This afternoon, during a conference call sponsored by Families USA, Sen. Max Baucus (D-MT) laid out various measures to improve the affordability standards in the committee’s health care bill. Responding to my question about how to make the bill more affordable for American families, Baucus suggested that the Senate could increase subsidies, reduce benefit packages, or strengthen the penalties for Americans who don’t meet the requirements of the individual mandate.

Baucus said that it would be politically difficult to increase subsidies and did not suggest that the Senate was considering a public plan to help lower premiums and the costs of the actual bill. Instead, Baucus implied that the Senate may reduce the value of the minimal creditable coverage for so-called young invincibles and Americans in the exchange:

There are a lot of ways to address it, as you’ve said Igor. One is higher subsidies, but you know, we don’t want to go much over $900 billion total over 10 years. Another is to adjust the minimal creditable coverage provision that is under the bill…We’re 65% [of actuarial value] in the Senate. If that’s lowered to a lower number, that’s going to make health insurance less expensive. However, it’s going to mean lesser coverage too. There is some talk about, you know, even lower plan for — the popular term is — young invincibles. For people who are very young, say 25 or [2]6 or something like that, who would be able to purchase very low premium plans that might have a high– it’s a catastrophic plan — which may have a high deductible…..That would help coverage, that would help coverage all together and lowering to 65%, for the so called bronze plan, down to 60 would also help address affordability…

Listen:

“Raising the tax credit will address affordability, there are lots of different ways,” Baucus said. “And also the mandate if you will, the penalty. If the penalty is changed that will have an effect on coverage too. There are a lot of moving parts here.”

The Senate Finance Committee has already made reform more “affordable” by excluding some 2 million Americans from the requirement to purchase coverage and lowering the benefit standards would further undermine the goals of universal affordable coverage for all. Most progressives argue that the current benefit packages in the Baucus bill are already far below the standards offered to federal employees or most employer-based coverage. The young invincibles plan would allow younger applicants to enroll in cheaper but less substantive plans that may prove inadequate over time. For Americans in the exchange, insurers would have to cover 65% of the health care expenses of an average population; the remaining 35% would be picked up by individuals.

By lowering the minimal creditable coverage, the government would be asking Americans to pay lower premiums for a less substantive plan that could become wholly unaffordable if the beneficiary needs care. Here is a comparison of all the affordability and minimal creditable coverage provisions in the major bills:

Transcript: Read more

Early last week, Rep. Mike Ross (D-AR) — who led a group of seven centrist Blue Dogs who objected to a public option that reimbursed providers based on Medicare rates — floated a proposal to replace the public option with a proposal that would allow Americans under 65 to buy into the Medicare program. Medicare would reimburse the newly enrolled population “at a reimbursement rate much greater than current Medicare rates.”

On Friday, the Wonk Room sat down with public option godfather Jack Hacker and asked him to respond to Ross’ proposal. “Mike Ross is saying that the better alternative to having a new public health insurance plan that’s distinct from Medicare and competes on a level playing field, is actually to just open up Medicare on some new basis to people younger than 65. It’s a pretty remarkable development”:

What I would say is, I’ll take that and raise you. Okay, great! Let’s open up Medicare. If you think that’s a good idea, why don’t we open up Medicare more generally, in the sense that we use the basic Medicare model. And the Medicare model is build on the idea that people who are covered by Medicare have the ability to go to all the providers who contract with Medicare and be assured that in a transparent process that those providers will agree to be paid the rates that Medicare pays….What Ross is really saying, to my mind, is that Medicare is a good model. And the essential part of the Medicare model is that it contracts directly with providers, who agree to accept rates that are based on very careful thinking about what’s the proper amount to pay for different kinds of services.

Watch it:

During the interview, Hacker rejected Ross’ contention that hospitals would close if they were reimbursed at Medicare rates, pointing to research which found that Medicare reimbursement rates lead to greater efficiencies.

Hacker also predicted that seniors would oppose opening the program to younger Americans and explained that Medicare was not designed “to provide health security to a younger than 65 population.” “There are a lot of holes in the Medicare program that should be fixed but which aren’t going to be fixed immediately. One of the important reasons to have a separate insurance plan is to make sure you’re providing the kind of good coverage that you know younger Americans need,” Hacker said.

“Ultimately though, we should understand the public health insurance plan idea, and Medicare as being very much interrelated. That over time, we should see this public health insurance plan and Medicare as a way of improving the cost effectiveness and the quality of care delivered to both younger Americans and to those over 65.”

In Saturday’s radio address, President Obama condemned the insurance industry for “filling the airwaves with deceptive and dishonest ads” and “flooding Capitol Hill with lobbyists and campaign contributions” “designed to mislead the American people.” Obama called out the industry for “making this last-ditch effort to stop reform” and criticized cable news and so-called experts for buying into the latest false industry reports. “It’s smoke and mirrors. It’s bogus. And it’s all too familiar,” he said.

But that’s where the fiery speech ended. Obama’s response to the insurance industry reports provided him the perfect opportunity to press for a public option, only he let the moment slip. The address was long on rhetoric but short on policies that could keep the industry in check. Obama sanctioned Democratic efforts to remove the industry’s anti-trust exemption, but fell short of endorsing a robust public option that could lower health care costs, lower the costs of the bill, and keep insurance companies accountable. The following day, White House Officials took to the airwaves to explain that the administration would not demand a public plan. In fact, despite the Democrats’ super majority in Congress, and the overwhelming support of the American people, the administration wouldn’t be demanding much of anything:

- Valarie Jarrett: He’s not demanding that it’s in there. He thinks it’s the best possible choice. But I think, David, let’s not underestimate how much progress we’ve made. [MTP, 10/18/2009]

- David Axelrod: I think the final bill will achieve those goals, and a public option would help in that regard….There will be compromise. There will be legislation, and it will achieve our goals.” [This Week, 10/18/2009]

- Rahm Emanuel: And so the president believes in it as a source of competition. He also believes that it’s not the defining piece of health care. It’s whether we achieve both cost control, coverage, as well as the choice that…The president of the United States will obviously weigh in when it’s important to weigh in on that. [State of The Union, 10/18/2009]

The address was a missed opportunity. Obama could have responded to the industry’s self-serving report by arguing that reform must inject significant competition into health insurance markets. He could have used their new-found tone to argue that reform must hold the industry accountable. The American people, in other words, should not be compelled to buy private coverage from an industry that has just admitted that it would increase premiums by some 111% if reform passes.

But rest assured that Obama still believes the public option is “the best possible choice” to restore competition and improve affordability. He just refuses to fight for it. Why? The public option is not a liberal ideological baton, it’s a sensible compromise that builds on free market principles. According to the Congressional Budget Office, the option would attract some 10-15 million new applicants, hardly a threat to private insurers who have spent years building brand loyalty and today boast hundreds of millions of applicants. It would add a sliver of competition into the market — and, judging by the industry’s reaction, that’s threatening enough. It would save the government some $150 billion dollars, lower the cost of the bill, lower premiums by some 10%, and help bring about the kind of delivery system reforms that could lower the rate of growth in health care spending.

What’s more, 77% of the American people and the majority of Democrats in the House and Senate support it. So why not pressure reluctant Democrats to support the policy? Why not push Reid on the option? What does the White House have to lose?

The President may not have the votes for a public plan today, but he’ll never get them if he doesn’t publicly pressure the Congress to stand up to the health insurance industry and help make insurance more affordable for millions of Americans.