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How (Not) to Craft Reform

Today's Washington Post brings the affordability issue into sharper relief:

Under the Baucus plan, subsidies would be offered to people who earn up to 400 percent of the poverty level ($43,000 for an individual or $88,000 for a family of four) in the form of tax credits that would be paid directly to the insurance company of the person's choice. The credit would be calibrated on a sliding scale to ensure that people at the bottom of the income range paid no more than 3 percent of their earnings for premiums while those at the top would be liable for as much as 13 percent.

That would amount to more than $700 a month for a family of four making $66,000 a year -- significantly more than most people at the same income level now pay, according to research conducted by Linda Blumberg, a senior fellow in the Health Policy Center at the Urban Institute. Families earning less than 300 percent of the poverty level also would be eligible for assistance with deductibles and other out-of-pocket expenses, but families who earn more would be on their own.

"That group does spend in the neighborhood of 12 percent of their income. But it's not just the premium. It includes out-of-pocket spending," Blumberg said, adding that the Baucus plan "is going to be somewhat of a wakeup call."

Families that do not purchase insurance would face penalties on their annual tax returns of up to $1,500 a year if they make less than 300 percent of the poverty level, or $3,800 a year if they make more.

But Senate Finance Committee negotiators are quick to point out that a hardship waiver would be available.

"We're doing our very best to make the insurance requirement as affordable as we possibly can," Baucus said, without driving up the overall cost of the bill.

Not to sound like a broken record, but the politics of this strategy are every bit as bad as the policy. Rather than come up with an extra $100 or $150 billion over ten years--a small amount, easy to raise in any number of ways--the Gang of Six (or Four, as it may be) wants to pass reform without the subsidies and protection that would benefit middle-class voters.

For more details on what the Gang of Six package would mean for the public, see this internal Finance Committee memo we posted yesterday.