Democrats in the Senate had hoped to get a fig leaf of bipartisanship from Olympia Snowe or Susan Collins (R-ME) once Max Baucus rolled out his supposedly moderate bill for overhauling the American health-care system.  Yesterday, Snowe rejected the bill, leaving Democrats isolated and divided on the bill, just days after Obama demanded action on the effort:

Senate Democrats are going to have to move forward on healthcare without a single Republican supporter after Sen. Olympia Snowe said Tuesday she could not back the Finance Committee’s bill.

Chairman Max Baucus (D-Mont.) failed to win any Republican backer despite weeks of intense negotiations behind closed doors to strike a deal.

Snowe (Maine), who was one of three Republicans who backed the $787 billion economic stimulus package, was being lobbied heavily by the White House, and some centrists view her refusal to strike a deal with Baucus as troubling. But concerns about how the plan would be paid for prompted her to back away in the hours before its release.

“I do have concerns and I’m not sure they can be addressed before he issues [legislation] tomorrow,” Snowe said.

This means that the Democrats will have to try reconciliation to get the bill through the Senate.  Snowe’s rejection, however, hides another unpleasant fact that would have been apparent, which is that Democrats don’t have all of the other 59 votes needed, either.  Other Democrats have already expressed unhappiness with individual mandates, IRS involvement, and the costs.

Baucus says he’s solved the funding problem, but his solution brings up another big problem.  He plans on taxing so-called Cadillac or gold-plated health insurance plans, but he defines that at $8,000 per year in premiums and above, as Jazz Shaw noted yesterday:

COST: Under $900 billion over 10 years.

HOW’S IT PAID FOR: Fees on insurance companies, drug makers, medical device manufacturers and insurers. Tax of 35 percent on insurance plans costing more than $8,000 for individuals and $21,000 for families, applied to premium amounts over the threshold. Cuts to Medicare and Medicaid. A fee on employers whose workers receive government subsidies to help them pay premiums. Fines on those who fail to get coverage.

Baucus wants to tax the overall cost of the plans, not the portion that employees pay through payroll contributions.  The average plan premium in the US is over $4800 per year for individuals and $13,300 for families.  The Kaiser Family Foundation report does not detail the distribution of plans over $5788/$16,000 respectively, but 18% of individuals and 20% of families have this more expensive coverage, which means that Baucus’ taxes will almost certainly hit more than the top 5% of families and individuals.

Does this mean Harry Reid will use the “reconciliation” process?  The Democrats are threatening it, but it’s a strategy fraught with risks.  All it takes is one Senator to go rogue on the floor and start withholding unanimous consent, and the Senate grinds to a halt.  Reid’s already complaining about Republicans slowing down the process, but he won’t be able to get anything done at all once a few Republicans begin demanding full bill readings, votes for process, and so on.

Expect the Democrats to go back to the drawing board in both chambers.  The longer these versions are on the table, the more unpopular they become.

Update: The Hill reports that the Baucus plan will cut Medicare:

Baucus’s measure would cost $856 billion over 10 years — far less than the $1 trillon-plus bills approved by four other congressional committees and less even than Baucus’s previous estimates. The price tag also falls below the $900 billion limit set by President Barack Obama.

The new costs would be fully offset by reductions in Medicare spending and by generating new revenue from an excise tax on health insurance companies that sell plans that cost more than $21,000 for families and more than $8,000 for individuals. Insurers, pharmaceutical companies, medical-device makers, clinical laboratories and hospitals would also pay fees.

Gee, didn’t Barack Obama claim that Medicare cuts were a “myth”?  Why, yes he did:

Robert Kocher of the National Economic Council debunks the myth that Health Insurance Reform would be financed by cutting Medicare benefits.

I wait with bated breath for Obama to denounce Baucus as a mythmaker, and for Jimmy Carter to denounce him as a racist.