The recent proposed legislation by the Senate Finance committee, written by Senator Max Baucus, is a reasonable effort to bring subsidized health insurance to the uninsured. It also attempts to: (1) reduce administrative costs in the private health insurance market by eliminating rating and regulatory authority of state departments of insurance, (2) standardize plans across states, thereby standardizing mandated benefits, and (3) introduce health exchanges to reduce distribution costs. Unfortunately, the Baucus bill does not take on the core problem of increasing medical costs that is ultimately the cause of America’s growing uninsured population.

Congress needs a bolder bill rather than more subsidies, more income taxes, more premium taxes, more grants, or more pilot projects. The fundamental cause of rising medical costs is the fact that our medical services, technology, biotech, and pharmaceutical industries continue to mass produce huge advances in medicine and create unsustainable medical trends in the US. This medical trend also subsidizes our international counterparts with state-run programs.

And where’s the insurance industry? These are the companies with armies of actuaries and underwriters that constantly dig through medical trends, unit costs of medical expenses, premiums, claims, renewals, technology, etc. It is admirable that they have taken a low key approach while being absolutely bashed by politicians of all colors and stripes, but at some point if they want the private insurance industry to survive, they need to develop and communicate some recommendations on how the country can control medical costs.

At the end of the day, to keep our health care system solid, we will need to do a combination of four things:

1. Increase taxes,
2. Increase cost-sharing for both private and public beneficiaries,
3. Limit medical benefits, or
4. Govern and limit access to new medicines, technologies, and procedures.

Baucus’ bill recommends the first option but punts on points two, three, and four.