Fox News gets Senator John Barrasso (R-WY), one of the Senate’s two actual physicians, to react to the PriceWaterhouse Coopers audit of the Baucus plan this morning. To boil the response from the GOP down to its essence: We told you so. It hikes costs so much, in fact, that the PWC audit notes that a “bronze” level plan now would qualify as a Cadillac plan by 2019, thanks to the massive increase in premiums:
As TNR notes, the PWC audit ignores the subsidies offered to families below the $88K/year income level, but that’s not relevant to actual cost. PWC wanted to take a look at the actual cost of premiums, not the impact on subsidies, which is a political rather than economic question. The subsidies will still be in place, but they will apply to policies that cost a lot more than Baucus projected.
How much more? Take a look at this analysis from page 6 of the report:
PwC also examined the impact of the excise tax on the mandated plans expected to be offered under the state health insurance exchanges detailed in the Senate Finance Committee Bill.17 We estimate that in many metropolitan areas, which tend to have higher than average medical costs, the lowest option plan (Bronze Plan) would be considered a “Cadillac plan” as early as 2016. By 2016 at least one of the mandated plans will be considered a “Cadillac plan” and be subject to the 40 percent excise tax in 17 of 50 states. By 2019 at least one of the mandated plans will be considered a “Cadillac plan” and be subject to the 40 percent excise tax in 24 of 50 states.
Barasso didn’t get fooled by the subsidy red herring, either. He notes that the subsidies don’t start until 2013, but the taxes and fees kick in immediately. That will start the price pressure on premiums next year, not in 2013, and it will actually make the problem of uninsured worse in the short run.
Besides, what was the rationale for the excise tax on Cadillac plans in the first place? It intended to discourage plans that allowed for overuse of the system. By the end of its first decade, the Baucus plan makes most plans subject to that tax, which means that there is no real penalty for offering them or buying them. It transforms quickly into another general industry tax and does nothing to encourage rational use of the system.
We cannot reduce costs by imposing massive new taxes on the medical care system. To argue otherwise is simply Orwellian, and PWC just restates the obvious in more specific terms.