Finance Committee defeats public option amendments

On Tuesday, the Senate Finance Committee resumed its markup of the Baucus health reform bill and defeated 15-8 an amendment by Senator Jay  Rockefeller (D-WV) to add a public option to the bill.  Later in the afternoon, the committee defeated a public option amendment by Senator Chuck Schumer (D-NY) but by a narrower 13-10 vote. (Instead of a public option, the Baucus bill would enable nonprofit "co-ops" to compete with insurance companies in the new insurance "exchanges.")  Rockefeller and Schumer are expected to offer public option amendment(s) on the Senate Floor--where a lengthy debate is anticipated.  Supporters argue that a public option is needed to force insurance companies to lower premiums to affordable levels.  A recent poll by Health Care for America Now and reported by Congress Daily found that 64% of Americans oppose a mandate to purchase health insurance, but the opposition drops to 37% with a public option.

Hoyer says House Floor action on health reform may be delayed

House Majority Leader Steny Hoyer acknowledged earlier this week that House Floor action on health reform could slip into late October. House leaders face the challenge of combining the three committee-reported bills (Ways & Means, Energy & Commerce, and Education & Labor) and doing so in a way that garners 218 votes for passage.  This is not a sure thing given ongoing disagreements between the Progressive Caucus and the fiscally conservative Blue Dogs.  (Background: A one month delay would still allow Democratic leaders to opt for filibuster-proof reconciliation procedures to be used as a procedural fallback since the October 15 reconciliation reporting date in this year's Budget Resolution is not an enforceable deadline.)

Baucus Plan Exempts Hospitals from Medicare Commission Oversight

Tuesday's Congress Daily reports that Senate Finance Chairman Max Baucus' health reform plan exempts the hospital industry from the oversight of a new Medicare Commission charged with finding and implementing Medicare cost savings.  "Hospitals would be exempt from the commission's ax, according to committee staff and hospital representatives, because they already negotiated a cost-cutting agreement with Baucus and the White House....A committee aide and a spokeswoman for the American Hospital Association reiterated that hospitals received a pass based on the $155 billion cost-cutting deal already in place."  The bulk of the $155 billion is comprised of $100 billion from reducing projected hospital "market basket" updates, and roughly $50 billion from reducing "DSH" payments to hospitals that care for a disproportionate share of uninsured patients.

Medicaid expansion and the States

Congress Daily reports that "at least 14 Republican governors have sent or will send letters to their congressional delegations claiming the Democrats' health care plans will bankrupt the states," due to the fact that Medicaid is jointly funded by the federal and state governments.

Health Reform Side-by-Side

Currently pending are three major health reform measures at various stages of development, as well as a set of principles laid out by the President in addressing Congress on September 9, 2009. 

1. A tri-committee House plan (Ways & Means; Energy & Commerce; and Education and Labor), which will have to be merged before House Floor consideration.  
   • CBO Cost Estimate    JCT Revenue Estimate   
   • Ways & Means Committee     CBO Letter to Ranking Member
   • Education & Labor Committee 
   • Energy & Commerce Committee
2. A Senate HELP Committee Democratic plan (Kennedy-Dodd-Harkin) was voted out of committee on July 15, 2009.  HELP Committee Summary
3. A plan released by Senate Finance Committee Chairman Max Baucus (D-MT) based on bipartisan negotiations among the "Gang of Six," but currently supported only by committee Democrats.  Modification to Chairman's Mark     Original Chairman's Mark
4. On September 9th in an address to a joint session of Congress, the President laid out a set of major principles for health reform.

Click here for a Concord Coalition side-by-side comparison of the three plans and the President's principles

Shielding Wealthy Retirees from Contributing More to Medicare

Last week, the House nearly unanimously passed a bill (HR 3631) that would have the effect of shielding wealthy retirees from higher Medicare premiums.

Background.--Social Security recipients are not scheduled to get a cost -of-living adjustment (COLA) in their benefits next year because of low inflation in the economy.  At the same time, premiums for Medicare Part B, which covers physician services and outpatient care, are expected to rise.  Because most seniors have Part B premiums deducted from their monthly Social Security benefit checks, the lack of a COLA would mean an effective reduction in Social Security benefits.  However, there is a "hold harmless" provision in federal law that shields most Medicare beneficiaries from having to pay a Part B premium increase if it would have the effect of lowering their monthly Social Security benefits.

Medicare beneficiaries who are not shielded from the Part B premium increase include seniors with incomes above $85,000 if they are single and $170,000 for couples.  Their monthly premiums would rise from $96.40 to $104.20.  (The premium increases would also impact low-income seniors who receive benefits from Medicare and Medicaid.)

The bill passed by the House last week (HR 3631) would expand the hold harmless so that no Social Security recipients (including high-income) would see their monthly Social Security check decrease because of a Part B premium increase.

House Majority Leader Steny Hoyer (D-MD) was one of only 18 House members voting against the bill, saying "I don't know how many of you go to sleep at night worried about whether Ross Perot can pay his premium, but this will freeze Ross Perot's basic premium from going up. I think that, as well-meaning as this legislation is, it is not about poor seniors." 

This is one small example of how difficult it is for Congress to make any changes in Medicare premiums, even where the changes impact high income beneficiaries.

Will the Independent Medicare Commission be a Toothless Tiger?

As noted above in the health reform update, the Baucus health reform plan would reportedly exempt hospitals from future scrutiny by the proposed "Independent Medicare Advisory Commission" due to the hospitals' agreement not to oppose $155 billion in savings from hospitals over the next 10 years.  While we understand the political impetus behind this "agreement," we have serious concerns about how this reflects on Congress' ability to set the nation on a fiscally responsible path. 

The Independent Medicare Advisory Commission, first proposed by Sen. Jay Rockefeller (D-WV), is aimed at identifying and setting in motion changes in Medicare policies to reign in the unsustainable costs of America's fastest growing entitlement program.  Clearly, removing hospitals from the purview of the Commission would substantially limit its potential effectiveness.  Moreover, this sets a dangerous precedent of taking major items "off the table" before deficit reduction efforts have even begun. 

The nation is currently on an unsustainable fiscal path:  Medicare hospital insurance is already paying out more than it takes in; Social Security will be in the same position a few years from now; deficits will increase by $9.1 trillion over the next 10 years; annual interest payments will reach $799 billion by 2019; and debt held by the public will reach 100% of GDP by 2023.  Clearly, America's policymakers in Congress and the Administration need to enter into deficit reduction talks with all deliberate speed and without taking anything off the table.

CLASS: A New Entitlement on an Unsustainable Path

Another example of why deficit reduction continues to be extremely difficult is Congress' propensity for establishing new entitlements that cost little or nothing in the first several years, but predictably grow into expensive and unsustainable programs in the "outyears."  A current example is the CLASS program (Community Living Assistance Services and Supports), which would establish a voluntary, federally administered long-term care program.  Both the House and Senate health reform proposals include the CLASS program.   

Enrollment in the new long-term care program would be open to noninstitutionalized individuals who are either active workers or a spouse of an active worker. The average premium would be limited to $65 per month in 2011 and indexed for inflation in subsequent years. The benefit would be at least $50 per day and the Secretary of Health and Human Services (HHS) would set actual benefit levels according to the extent of an enrollee's impairment.  Benefits would be paid out of a new "trust fund" consisting of enrollees' premiums and interest. 

The legislation would provide considerable authority to the HHS Secretary to adjust premiums and benefits to maintain the solvency of the new trust fund. In the near term (2010-2019), CBO estimates that CLASS would reduce the budget deficit because premiums would be flowing in and benefits would not begin to pay out until enrollees have been in the program for at least five years.  However, CBO states in its cost estimate that "if the Secretary did not modify the program to ensure its actuarial soundness, the program would add to future federal budget deficits in a large and growing fashion beginning a few years beyond the 10-year budget window." 

Can we afford to establish a new entitlement whose solvency is based on the hope that a Secretary of HHS will have the political courage and presidential and congressional backing to raise premiums and lower benefits?

Fiscal Year 2010 begins today (Thursday, 10/1) and Congress will have completed action on only one of its appropriations bills--funding for the Legislative Branch--necessitating enactment of a continuing resolution to avoid the dreaded “government shutdown.”

Background.--In recent years, appropriations bills have seldom been completed by the start of the new fiscal year. In the last 33 years Congress has, only four times, completed all of its annual appropriations bills by the start of the new fiscal year.

However, the Constitution is very clear that “no money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” In addition, in 1870 Congress enacted the Anti-Deficiency Act strictly prohibiting Federal programs from operating without specific budget authority appropriated by Congress. Put simply, without appropriations, Federal managers have no legal authority to obligate the U.S. government’s resources. Federal managers who attempt to do so are subject to disciplinary action and criminal prosecution.

Therefore, when appropriations are not enacted by October 1, the beginning of the new fiscal year, Federal departments and agencies must shut down (although special provisions permit certain “essential government employees” to continue working).

To avoid a shutdown of government programs not funded by the start of the fiscal year, the Congress typically passes stop-gap measures called “continuing resolutions” or “CRs.” These joint resolutions of Congress (requiring presidential signature) authorize agencies to continue current programs for a period of time according to a formula, usually the previous year’s levels, or the lower of the funding levels in either the House-passed or Senate-passed bill. (The CR for FY 2010 funds most programs at their 2009 funding level through the end of October.)  The number of continuing resolutions needed until all programs are funded for the new fiscal year can vary dramatically depending on how contentious the funding issues are.

CRs are also often used to temporarily extend expiring programs or limitations until legislative action has been completed.  The FY 2010 CR temporarily continues intelligence programs, Guantanamo Bay restrictions, stop-loss payments to US troops, child nutrition programs, surface and aviation transportation programs, numerous housing programs, flood insurance, certain visa programs, the "E-verify" program, the chemical facility security program, and the Ryan White AIDS funding program.

In addition to temporarily continuing funding to avoid government shutdowns, continuing resolutions are also frequently used as the legislative vehicle for “omnibus appropriations bills.” These are bills that package together all of the unfinished appropriations bills.  

There is much opposition to the use of omnibus appropriations bills both within and outside the Congress, because the sheer length of the bills makes it impossible for any Member of Congress to exercise anything close to due diligence in understanding the totality of what they are voting on. Yet, getting to closure on the new year’s funding levels at the end of a congressional session very often leads to the legislative vehicle everyone loves to hate—the omnibus appropriations bill. (In recent years, when eight, ten, or all of the regular appropriations bills are packaged together, they are referred to as an omnibus appropriations bill. When four or five bills are packaged together, it has become common—in budget-speak—to call them a “minibus.”)

For example, for FY 2010, Congress may pass separate conference reports for five or six appropriations bills that were acted on by both the House and Senate (and subsequently conferenced), with a minibus covering the remaining bills attached to a CR later this fall.

When fiscal politics become extremely intense, Congress and the President have on occasion failed to enact continuing resolutions to avert a shutdown of Federal departments and agencies at the start of the fiscal year. The longest such shutdown, causing the furloughing of 284,000 employees, lasted for three weeks, from December 16, 1995, through January 6, 1996. President Clinton and Republican congressional leaders were in a tense standoff over tax cuts and proposed cuts to Medicare, Medicaid, education and environment programs, and AmeriCorps.

Following the shutdown of FY 1996, there have been numerous proposals to prevent future shutdowns by providing for “automatic continuing resolutions” when funding deadlines are missed. However, because of the intense political fallout from the standoff of 1996 (primarily blaming Congress for the shutdown), recent Congresses have studiously avoided shutting down the government, eliminating any political momentum for enacting an “automatic CR.”

The FDIC (Federal Deposit Insurance Corporation) has announced its intention to seek prepayment of insurance premiums by member banks in order to overcome a significant cash shortfall due to nearly 100 bank failures this year. The proposed rule would require prepayment of estimated assessments for the fourth quarter of 2009 and all of 2010, 2011, and 2012. The FDIC estimates that the total prepaid assessments collected would raise $45 billion.

If FDIC is unable to raise sufficient cash through the prepayment proposal, it would have to resort to its line of credit with the Treasury which would result in additional Treasury borrowing and increased deficits.

However, FDIC Chairman Sheila C. Bair said, "It's clear that the American people would prefer to see an end to policies that look to the federal balance sheet as a remedy for every problem. In choosing this path, it should be clear to the public that the industry will not simply tap the shoulder of the increasingly weary taxpayer. This proposal is a vote of confidence for the banking industry's resilience, and it will continue to recover its strength as we work through the significant challenges ahead."

According to the FDIC release, "as of June 30, FDIC-insured institutions held more than $1.3 trillion in liquid balances, or 22 percent more than they did a year ago. Prepaying assessments will put the industry's liquid balances to good use in conserving capital and helping to maintain the capacity of banks to lend while they rebuild the DIF (Deposit Insurance Fund).  FDIC analysis indicates that this arrangement is much less likely to impair bank lending than a one-time special assessment."