Senate

The Senate Finance Committee voted on Tuesday to report Chairman Baucus' health reform plan by a vote of 14-9.  The vote was party line, with the exception of Maine Republican Olympia Snowe who voted for the measure. CBO Description and Preliminary Analysis of Finance Committee plan

Next step: Senator Majority Leader Reid (D-AZ) has convened 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 four 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; (3) the HELP bill is more expensive than the Finance Committee bill; and (4) the Finance Committee bill would create an independent Medicare Commission aimed at containing costs. 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 aim that the bill should cost about $900 billion over 10 years and his 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.

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.

 Concord Coalition Letter to Senator Harry Reid on the Health Care Reform Bill

House

If Democrats are unable to muster 60 votes in the Senate, 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.  This week, congressional Democrats acted to preserve the Reconciliation option by having the House Ways & Means Committee send its version of health reform to the Budget Committee as a reconciliation bill.

In addition, the House is continuing work on merging 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 (similar to a proposal favored by Sen. Olympia Snowe (R-ME).

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). 

A vote on a merged House bill is unlikely to occur until November, according to Majority Leader Steny Hoyer (D-MD)

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.

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."  

Treasury Secretary Timothy Geithner sent letters to congressional leaders in August notifying them that the current $12.1 trillion "debt ceiling" is likely to be reached this fall. (Recent indications are that the debt ceiling will need to be raised in mid-November.) 

On Wednesday, 9/14, 10 Senators sent a letter to Senate Majority Leader Harry Reid (D-AZ) urging that a deficit reduction panel or special process be launched as part of the impending debt ceiling increase. Specifically, the Senators said “we strongly believe that as part of the debate to increase the debt limit, Congress needs to put in place a special process that allows Congress and the Administration to face up to our nation’s long-term fiscal imbalances – and allows for deliberation and a vote on a comprehensive package addressing these issues.”

The Concord Coalition agrees with the 10 Senators that a bipartisan deficit reduction panel should be put in place as soon as possible, and the debt ceiling legislation presents a timely and appropriate opportunity to initiate action.   

America’s fiscal policy is on a dangerous and unsustainable path.  Based on current policies, the public debt will grow by more than $9 trillion over the next 10 years and annual interest payments will reach $800 billion by 2019, consuming more than a third of total individual income tax collections. Debt held by the public will reach 82 percent of GDP (gross domestic product) by 2019 and 100 percent of GDP by 2023.

Moreover, with health care costs growing much faster than the overall economy, the baby boom generation retiring, and longevity increasing, the largest entitlement programs in the federal budget – Medicare, Medicaid, and Social Security – are on unsustainable and worsening trajectories.

Tough choices need to be made, and the longer we wait, the more difficult the choices become. Health care costs need to be effectively contained to slow the growth of Medicare and Medicaid; Social Security benefits need to be brought in line with revenues; defense and non-defense discretionary spending growth needs to be capped; a statutory PAYGO regime needs to enacted into law to ensure that all new tax cuts or expanded entitlement benefits are fully paid for; tax expenditures need to be carefully examined to see if their cost justifies lost revenues; and the widening gap between total revenues and total spending needs to be closed.

It is the responsibility of Congress and the Administration to place America’s economic future on a secure footing, for the sake of our children and future generations. Unfortunately, lack of political will and excessive partisanship is standing in the way.  The Senators who signed yesterday’s letter have concluded that a bipartisan panel – as proposed by Senators Conrad (D-ND), Gregg (R-NH), Lieberman (I-CT), Voinovich (R-OH), and others – is essential to breaking the political logjam and moving a comprehensive deficit reduction package through Congress. 

The Concord Coalition agrees. On October 31, 2007, Executive Director Robert Bixby testified before the Senate Budget Committee in favor of a debt-fighting commission emphasizing: (1) it must be truly bipartisan; (2) it must have a broad mandate; (3) there must be no preconditions; (4) it must engage the public; and (5) its recommendations should be guaranteed a vote in Congress (while allowing for deficit neutral amendments). 

Text of Letter

The Government Accountability Office (GAO) released on Thursday its estimate of the "fiscal gap."  The fiscal gap is the amount of action needed--in terms of tax increases, spending reductions, or some combination of the two--for debt as a share of GDP to equal the 2009 level of 41%, at the end of 75 years.

According to GAO, the fiscal gap is $62 trillion in present value dollars which "means that revenue would have to increase by about 47 percent or noninterest spending would have to be reduced by 33 percent on average over the next 75 years to keep debt at the end of the period from exceeding its level at the beginning of 2009 (which was 40.8 percent of GDP)."   Other highlights of the GAO report (emphasis added):

• "Roughly 92 cents of every dollar of federal revenue will be spent on the major entitlement programs (Medicare, Medicaid, Social Security) and net interest costs by 2019."
• "Health care cost growth and demographic trends that were once thought of as long-term challenges are already having a negative impact on the federal budget in the near term. The oldest members of the baby-boom generation are now eligible for Social Security retirement benefits and will be eligible for Medicare benefits in less than 2 years.  Meanwhile, Medicare's Hospital Insurance Trust Fund began running cash deficits in 2008....Social Security cash surpluses, which have been used to help finance other government activities, are projected to turn to cash deficits by 2016," (although benefits already exceed payroll tax revenues in 2010).
• Current projections "show that the federal government is on an unsustainable fiscal path. While this is similar to the results of previous simulations, the sense of urgency has increased....The longer action is delayed, the larger the changes necessary."
• By 2030, interest payments, Medicare, Medicaid, and Social Security will consume nearly all revenues leaving "little room for all other spending, which consists of what many think of as government, including national defense, homeland security, investment in highways and mass transit and alternative energy sources, plus smaller entitlement programs such as Supplemental Security Income, Temporary Assistance for Needy Families, and farm price supports." 

GAO Report on Long-Term Fiscal Outlook

Also on the deficit front, Secretary of the Treasury Geithner and OMB Director Orszag released a joint statement on "Budget Results for Fiscal Year 2009," finding that the deficit for FY 2009 was $1.417 trillion.  The report, which you can link to below, includes final numbers on revenues, outlays, and expenditures by each department.

Treasury / OMB Statement on the FY 2009 Deficit

The Social Security Administration confirmed on Thursday that, with consumer prices down over the past year, monthly Social Security benefits will not automatically increase in 2010.  This will be the first year without an automatic COLA (cost of living adjustment) since COLAs were established in 1975.  By contrast, last year when consumer prices increased largely as a result of higher gas prices, beneficiaries received a 5.8% COLA--the largest since 1982.  Social Security News Release

Due to the impending COLA announcement, the Obama Administration announced on Wednesday they will seek legislation to send a $250 one-time check to beneficiaries in 2010--equivalent to a 2% COLA for most recipients.  The one-time checks are being characterized as "Economic Recovery Payments" to seniors, with the emergency designation allowing Congress to avoid finding offsets for the $13 billion in payments.  

From a fiscal responsibility perspective, the payments are troubling because they cast doubt on the political will of policymakers to take the necessary steps to place Social Security and other entitlements on a sustainable path.  

In addition to 49 million Social Security beneficiaries, the $250 checks would also go to 5 million Supplemental Security Income (SSI) beneficiaries, 2 million veterans benefit recipients, a half million railroad retirement and disability beneficiaries, and a million public employee retirees.

White House Statement