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The Baucus bill would still facilitate a government takeover of health care.

By 9.16.09

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Senate Finance Committee Chairman Max Baucus on Wednesday released a much-anticipated $856 billion health care bill (pdf) intended as a compromise measure. While better in some respects from other Democratic proposals, it would still put American on the pathway to a government-run health care system.

After months of bipartisan negotiations, Baucus delivered a 223-page summary of legislation that has yet to attract the support of a single Republican, while drawing fire from Democrats and liberal activist groups.

Unlike bills already released by House Democrats and by the Health, Education, Labor and Pensions Committee, the Baucus bill does not create a new government-run plan modeled after Medicare. But the non-profit co-ops Baucus envisions as a substitute should not ease the concerns of supporters of smaller government. Far from being a free market alternative to a government plan, the co-ops would be created with $6 billion in federal funding and benefit from an exemption from federal income tax that is effectively the same as a subsidy.

The co-ops would be offered alongside private insurance on government-run insurance exchanges that the federal government would require each state to create. But private insurance would not be private in any meaningful sense of the word, because the Baucus bill forces insurers to participate in the exchanges, specifies minimum benefits that the plans must offer, and puts restrictions on how much they can charge customers.

While the legislation does not explicitly require individuals to drop their current coverage immediately, it puts incentives in place that could cause many to lose it anyway. The bill allows individuals to keep their current "grandfathered" plans, but only until 2013 -- and if they keep them, they won't be eligible for any of the tax subsidies enjoyed by those who switch to government-designed policies.

Over time, the Baucus bill would encourage employers to drop coverage they offer to workers and steer those businesses toward purchasing insurance on the government-run exchange. Small businesses with 25 or fewer employees, for instance, would be eligible for tax credits to purchase insurance for their workers, but starting in 2013, they could only claim those credits if they go through the exchange. And while the bill wouldn't require the states to open exchanges to businesses with more than 50 employees immediately, in 2017, states would be forced to submit a five year "phase in" schedule that would eventually open up the exchanges to all employers. In other words, within 15 years, even if most Americans aren't receiving government benefits directly or participating in a government plan, they may very will be buying their insurance at a government store.

Even though President Obama has insisted that under health care legislation, "The middle-class will realize greater security, not higher taxes," the Baucus bill would include a steep middle-class tax hike in the form of a mandate requiring that individuals purchase health insurance. Or as the bill summary reads: "The consequence for not maintaining insurance would be an excise tax."

Under the plan, individuals would face a tax of at least $750 if they do not purchase health coverage. And while the proposal would provide subsidies to lower-income Americans, those subsidies would stop at 300 percent of the federal poverty level. What that means is that a family of four with a household income above $66,150 would face a tax of $3,800 if it does not obtain health insurance, while an individual with income above $32,490 would face a tax of $950.

Baucus would waive the requirement for individuals who can prove they can't afford a minimal health insurance policy as defined by the government, but even then, premiums would have to exceed 10 percent of adjusted gross income -- or over $3,000 for somebody with income of $32,490.

At the lower end of the income scale, the bill would expand Medicaid eligibility to 133 percent of the poverty level, which, according to past estimates (pdf) by the Congressional Budget Office, would add 11 million beneficiaries to the program.

In addition to proposed cuts in Medicare spending and promises to save money by eliminating waste, fraud, and abuse, the bill would be financed through a series of new taxes. Chief among them is a tax on high-end health plans that have annual premiums exceeding $8,000 for individuals and $21,000 for families, a measure that has already drawn the ire of unions.

In addition, the bill proposes a $6 billion a year tax on insurers; a $4 billion a year tax on medical device makers; a $2.3 billion a year tax on pharmaceutical companies; and a $750 million a year tax on clinical laboratories.

In parts of the legislation, it's clear that Baucus attempted to take Republican criticism and ideas into account. The bill includes ID verification requirements for those collecting health care tax subsidies in an attempt to prevent illegal immigrants from receiving benefits, and it aims to segregate funds so that no subsidies can be used to fund the abortion component of private health plans. The bill would not add an end of life care benefit to Medicare, and does not include a firm employer mandate (though it does charge a fee to employers if they do not provide coverage and some of their workers use tax subsidies to purchase insurance).

In addition, the bill would open the door slightly for the interstate purchase of insurance, an idea long-touted by conservatives. But instead of permitting Americans to purchase coverage across state lines outright, it would simply enable states to join together in "compacts," allowing citizens in one state to buy coverage from any other participating state.

Despite these concessions, the Baucus bill should still be viewed as unacceptable to supporters of limited government. Beyond the hefty price tag, if passed, America would end up with a system in which individuals are forced to purchase insurance or pay a steep tax penalty, Medicaid is expanded significantly, all insurance policies are designed by the federal government, and Americans are driven into purchasing insurance at a government store.

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About the Author

Philip Klein is The American Spectator's Washington correspondent. You can follow him on Twitter at: http://twitter.com/Philipaklein