The Senate Finance Committee’s Affordability Catch-22

Last night,the Senate Finance Committee approved a series of amendments that reduce penalties for Americans who don’t purchase health insurance and exempt more individuals from the requirement to obtain coverage. Under the legislation, the maximum penalty for a family that does not purchase coverage “would start at $200 in 2014 and rise to $800 in 2017”; people who have to pay more than 8 percent of their adjusted gross income for the cheapest available insurance plan “would not be required to purchase it.”

“This is the major amendment on affordability,” Sen. Chuck Schumer (D-NY) said. “We should make insurance more affordable by increasing the subsidies. That was not fiscally possible to stay within the constrains that we have in this committee. Hopefully we can move them, make them better as we move forward in the process,” he said.

The problem is this: the White House has decided that they don’t want to defend the higher taxes that affordable universal coverage would require. They don’t want to be labeled as ‘tax-n-spend’ liberals. Instead, they’re willing to accept a smaller reform package with less subsidies and less coverage. As a result, Congress is forced to exempt an extra two million people from the mandate to avoid the hits that would come from requiring these Americans to purchase expensive, unsubsidized coverage. If you can’t help people afford insurance, you can’t require all of them to buy it.

But this approach doesn’t make good policy or politics. On the policy front, exempting too many people from coverage maintains the perverse cost-shifts (uninsured to the insured) already in the system, jeopardizes the balance of the new purchasing pools in the Exchanges, and only increases health care costs. Politically, Congress is asking Americans to purchase not-so-affordable coverage from the less-than trustworthy private insurance industry. Medical bankruptcies and out-of-control spending will not disappear over night.


That’s the problem the Senate Finance Committee is facing: they have to make the bill more affordable by making actual health insurance coverage less affordable.