Senate Finance Panel Chair Circulates Health Care Overhaul Proposal

On Sunday, Senate Finance Committee Chair Max Baucus (D-Mont.) circulated a new draft health reform proposal to the so-called "Gang of Six" bipartisan negotiating group that is expected to cost between $850 billion and $900 billion over 10 years, the New York Times reports (Pear, New York Times, 9/7).

According to Politico, the new plan would establish not-for-profit consumer-owned health insurance cooperatives instead of a public insurance plan option (Budoff Brown, Politico, 9/7).

In addition, Baucus' plan would expand Medicaid to all U.S. residents -- excluding undocumented immigrants -- whose incomes are up to 133% of the current federal poverty level. 

Tax credits would be granted to help low- and middle-income families buy private insurance and establish insurance exchanges where individual and small businesses could purchase coverage.

Under the plan, about $400 billion in cost savings would be produced from proposed Medicare changes (Murray, Washington Post, 9/7).

Another provision in the outline would move lower-income children out of the Children's Health Insurance Program when it expires in 2013 and to the new insurance exchange where they would be covered with their parents (Budoff Brown, Politico, 9/8).

Funding the Proposal

Under the new proposal, a tax would be levied on insurance companies that offer so-called "Cadillac" coverage, or the most expensive health plans. According to the Times, the aim of the tax is to encourage employers to purchase less costly, less generous health plans in an attempt to address overuse of services and wasteful medical spending (New York Times, 9/7).

The Washington Post reports that the levy would raise about $180 billion over the next 10 years (Washington Post, 9/7).

Baucus' proposal also would impose a fee on all health insurance companies, which would be based on their market share and produce about $6 billion a year starting in 2010 (New York Times, 9/7). According to the Post, the measure is "intended to extract some sacrifice from an industry that stands to gain 46 million new customers."

Baucus' proposal includes several enforcement mechanisms designed to protect consumers from having the fees passed on to them (Washington Post, 9/7).  However, according to a recent report by the investment bank Oppenheimer, "It will be very difficult for the Senate Finance Committee to structure the fees in a way that they won't be immediately passed on to consumers in the form of higher premiums" (New York Times, 9/7).