Health Reform on the Cheap

Julie Appleby, at Kaiser Health News, uncovers a worrisome loophole in the Senate Finance legislation:

The first year the legislation would take effect, people getting subsidized coverage would be required to pay from 2 to 12 percent of their incomes for insurance. The government would pick up the rest of the tab. People with lower incomes would pay less and those with higher incomes more.

But in the second year, it changes. From then on, it is based on a percentage of the premium that was paid the first year, no matter how far premiums rise.

For years, health insurance premiums have risen faster than wages, and the trend is expected to continue.

"People are going to have to keep paying more and more,” says Judith Solomon, a senior fellow at the Center on Budget and Policy Priorities, a nonpartisan Washington research group that looked at the effect in a recent paper.

The way the subsidies are indexed, she says, has so far taken a back seat to a larger debate among lawmakers, budget hawks, consumer advocates and others that is more focused on the size of the subsidies – and how much of their income people should initially be forced to put toward coverage.

Of course, it's not just that everybody is focused on the size of the subsidies. It's also that budget hawks keep pushing to reduce federal outlays. Relative to the just-released House bill, the Senate Finance bill allocates less money to helping people buy insurance. This is the consequence.