market, wherein consumers make the decisions. The rates are
set the same for everyone, thus acknowledging reality; that it's impossible to
predict when you'll be hit by a bus or a car, when you'll be stricken with
cancer or a heart attack. And risk is spread evenly throughout the entire
market, without attempting to micromanage it. Micromanagement of risk is among
the key problems with our health insurance system, and Baucus embraces that
with both arms.


if Baucus' system would work perfectly in every other way, there is still no
explanation as to how he plans to cover the 10-20 million people who have no
access to health insurance through an employer, either because they work for
themselves, or they work for a very small company. He mandates that everyone
must buy insurance, but his reimbursement regime is very limited. What happens
to the household in which two adults have two kids, and work two jobs each, and
are looking at family premiums in the $1500 a month range (assuming a base
premium of $200 a month), when the combined household income is $50,000 per
year? And if everything is handled at the state level, and states must be
completely self-sustaining a few years in, who picks up the slack?


are no answers in the Baucus Plan. Co-ops are a suggestion, not a mandate. Creating
either one nationwide exchange, or even one single exchange in every state,
with a mandated publically financed public option for those who can't get
insurance any other way, or those who choose not to deal with private insurance
companies is clearly the only option that makes sense at the current moment,
and Max Baucus' plan actually serves to make that reality clearer than ever.


why progressives should be glad he presented his plan. Baucus is covering his
ass, and the asses of the other Blue Dogs, who are in states with a significant
population of right wing cretins. There’s no possible way this plan will go
through intact. It's simply not possible, because it makes no sense. If I was
able to pick it apart this easily in the first 50 pages, who besides right wing
cranks will buy its nonsense?


just won the war. But keep marching, anyway. 

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  1. Carly, you completely misread the Republicans’ opposition to this. They don’t want ANY health care bill to pass, because they want the Democrats to fail. Period.
    At the moment, they’re not interested in helping the insurance industry. They are only interested in making sure Democrats fail. If the bill entirely benefited the insurance industry, the Republicans STILL wouldn’t vote for it, because they’re not interested in giving anything to the Democrats. If they can make Democrats fail, then they get power back, and that is all they’re after.
    They won’t support this bill, and there is nothing in this bill for anyone else to support, either. In fact, this is going to be the best thing to happen to the public option. Like I said; when the “co-op” idea was just a notion they could hold it up as an alternative to the public option. Now that it’s before the public, there’s no way anyone’s going for it.

  2. You explain that this bill or “markup” from Baucus is wonderful for the insurance companies, and you say it’s laughable that Baucus would think any Repubicans would sign on to it. That’s a complete contradiction. Is it something no Republican would sign on to, or is it a gift to the insurance lobby? Because if it’s a gift to the insurance lobby, then it’s exactly what Republicans are holding out for. And if it’s a bill no Republican will vote for, then it must NOT benefit the insurance companies.
    So which is it? It can’t be both.
    To me, it looks like this is how we’re being double-talked and bamboozled. We’re not smart enough to think anything through. We’re just waiting, like the astro-turfers on the other side, for whatever “our side” tells us we want. Our interst in health care reform seems to be just a matter of what side we want to win (our side! our side!), not actual health care reform. You’ve got us all wrong…I hope.
    We need to be praying the Republicans DON’T sign this. My hopes on that are thin. Rumors are already out: “Some Republicans may defect and sign the bill!”
    Defect? What a laugh. It’s exactly the bill they want, isn’t it?

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