Krugman on the Baucus plan: too wimpy

Nobel laureate Paul Krugman thinks the health care reform plan emerging from Max Baucus’s Senate Finance Committee is too weak. If it’s strengthened he could envision supporting it, otherwise it seems he’d scrap it. Krugman compares the health reform bill to the stimulus package; in his view both have been watered down too much in an attempt to get Republican votes, which probably won’t come anyway.

Krugman has three main problems with the Baucus plan:

  1. It “bungles” the employer mandate by tying employers’ fees to the subsidies its employees receive. Krugman doesn’t like that because employers would avoid hiring people from low income families and it would create a “bureaucratic nightmare”
  2. Subsidies for those who can’t afford insurance are too “stingy”
  3. It does not promote sufficient competition among health insurers

I agree with Krugman that the Baucus plan is flawed. Of course it is. To me the main objective in this stage should be to get everyone into coverage, which will then force the country to tackle the problem of health care costs sooner rather than later.

The Massachusetts experience has shown that relatively modest penalties are sufficient to encourage employers to offer coverage. Whether that would be true nationally remains to be seen, but it’s worth a try. Therefore I’d agree with Krugman on his first point but would probably set the penalty level lower than what he has in mind.

On the second point it’s probably unaffordable to offer sufficient subsidies to everyone to purchase comprehensive insurance. That’s true in Massachusetts –a rich state with a low rate of uninsured– and would be even more true on a national basis. The way to deal with this is to allow policies that are relatively bare bones or to have overt (rather than covert) rationing.

On the third point I don’t think competition among health insurers is going to make much difference. I’d rather see more encouragement of competition among providers.

September 18, 2009

2 thoughts on “Krugman on the Baucus plan: too wimpy”

  1. The Baucus health reform plan is weak because it was created in a manner intended at achieving compromise. Whenever compromise is sought between groups with very different belief systems, the results will never be spectacular. I believe the thoughts behind this have been to provide some solution, even if not perfect, such that some advancement is made toward reform.

    However, with the plan lacking significant Republican and Democrat support, it may simply be an exercise in political discussion to talk about how strong or weak it is.

  2. I think the Baucus plan is, unfortunately, about the best that can be achieved in the current political climate. It does accomplish two important goals — getting universal coverage, and preventing insurers from denying coverage due to pre-existing conditions. It will save many Americans from financial disaster. So it shouldn’t be viewed as a complete disappointment, but it seems likely to be a failure in the cost cutting department. Nothing creative is offered in this area.

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