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A Peek at What Max's Bill Really Means

Senate Finance Chairman Max Baucus says he will release a health care bill* very soon, maybe in the next 24 hours. And we already have a pretty good idea what it will look like, thanks to an outline Baucus has distributed to the Gang of Six--the bipartisan group with which he’s been trying to hammer out a compromise.

Sources inside the Finance Committee say that the formal bill will look a lot like that proposal, with some minor modifications. Of the three Republicans engaged in those discussions, only Maine Senator Olympia Snowe seems likely embrace the proposal, although one can never be entirely sure about what Iowa's Charles Grassley will do--or how he'll decide to tell the world. (I'm hoping for a tweet: "Sorry MAx. NoDEATH panel 4 me.")

Regardless of which Republicans sign on, affordability is going to be a major source of controversy, both within the Finance Committee and outside of it. Relative to both the bills that three House committees approved and the one that the Senate Health, Education, Labor, and Pensions (HELP) Committee passed, Baucus’s proposal is less generous. It offers less financial assistance--and would not guarantee that plans offer as much protection from medical expenses.

But does that mean it's actually inadequate?

To address this very question, Finance Committee staff last week distributed a memo outlining the proposal’s effects. The key table, which appears on the last page and is reproduced below,

breaks down both premiums and average out-of-pocket expenditures for single people and for families, at different income levels, who buy coverage through the new insurance exchanges. (For those who don't already know, the exchanges would probably not be open to people who have access to large employer coverage--at least in the current iteration of the Finance bill.)

The bottom line here depends, in part, on which people you consider--in particular, whether you’re looking at the poor or middle class, and whether you’re looking at the relatively sick or the relatively healthy.

Total medical expenses, including premiums and out-of-pocket expenses, would be no more than 20 percent of annual income for most of the people profiled in the document. For the poor, it'd be dramatically less. That's the (relatively) good news.

And the bad news? These figures are all for people in average health. But people end up paying a lot more in out-of-pocket expenses when they have a serious medical issue--whether it's because of an accident, an acute illness, or a chronic disease. According to my back-of-the-envelope calculations, a family of four making $42,000 a year could owe $9,000 a year in medical expenses if it hit the maximum in out-of-pocket expenses--which is pegged, in the Finance legislation, to deductible levels in Health Savings Accounts. That's easy to do when one family member gets in an accident, has an acute medical problem, or is dealing with a chronic disease.

A family of four making $78,000 a year could owe $23,000--nearly a third of its income--if it had a member with high medical bills.

The committee analysis (and mine) includes a ton of assumptions--chief among them, that the families are buying the "silver" option, the benchmark plan on which federal subsidies are based. In other words, these figures are not precise, particularly since we don't even have an actual bill yet. And, in case you were wondering, families staring at such huge medical expenses would probably fall under the "hardship" waiver, exempting them from the requirement to purchase insurance. (In other words, neither Baucus nor any other sane member of Congress is going to force people to shell out money for insurance that leaves them so exposed to costs.)

But those figures for how families with severe medical needs would fare are a reminder of what liberals should be watching as details of the Finance legislation emerge--and as the debate over its fate unfolds. 

*In keeping with the Finance Committee tradition, Baucus will not release an actual bill, the way other committees did. Instead, he will offer what's known as a “chairman’s mark.” That means it will be written in plain English. Translation into the formal language of legislation will take place when, and if, the committee votes to approve it. Before that can happen, committee members will have a chance to introduce and consider amendments, leading up to final consideration of the whole package. Baucus has said the hearings will take place next week.