Max Baucus' bet on John Castellani

Health reform remains what it has always been, a negotiation between buyers and sellers of health care.
Written by Dana Blankenhorn, Inactive

The bet the Obama Administration has placed on the reform plan Senate Finance Committee chair Max Baucus finally presented today has nothing to do with Republicans or Democrats.

It has to do with business. Specifically, it has to do with the buyers and sellers of health insurance, which represent about two-thirds of the total health care market. (Government buys nearly 30%, and a small percentage is paid for by private parties. Co-pays are covered by insurance contracts.)

Liberals have long alleged the Baucus bill was written by the health insurance industry. They are right. This is a feature, not a bug.

But success is not guaranteed. A bill that can pass is also a bill approved of by The Business Roundtable, which represents the biggest buyers of health insurance.

Health reform remains what it has always been, a negotiation between buyers and sellers of health care.

Buyers have pushed reform on sellers for years, sometimes resorting to self-insurance in order to make their points. Insurers have slowly responded.

All their wellness proposals, the use of Electronic Health Records, the push to automate, and efforts like predictive health have been aimed at reducing medical inflation and, thus, insurance inflation.

But there is a big prize waiting to be won by both sides. Expanding the pool, mandating that all businesses and consumers buy some form of health insurance, will lower the cost now paid by buyers by spreading the risk around.

The health insurance industry offered this deal before the President took office, and it's still part of the Baucus plan. They will cover everyone, with no exceptions, but customers must pay the prices set by industry. The Baucus bill has formulas for setting limits on prices, but they're all based on a baseline set by the industry.

A public plan, pushed by Democrats, would force insurers to compete with the government on price. Even if they were able to compete on that basis, profits would be squeezed. They would rather not.

The Roundtable seems prepared to concede this point. Will they now endorse a plan that the sellers wrote? Any further amendments from the Roundtable would have to lean toward reform in order to have an impact on costs.

The ambivalence of Max Baucus, in other words, remains tied to that of Business Roundtable CEO John Castellani (above), and his reluctance to give Democrats political cover. Castellani's reluctance is reflected in the refusal of any Republican Senators to agree with what Baucus has proposed.

If buyers and sellers of insurance can't push their political allies into signing off on a deal they negotiated, the President and his party will take the fall and they will be leading the lynch mob. Sounds like fun, but lynch mobs are always bad for business.

The bill before them is not perfect, but it is good for businesses on both sides of the table and they won't get a better deal from Republicans. Now that Baucus has opened his kimono it's time for Castellani to do the same. And for United Healthcare to do so as well.

There remains the chance, after all, that Democrats could still be pushed to pass a bill with a public option, using reconciliation to win a Senate majority. That's another risk buyers and sellers need to face.

Going once, going twice...

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