Senate

The Congressional Budget Office (CBO) released a preliminary estimate of the Baucus Health Reform Plan (as amended in committee).  According to the CBO analysis, the plan would result in net deficit reduction of $81 billion over the first 10 years (2010-2019); and in subsequent years the trend "would probably be continued reductions in federal budget deficits."   More specifically, in the first 10 years, CBO projects:

MAJOR COSTS:

• $345 b in additional federal outlays for Medicaid and CHIP;
• $461 b in low-income subsidies for purchase of coverage through the Exchanges (although a deficit reduction "failsafe" provision could reduce subsidies over 2015 to 2018);
• $23 b in reduced revenues from the tax credit for small employers;

MAJOR SAVINGS:

• $201 b in new revenues from an excise tax on high-premium insurance plans;
• $162 b in reduced payments for non-physician Medicare services; 
• $117 b in reduced payments to Medicare Advantage plans;
• $45 b in reduced Medicare and Medicaid DSH* payments (to hospitals serving low-income patients);
• $4 b in new revenues from penalty payments by individuals failing to get coverage;
• $23 b in new revenues from penalty payments by employers not providing coverage; and
• $22 b in savings from the new Medicare Commission.

*Disproportionate Share

CBO estimates that by 2019 the share of legal nonelderly residents with insurance coverage would rise from 83% to 94%.

Regarding the proposed health insurance co-ops (Sen. Conrad's alternative to a public plan), CBO projects "very little effect on the estimates of total enrollment in the exchanges or federal costs because...they seem unlikely to establish a significant market presence."

The Outyears:  "The proposal would reduce the federal deficit by $12 billion in 2019....After that, the added revenues and cost savings are projected to grow more rapidly than the cost of the coverage expansion....The projected longer-term savings for the proposal also assume that the Medicare Commission is relatively effective in reducing costs...."

CBO Preliminary Analysis of Finance Committee plan

Senate Finance Committee will vote on the Baucus (D-MT) bill next Tuesday (10/13). 

After the Finance Committee vote, Senator Majority Leader Reid (D-AZ) will convene negotiations to merge the Finance Committee bill with the Senate HELP Committee bill (Health, Education, Labor and Pensions Committee). (The HELP Committee plan (Kennedy-Dodd-Harkin) was voted out of committee on July 15, 2009.)  HELP Committee Summary

As reflected in the Concord Coalition side-by-side comparison, the two bills differ significantly on three major points: (1) the HELP Committee bill includes a public option to compete with private insurance plans in the health exchanges, while the Finance bill has non-profit co-ops; (2) the HELP bill provides larger subsidies than the Finance bill for low income Americans to purchase plans through the exchanges; and (3) the HELP bill is more expensive than the Finance Committee bill. Concord Coalition side-by-side

Senate negotiators face a difficult challenge as they attempt to produce a compromise Finance-HELP bill that can garner 60 votes in the Senate (to overcome a Republican filibuster), as well as meet President Obama's pledge that he will not sign a bill that increases deficits now or in the future.  The vote of Republican moderate Olympia Snowe (R-ME) may be key to reaching the 60-vote threshold, because Democratic Senator Blanche Lincoln (D-AR)--facing a tough reelection battle--may oppose a health care overhaul.

Many commentators believe that Reid will have to bring a compromise bill to the Floor without a public option in order to get 60 votes.  Moderate Democrats Evan Bayh (D-IN), Mary Landrieu (D-LA), Ben Nelson (D-NE), and Blanche Lincoln (D-AR) have expressed doubts about a public option.

However, according to Congressional Quarterly, "the Las Vegas Review-Journal reported that during an Oct. 1 conference call, Reid told Nevada voters: 'We are going to have a public option before this bill goes to the president's desk.'"  It is possible that what Reid has in mind is the Senate initially passing a bill without a public option and then bringing a conference report back to the Floor with a public option hoping that the Democratic Caucus will hold together for the final vote.

Reconciliation Fallback: If Senate Democrats are unable to muster 60 votes, they can resort to a budget reconciliation bill--which is filibuster-proof and needs only 50 votes for passage, but has very tight restrictions on what may be included in the bill.  Provisions that are non-budgetary--such as insurance reforms that protect beneficiaries from pre-existing condition clauses and annual or lifetime caps--could not be included in a reconciliation bill.

House

The House is currently working to merge the three versions of health care reform reported by the Ways & Means, Energy & Commerce, and Education & Labor committees. The three bills are much more similar than the two bills in the Senate.  All three bills include a public option. 

According to Congressional Quarterly, Rep. Diana DeGette (D-CO), a deputy whip for House Democrats, has been working with the moderate New Democrat Coalition and the fiscally conservative Blue Dog Coalition and has concluded that "we do have the votes for the public option in the House."

More than half of the Democrats in the House (154) have signed on to a letter denouncing the Senate Finance Committee's plan to tax expensive "cadillac" insurance plans as a means to finance subsidies and hold down costs.  The letter to Speaker Nancy Pelosi (D-CA) urges her "to reject proposals to enact an excise tax on high-cost insurance plans that could be potentially passed on to middle-class families."

House leaders on October 7 presented to the House Democratic Caucus several approaches on how to structure a public option.  One version would be tied to Medicare rates; another would require the HHS Secretary to negotiate rates with providers; and a third public option would be subject to a trigger.

Rep. Anthony Weiner (D-NY) said House leaders are considering whether to expand Medicaid eligibility to anyone earning up to 150% of the poverty level (as in the Senate HELP bill). 

Looking Ahead to Conference

Key issues in conference will include: (1) a public option - the Senate may enter conference without a public option; (2) how to pay for the subsidies to low-income families and individuals; and (3) how to make the final bill deficit neutral in the first ten years and beyond.

In 1997, the bipartisan "Balanced Budget Act" set up a new Medicare physician payment system designed to generate significant cost savings.  The new mechanism was called the "Sustainable Growth Rate" and tied future Medicare physician payment rates to past spending.

Doctors complained bitterly about the SGR formula and Congress stepped in almost every year since 2002 to stop the SGR automatic cuts from being implemented.  This has caused a rapidly increasing gap between current Medicare physician payments and the SGR rate required by the 1997 law.  Consequently, payment rates under the SGR physician fee schedule are due to fall by about 21 percent in 2010 and by about 5 percent annually for at least several years thereafter.

According to a 2008 analysis by the Congressional Budget Office (CBO), merely freezing physician's Medicare payment rates at 2009 levels would cost $318 billion over the next decade--because CBO's baseline is based on the SGR formula in the 1997 law.  Moreover, letting physician payments grow with the current rate of medical inflation, would cost $556 billion over 10 years.   CBO Report:  See Option 59

Consequently, the Baucus health reform plan in the Senate would not fix the SGR problem, because to do so would dramatically increase the cost of the health reform bill.

However, the House does purport to fix the SGR problem by freezing physician pay--but then ignores the cost of doing so.  More specifically, the House would exempt the cost of fixing SGR from the House PAYGO rule and seeks to mollify deficit hawks by calling for enactment of a new statutory PAYGO regime (that exempts SGR, as well as an AMT fix, and extension of the Bush tax cuts).

The Concord Coalition takes the position that SGR should be permanently fixed and replaced with a physician payment system that is both realistic and restrains spending growth--and that the costs of doing so should be fully offset.

Senate HELP (Health, Education, Labor, and Pensions) Committee Chairman Tom Harkin (D-IA) signaled this week that his committee will move a sweeping higher education reform bill under filibuster-proof budget reconciliation procedures.  According to Congressional Quarterly, "Harkin said he expects to get an extension from the Senate Budget Comittee (from the current October 15 deadline) to take up the measure in November after completing work on a health care bill."

Background

In September, the House passed a major overhaul of the student loan system that would terminate the Federal Family Education Loan program (otherwise known as guaranteed student loans) and re-direct all loan activity into the direct student loan program.  This would result in substantial budgetary savings which would be invested in Pell Grants, lowering borrower interest rates, and other education programs. The bill, HR 3221, passed the House by a vote of 253-71.

Currently, the two programs -- direct student loans and guaranteed student loans (FFELs) -- operate side-by-side.  In FY 2009, the guaranteed student loan program administered about $64 billion in loans and the direct student loan program administered about $22 billion in loans.  Both programs offer the same varieties of repayment terms and low-interest loans.  They differ only with respect to the source of the loan funds--private lenders and the Federal government, respectively.  (Since they are loan programs, the actual federal budgetary costs are limited to administrative costs, fees, and anticipated defaults.)

The reform effort began earlier this year with an Obama Administration budget proposal to convert guaranteed student loans to direct government loans.  Budget savings would result by effectively removing the middleman from the lending process.  The Administration proposed to invest the savings in the Pell Grant Program and other education programs. 

Critics of the Administration plan have said the bill would eliminate thousands of jobs in the banking industry, and many have backed an alternative proposal by lending giant Sallie Mae that would preserve the role of private lenders in disbursing loans.  However, according to the Congressional Budget Office (CBO), that approach would have netted less in budgetary savings.   CBO Analysis

CBO has estimated that the student loan provisions in the House-passed bill would save $89 billion over 10 years.  Under the bill, $47 billion over 10 years would be used to increase the availability and amount of Pell grants -- from $5,550 per student in 2010 to $6,900 in 2019. (The bill would also index maximum grant amounts to the Consumer Price Index plus 1 percent.)

The bill would also provide $28 billion over 10 years in new direct spending for a number of education programs, including:  

• $8.6 billion for community colleges;
• $7.9 billion for the Early Learning Challenge Fund;
• $4.1 billion to modernize facilities for K-12;
• $3.0 billion for a College Access and Completion Innovation Fund;
• $2.2 billion for Historically Black Colleges and Universities; and
• $1.9 billion for education grants for veterans.

The House passed HR 3221 as a free-standing bill, but also reserved the right to re-pass the measure as a budget reconciliation bill in the event that filibuster-protection is needed in the Senate--which is apparently the case.   

CBO Cost Estimate for HR 3221 

CBO Analysis of the Subsidy Costs of Direct and Guaranteed Student Loans

The Congressional Budget Office on Wednesday estimated the FY 2009 deficit at about $1.4 trillion -- which is a record in dollar terms and at 9.9 percent of GDP is the highest relative to the size of the economy since 1945, the final year of WWII.  Reasons for the record deficit:

• Due to the recession and stimulus tax cuts, federal revenues fell by $420 billion, coming in at 14.9 % of GDP -- the lowest level in 50 years.  Individual income taxes dropped from $1.146 trillion in '08 to $916 billion in '09.  Corporate taxes from from $304 billion to $139 billion.
• Outlays increased by $532 billion to 24.7 % of GDP, the highest level in 50 years, due to spending on: TARP ($154 billion); Fannie Mae and Freddie Mac ($91 billion); the economic stimulus bill ($100 billion in outlays by Sept. 30); and substantially higher outlays for unemployment benefits (160%), Medicaid (25%), Medicare (10%), Social Security (8.6%), and defense (7%).

House Budget Chairman John Spratt (D-SC) said that "today's figures send us the latest alarm. As the economy stabilizes and starts to recover, we will have to turn our focus back to deficit reduction."

CBO Report on FY 2009 Deficit (10/07/09)

Overview

This week the Senate completed action on its version of Defense Appropriations for FY 2010; the House and Senate both approved the Agriculture Appropriations Conference Report; and the House passed the Energy-Water Conference Report (click on links below).

Increases over 2009 Spending:  According to a Congressional Quarterly analysis, Congress plans to spend $75 billion or 7 percent more in FY 2010 than in FY 2009 on the 12 annual discretionary spending bills.

REVISED House Subcommittee (302(b) Allocations (among the 12 appropriations subcommittees)

Senate Subcommittee (302(b) Allocations (among the 12 appropriations subcommittees)

Click on the dates below for links to bill summaries.  If you have trouble with the Senate links download the most recent version of Adobe Acrobat Reader or go to http://appropriations.senate.gov/ and click on "Subcommittees" for links to the documents.

*polled out (no formal subcommittee vote)

Earmark Disclosure

Earmark lists are available on the House Appropriations subcommittee websites and Senate earmark requests are available on the Senate Appropriations website.

Important Note

Following are links to the latest congressional action, plus a sampling of issues facing the appropriators as reported by Congressional Quarterly and Congress Daily. The numbers in parentheses are the FY 2009 regular appropriations level in billions (not including stimulus funds); the President's FY 2010 request; the House FY 2010 level; and the Senate FY 2010 level.

OMB SAPS

Statements of Administration Policy (SAPS) on the Appropriations Bills are available by clicking here.

Appropriations Bills
 

1. AGRICULTURE ($21.4 / P-$23.6 / H-$22.9 / S-$24.0) -- Major issues include increasing FDA funding; overhaul of the food safety system; whether to continue a ban on importation of Chinese poultry; a controversial animal identification system that grew out of concerns about mad cow disease; the President's proposal to end direct payments to farmers with more than $500,000 in annual sales revenue; and the allocation of funding between rural issues and FDA.  Summary Table  House Bill Summary   Senate Bill Summary

2. COMMERCE-JUSTICE-SCIENCE ($57.7 / P-$64.6 / H-64.4 / S-$64.9) --  Major issues include the President's proposed 7% increase over the current year; funds to close Gitmo; a major Southwest Border Initiative; readiness of the Census Bureau for the upcoming census; patent examiners working upaid overtime leading to turnover; NASA's post-space shuttle priorities; and a program to help states defray the costs of jailing illegal immigrants convicted of crimes. Summary Table    House Bill Summary   Senate Bill Summary

3. DEFENSE ($631.9 / P-$640.1 / H-636.3 / S-636.3) not including military construction and housing which are funded in the Mil Con-VA bill -- Major issues include terminating the F-22 fighter program which has been plagued with operational problems and cost over-runs; McCain amendment to eliminate unrequested C-17 cargo aircraft; funding for a 2d engine for the F-35 Joint Strike Figher program; funding for the C-17 transport plane, the VH-71 presidential helicopter and the Missile Defense Agency's Kinetic Energy Interceptor--all of which the Administration wants to end; proposed cuts in the Army's Future Combat Systems; and rising personnel costs.  (Note: the Administration has threatened to veto the Defense Authorization bills if they authorize further funds for the F-22 or disrupt the F-35 program.)   House Bill Summary   Senate Bill Summary

4. ENERGY-WATER ($33.2 / P-$34.4 / H-$33.3 / S-$34.3) --  Major issues include how to fund the backlog of Army Corps water infrastructure projects; Defense environmental clean-up; funding for the Administration's "Re-Energyse" proposal (energy innovation centers); how to continue the big boost in renewable energy research after the stimulus bill's funds run out; funds to dispose of weapons grade plutonium under a new agreement with Russia; streamlining approval of new nuclear reactors; and the President's proposal to cut funding for the proposed nuclear waste facility at Yucca Mountain.  House Bill Summary  Senate Bill Summary

5. FINANCIAL SERVICES-GENERAL GOVT ($22.6 / P-$24.2 / H-$24.15 / S-$24.4) -- Major issues include U.S. policy toward Cuba; education vouchers in the District of Columbia; IRS funding; funding for states to upgrade voting equipment; and a provision requiring GM and Chrysler to reinstitute agreements with certain auto dealerships. Summary Table   House Bill Summary  Senate Report

6. HOMELAND SECURITY ($40.0 / P-$42.8 / H-$42.6 / S-$42.9) -- Major issues include funding efforts to find and deport illegal immigrants; whether to further fortify the fence being built along 700 miles of the U.S.-Mexico border; whether to bar release of photos of terrorism detainees; allowing Gitmo detainees into the U.S.; whether the proposal to cut the DHS budget starting in 2012 is realistic; the system for providing federal disaster relief; reorganizing the Federal Protective Service; continuing an "antiquated" Coast Guard navigation system; and increased funding for road and rail security. House Bill Summary   Senate Bill Summary

7. INTERIOR-ENVIRONMENT ($27.6 / P-$32.3 / H-$32.3 / S-$32.1) --  Major issues include boosting EPA funding; earmarks for water projects; eliminating a program to clean up diesel engines in California; adequacy of wildfire funding; drilling in federal lands and waters; and new taxes and fees on the oil and gas industry. House Summary Table   House Bill Summary   Senate Bill Summary

8. LABOR-HHS-EDUCATION ($155 / P-$160.7 / H-$160.6 / S-$163.1) --  Major issues include rejecting the Administration's request to target NIH money at specific diseases; modifications and funding increases for the Pell Grant program; funding for school construction; increased funding for OSHA and LIHEAP; lifting a prohibition on federal funds for needle exchange; and eliminating abstinence-only sex education programs. Summary Table  House Bill Summary  Senate Bill Summary

9. LEGISLATIVE BRANCH ($4.3 / H-$4.9 / S-$4.5) -- Major issues include creating a fund to pay for renovation of the Capitol and House and Senate office building; and requests for more staffing at CBO and GAO.  House Bill Summary   Senate Bill Summary

10. MILITARY CONSTRUCTION - VA ($72.9 / P-$77.7 / $H-77.9 / S-$76.7) -- Major issues include advance appropriating FY 2011 funds for VA health care; BRAC funding; housing for trainees; more funds for VA health care for treatment that is not service-connected; and funding for Guard and Reserve initiatives. (Since Jan. 2007, Congress will have increased the baseline for the VA by $20 b, a 58% increase.)  House Bill Summary   House Summary Table   Senate Bill Summary

11. STATE-FOREIGN OPERATIONS ($50.0 / P-$52.0 / H-$48.8 / S-$48.7) -- Major issues include the President's proposed 9% increase for the State Dept. and foreign aid programs; conditions attached to funds for the World Bank and IMF; dropping the "Mexico City" policy that prohibited use of international family planning funds for abortion; funding for Millennium Challenge Corporation (aimed at countries that adopt democratic and free-market policies); and funding for the U.N. Population Fund (which is strongly opposed by anti-abortion groups). House Bill Summary   Senate Bill Summary

12. TRANSPORTATION-HUD ($55.0 / P-$68.9 / H-$68.8 / S-$67.7) -- Major issues include how to make up the shortfall in gasoline tax revenues flowing into the highway trust fund; funding for high speed passenger rail and a national infrastructure bank; funding for a new air traffic control system; additional funding for low-income housing rental vouchers; increasing loan guarantees through the FHA; and capital and safety improvements to Washington's metrorail system.   House Bill Summary    Senate Bill Summary