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in 2009 there is no bigger issue

The support for the Baucus Bill seems to be on the wane, as insurance companies, liberal groups attack its desirability.   This Bill however is the grand compromise Bill amongst the 5 in Congress.   It will certainly change before it goes up for vote.

For the poor, meaning Medicaid, it is seen as a heavy burden on the States (see below).   For the young and some portion of the middle class it will raise the cost of insurance.  See Income Redistribution.  The liberals do not like it, for it does not have the public option.  The doctors might like part of it, for it does make some payments more generous for them, but also promises the notion of wage controls will likely come in the future.  So who is in favor of this supposed great compromise approach?  Not the Republicans.

With HSA accounts being eliminated with this Bill, and further messing up the incentives, we are clearly going in the wrong direction. 

It does appear that what this Bill does is to give more control to the government, less to the market and consumers. The effect this will have is to give the Federal Government the ability to force control over its main issue which seems to be the rising costs of Medicare, while also being able to clamp the markets in healthcare on all fronts.  The consumer is forecasted to have less control over their healthcare, with the third and fourth party setting the direction.  This will make healthcare less free market with lots more entitlement, cost mandates and shifts to different age and income groups.  In other words a total disaster.

Max's Mad Mandate         WSJ, Sept 27, 2009

The Baucus health bill will break 50 state budgets via Medicaid.

The more we inspect Max Baucus's health-care bill, the worse it looksToday's howler: One reason it allegedly "pays for itself" over 10 years is because it would break all 50 state budgets by permanently expanding Medicaid, the joint state-federal program for the poor.

Democrats want to use Medicaid to cover everyone up to at least 133% of the federal poverty level, or about $30,000 for a family of four.   Starting in 2014, Mr. Baucus plans to spend $287 billion through 2019—or about one-third of ObamaCare's total spending—to add some 11 million new people to the Medicaid rolls.

About 59 million people are on Medicaid today—which means that a decade from now about a quarter of the total population would be on a program originally sold as help for low-income women, children and the disabled. State budgets would explode—by $37 billion, according to the Congressional Budget Office—because they would no longer be allowed to set eligibility in line with their own decisions about taxes and spending. This is the mother—and father and crazy uncle—of unfunded mandates.

This burden would arrive on the heels of an unprecedented state fiscal crisis. As of this month, some 48 states had shortfalls in their 2010 budgets totaling $168 billion—or 24% of total state budgets. The left-wing Center for Budget and Policy Priorities expects total state deficits in 2011 to rise to $180 billion. And this is counting the $87 billion Medicaid bailout in this year's stimulus bill.

While falling revenues are in part to blame, Medicaid is a main culprit, even before caseloads began to surge as joblessness rose.  The National Association of State Budget Officers notes that Medicaid spending is on average the second largest component in state budgets at 20.7%—exceeded only slightly by K-12 education (20.9%) and blowing out state universities (10.3%), transportation (8.1%) and prisons (3.4%).

In some states it is far higher—39% in Ohio, 27% in Massachusetts, 25% in Michigan, Rhode Island and Pennsylvania.  Forcing states to spend more will crowd out other priorities or result in a wave of tax increases, or both, even as Congress also makes major tax hikes inevitable at the national level.

The National Governors Association is furious about Mr. Baucus's Medicaid expansion, and rightly so, given that governors and their legislatures will get stuck with the bill while losing the leeway to manage or reform their budget-busters.  NGA President Jim Douglas of Vermont recently said at the National Press Club that the Baucus plan poses a "tremendous financial liability" and doesn't "respect that no one size fits all at the state level."  He added: "Unlike the federal government, states can't print money."

Mr. Baucus hopes to use his printing press to bribe the governors, at least for a time. Currently, the federal government pays about 57 cents out of every dollar the states spend on Medicaid, though the "matching rate" ranges as high as 76% in some states.  That would rise to 95%—but only for five years.  After that, who knows?  It all depends on which budget Congress ends up ruining.  Either the states will be slammed, or Washington will extend these extra payments into perpetuity—despite the fact that CBO expects purely federal spending on Medicaid to consume 5% of GDP by 2035 under current law.

As for the poor uninsured, they'll be shunted off into what Democratic backbencher Ron Wyden calls a "caste system." While some people will be eligible for subsidized private health insurance, everyone in the lowest income bracket will be forced into Medicaid, the country's worst insurance program by a long shot. States try to control spending by restricting access to prescription drugs and specialists.  About 40% of U.S. physicians won't accept Medicaid at all.

Why? One reason is that Medicaid's price controls are even tighter than Medicare's, which in turn are substantially below private payers.  In 2009 or 2010, 29 states will have either reduced or frozen their reimbursement rates to providers.  Democrats love Medicaid because is it much cheaper than subsidizing private insurance, but that is true only because of this anti-market brute force.  Of course, such coercion will be extended to the rest of the health market under ObamaCare.


The states aren't entirely victims here.  Both Republican and Democratic state houses regularly game the Medicaid funding formula—which itself is designed to reward higher spending—to steal more money from national taxpayers.  Then when tax collections fall during downturns, budget gaskets blow all over the place.  This dynamic helps explain the spectacular budget catastrophes in New York and California. We'd prefer a policy of block grants, which would extricate Washington from state accounting and encourage Governors to spend more responsibly.

That's not going to happen any time soon, but the least Mr. Baucus can do is not make things worse. Instead, his Medicaid expansion is a disaster on every level—like the rest of ObamaCare.