The long debate over health care reform has now reached the end game, but there are still some obstacles to overcome before they can get a bill to President Obama’s desk. The question now becomes how the two houses of Congress can reconcile their differences.
The House and Senate versions of reform have many things in common, most important that both are projected to result in more than 30 million more Americans getting some kind of health coverage. The Senate and House bills both set up exchanges in which individuals without employer-sponsored health insurance and small businesses can shop for coverage. Both bills also include major reforms for the insurance industry that would prohibit insurers from excluding people from coverage for pre-existing conditions. Insurers also no longer would be able to base premiums on gender or occupation.
However, there are still some major areas of differences that both chambers must resolve. Here are the most important differences:
1. PUBLIC OPTION (and the health insurance exchange)
2. METHODS OF PAYING
- Coverage Mandates
- Employer Mandates
1. THE PUBLIC OPTION
“I would let this bill go to conference committee and see if we can fix this bill more … Let’s see what they add to this bill and make it work. If they can make it work without a public option, I’m all ears.” -Dr. Howard Dean
No public option. In order to get the filibuster-proof 60 votes for the bill, Majority Leader Harry Reid scrapped the creation of a new government-run health insurance plan. It had been so weakened by the time it made it into Reid’s bill that it was expected to enroll only several million people, but it was still a deal breaker for conservatives like Democrat Ben Nelson of Nebraska and Independent Joe Lieberman of Connecticut.
Contains a public option. The House bill would create a new government health insurance plan to compete with private insurers. But even though they kept a public option in its bill, it would be financed solely by premiums without any government subsidization and is a far cry from the versions that liberals had pushed, which would have pegged reimbursements to lower Medicare rates. This “public option” would have to meet the same coverage requirements as private insurers.
Although some House members have signaled that they may be willing to drop the public option in order to get a final bill that could get 60 votes in the Senate, they will insist on getting something in return. Probably from the insurance exchange, a web-accessible, marketplace for insurance. The likeliest concession from the Senate would be more generous federal subsidies for individuals and small groups shopping in the exchange, along with possible changes to the scope of the exchange itself.
The Senate bill calls for state-based exchanges, which would have less bargaining power with providers and insurers, but which appeal to moderates in the Senate afraid of big government. The exchange would be national under the House bill. This means that those shopping in the exchange – including many of the currently uninsured – would be bundled together in large pools. If House Dems give up the public option, they may insist that the exchange be national.
The Senate bill does have two other mechanisms for providing insurance outside the standard coverage options. Like the House bill, it would allow for and initially fund creation of non-profit consumer-owned health insurance cooperatives, though most economists say such coops would not have a major impact on the insurance market. The Senate bill would also allow the federal Office of Personnel and Management to contract with private insurers to offer at least two multi-state plans in each state exchange. These OPM negotiated plans could be less expensive than standard state-based insurance offerings, but their overall impact would be far less significant than a public option
The Senate bill would direct the U.S. Office of Personnel Management, which oversees health policies for 8 million federal workers and their families, to contract with private insurance companies to offer policies on the exchanges.
2. METHODS OF PAYING
- Coverage Mandates
- Employer Mandates
“I believe that the bill we passed in the House, though not perfect, would have been a major step forward in providing all Americans with quality, affordable health care that guarantees choice, and competition through a public option. Unless the final bill looks more like what we passed in the House, and less what we saw emerge from the Senate, I will not support it.” -Representative Anthony Weiner (D-NY)
Both the Senate and House bills would reduce the deficit by more than $100 billion over ten years, but they get there in very different ways. Both the House and Senate bills raise revenue by penalizing Americans who don’t buy health care coverage (mandates). Both bills would reduce Medicare spending, largely from cuts in the Medicare Advantage program. Both bills would also tax medical device makers, with the Senate bill also calling for massive fees on the pharmaceutical and health insurance industries. The Senate bill includes special fees on insurers, drug companies and medical device makers and would impose a 10-percent tax on indoor tanning.
- Taxes: The Senate bill would increase the Medicare payroll tax for families earning over $250,000 and individuals earning over $200,000, but would also tax health insurance itself, applying a 40% excise tax on health plans valued above $8,500 for individuals and $23,000 for families. (Only the amount exceeding these thresholds would be taxed.) This new tax on so-called “Cadillac plans” would raise $149 billion over 10 years. Exceptions would be made for Americans over 55, those working in high-risk jobs and (initially) those living in states where health care costs are highest. But the excise tax on Cadillac plans has another purpose – by discouraging high-value insurance plans, health care economists expect overall medical spending to decrease. And, by taxing the fast-growing cost of insurance itself, the Senate plan may have a better chance of keeping up with medical costs, something a high-income tax like the House’s would not accomplish. Research also indicates that when workers get lower cost health insurance plans through their employers, wages increase.
- Coverage mandate: The Senate mandate would phase in a $750-per-person annual penalty up to $2,250 per family or a penalty of 2 percent of taxable income, whichever is greater. The full penalty would take effect in 2016.
- Employer Mandates: The Senate bill has no employer mandate–per se. But large firms with more than 50 workers would have to pay a fine of $750 annually per worker if any of their employees obtain federally subsidized coverage on the exchange.
- Taxes: The House plan is to tax high income earners and it generates far more revenue and doesn’t affect the middle class like the tax on health insurance plans likely would. (Municipal employees and manufacturing union members are among those with high value high plans that could exceed the excise tax threshold). The House bill mandate would impose a 2.5-percent penalty tax on income up to the average cost of an insurance policy.
- Coverage Mandates: The House bill would impose a 2.5-percent penalty tax on income up to the average cost of an insurance policy.
- The Employer Mandates: House bill would require employers with payrolls above $750,000 to provide health insurance to workers. Those who do not provide insurance would face a penalty of 8 percent of payroll. Employers with a payroll between $500,000 would pay fines on a sliding scale of 2 percent, 4 percent and 6 percent of payroll. Workers with employer-sponsored plans with costs deemed unaffordable — exceeding 9.8 percent of salary — may drop that coverage and purchase federally subsidized insurance on the exchange. In those cases, the employer would pay a fine up to $3,000 per worker receiving the insurance subsidy.
Unions have been pushing Democrats hard to eliminate the tax on Cadillac plans or at least raise the threshold for which plans would be taxed, which could bring House Democrats on board without alienating Senate supporters of the excise tax. To make up for the lost revenue, Senate Majority Leader Reid could agree to a Medicare payroll tax higher than what’s called for in the current Senate bill.
“I will not vote for the Senate bill regardless of the abortion language,” Rep. Bart Stupak (D-MI)
Both sides in the debate generally agree on two things when it comes to health reform: federal funds should not be used to pay for abortions, and women should not lose their access to abortion services. The trick is how to keep public and private funds for abortion separate, and how far restrictions on abortion coverage can go before they effectively limit access.
The Senate bill, which was amended at the last minute to win the vote of Nebraska Senator Ben Nelson, would let states opt out of including plans with abortion coverage on the exchanges and would require anyone with abortion coverage to write two separate premium checks — one for the abortion coverage and one for the rest.
Also singles out abortion coverage as something patients must separately pay for, but by purchasing a rider. The House bill contains tougher language and it places stricter limits on abortion, prohibiting any insurance plans that cover abortion from participating in the public exchange and receiving subsidies.
Reconciliation of the two versions is a numbers game for the Democratic leadership. Pro-choice politicians in both chambers are reluctantly willing to accept the abortion language in the Senate bill, but they have vowed to oppose health reform if the more restrictive House version wins out. At the same time, anti-abortion Democratic Congressman Bart Stupak, who authored the abortion restrictions in the House bill, is warning that he’ll bolt if the Senate version emerges from conference committee.
But the Senate version is strong enough for many of those anti-abortion Democrats, who are not insisting that Stupak’s language go untouched. And other changes in the Senate bill — including cost-saving measures, the elimination of the public option and certain family-planning measures such as increased adoption tax credits that anti-abortion Senator Bob Casey got put in — could pick up some additional Democratic votes even without Stupak’s support.
“To those on the left, who are disappointed in what the bill does not do — and in some cases are even calling for its demise — I implore you to reconsider, to be a part of this solution even as we keep working on others, which I promise you I will do.”—Senator Jay Rockefeller (D-WV)
Much of the cost containment in both bills centers on Medicare– for two reasons. First, because the Medicare is such a big component of the federal budget, and second because it drives much of what happens in the private health insurance market as well— spending more than $450 billion a year. Both bills reduce the reimbursements that Medicare pays health care providers and Medicare Advantage plans.
The Senate bill contains an element that President Obama, and many economists, consider to be a potential game changer on health care costs. That is a 15-member independent commission, known as the Independent Payment Advisory Board. The board would have the power to bring down Medicare spending when it exceeds a certain measure of inflation. There would be limits to what the board could do though. It would not be allowed to recommend anything that would ration care or change benefits for current Medicare recipients. Congress could block the commission’s recommendations, but only if it turns them all down at once rather than picking and choosing.
The House bill does not contain such a commission, mostly because lawmakers wanted to retain the ability to set Medicare payments (which can be channeled to hospitals in members’ own districts), and partly because the proposal has come up against opposition by senior citizens groups.
President Obama has stated that he wants the Independent Payment Advisory Board in the final bill, so some version of it probably will be. What remains to be seen is whether there will be an effort to weaken the commission’s authority, and as a result, its ability to impact health costs.
There are also a number of other differences in the two bills with regard to Medicare. The House measure, for instance, would require that the HHS Secretary negotiate pharmaceutical prices directly with the drug companies — something that the Senate is not likely to go along with. And both bills would establish a number of pilot programs to test innovative methods of coordinating medical care among providers; one major question is how much power the HHS Secretary will have to implement those programs on her own, rather than having to seek Congress’ permission to do so.
“We need strong leadership so close to the finish line, not efforts to water down a bill to the breaking point.” – Rep. Raul M. Grijalva (D-Ariz)
The Medicaid program is jointly administered (and paid for) by the state and federal governments. Both bills would transform and vastly expand its mission. Currently, depending on each state, it is generally available to low-income people only if they are also elderly, disabled or pregnant. Both bills would make qualifying for Medicaid available on the basis of low income alone. Many health-care experts have said this is the most efficient and cost-effective way of expanding coverage to those of limited means. However, there are differences in how the two bills would expand Medicaid.
The Senate bill would put fewer people into Medicaid and set the upper limit at 133% of poverty (or $29,300 a year for a family of four).
The House would put more people into the program. Under this bill, those earning up to 150% (or $33,000 for a family of four) of poverty would qualify. The bill is also more generous in helping states pay for their share of the newly eligible Medicaid recipients.
State governments have a huge stake in this and will watch the negotiations. States’ budgets are already nearly broke, and they say that they cannot afford the additional burden. That is one reason Ben Nelson negotiated a special deal in which the government would pay the whole tab for the expansion. There are likely to be other lawmakers clamoring for similar arrangements. Additionally, some governors have warned that their states do not have enough providers willing to accept patients under Medicaid, which in many states pays very low reimbursement. The poverty level in 2009 for an individual was $10,830 and for a family of four $22,050. Many states have eligibility requirements below that level.
HOW WILL THE BILLS BE MERGED?
Leaders of the two chambers are still working out how they will go about doing this—and momentum is important. One option may be to forego the conference committee, which would have to bring more negotiators — including Republicans — into the room, and instead have the leaders and their key committee chairmen try to hammer out an agreement that would then be submitted to the House and Senate for a final vote.
Senate and House Democratic leaders, the chairmen of the five congressional committees that wrote the legislation and top White House officials will negotiate the final bill. Most of the discussions are likely to be held behind closed doors. Republicans obstructionism makes them irrelevant, so the talks will be on settling differences among liberal and conservative Democrats to win the needed 60 votes in the Senate and at least 218 in the House.
HOW QUICKLY CAN IT BE DONE?
Since the two chambers are working with similar bills, the final negotiations likely will weeks rather than months. Democrats would like to have a final bill by the time Obama delivers his annual State of the Union address to Congress. Presidents usually give the annual address in late January, but Obama could deliver it in early February, giving more time to congressional Democrats to secure a final deal. One factor that could delay things is that they need cost estimates from the Congressional Budget Office to make sure that the price tag for the final bill remains below $900 billion over the next decade — an amount that Obama has insisted upon as the upper limit.
CAN ANYONE KILL THE BILL?
It would be hard for opponents to kill it. The bill is the top legislative priority for Obama. His fellow Democrats are motivated to give him a major victory at the start of his second year in office. Most analysts say the final healthcare bill will be signed into law within the next several weeks despite Republican opposition and efforts to slow it down.
WHAT HAPPENS AFTER THE HOUSE AND SENATE REACH AGREEMENT?
Both the House and Senate must pass the final version of the bill before it is sent to Obama for his signature.
Once it is enacted into law, some provisions would go into effect immediately, such as barring insurers from excluding coverage for children due to pre-existing conditions.
Democrats will emphasize the measure’s benefits as they try to protect their House and Senate majorities in November congressional elections. Republicans, who stand a good chance of taking some Democratic seats, are expected to stress Medicare spending cuts and tax increases in the bill.
Federal agencies will start writing regulations to implement the overhaul. A provision requiring everyone to purchase healthcare insurance might face a court challenge from people who believe the Constitution does not give Congress authority to require everyone to purchase a product from private companies.
“Nowhere has there been a bigger gap between the perceptions of compromise and the realities of compromise than in the health care bill. Every single criteria for reform I put forward is in this bill.” -President Barack Obama