House

The House passed a comprehensive health reform bill (HR 3962) on November 7 along party lines with the exception of 39 Democrats opposing the bill and one Republican supporting the bill.  The vote was 220-215.

In a nutshell: the House-passed bill would require most individuals to buy health insurance if they don't get it through their jobs beginning in 2013.  Individuals and families with income up to 150% of the federal poverty level would qualify for Medicaid, and those with incomes up to 400% of FPL would qualify for subsidies. Employers with annual payrolls over $500,000 would be required to provide coverage or contribute to a fund for coverage ("play or pay").  The bill would create health insurance "exchanges" where individuals, families, and small businesses could shop for insurance policies, and would create a national public insurance option to compete with private insurance plans. Insurance companies could no longer refuse to cover customers with pre-existing medical conditions, impose annual or lifetime benefit limits, or cancel a policy when someone files expensive claims.  The bill would impose a tax surcharge of 5.4% on couples with gross incomes over $1 million and individuals over $500,000.

Many of the Democrat "no" votes came from members of the fiscally conservative House Blue Dog Coalition concerned about the trillion-dollar-plus cost of the bill and the inadequacy of cost containment measures (see article below).

Earlier in the day, the House defeated 176-258 a Republican substitute health reform plan that would have extended coverage to 3 million of the 54 million projected to be uninsured by 2019.

Administration Statement on the House bill

Senate

On the Senate side of the Capitol, Senate Majority Leader Harry Reid is waiting for Congressional Budget Office (CBO) scoring of his health reform bill that merges the Senate Finance Committee bill (S 1796) and the Senate HELP Committee bill (S 1679).

Even if Reid receives a budgetary "score" that confirms his Senate health reform bill is within the $900 billion, deficit-neutral guidelines set forth by the President, he will still face the problem of not having 60 votes to pass the bill (60 votes being required to end a filibuster and bring the measure to a vote).  By including a "public option" health plan in his bill, Reid has lost the support of Senator Olympia Snowe (R-ME), Senator Joe Lieberman (I-CT), and possibly several centrist Democrats.

That will leave Senator Reid with three options to move health reform forward: (1) bring to the Floor a bill closer to the Senate Finance Committee version that did not include a public option and instead included state co-ops to spur competition with private insurance companies; (2) bring to the Floor a bill that includes a public option that would "trigger-in" only if health insurance exchanges failed to provide a threshold amount of choice and price competition; or (3) utilize the "budget reconciliation process" that would reduce the vote threshold to 50 votes--because reconciliation votes cannot be filibustered.  However, the downside of utilizing budget reconciliation is that the bill could not include any provisions that do not have a federal budgetary impact -- which would require that many of the key private insurance reforms would have to drop out of the bill.

Because of the political complexities of passing a bill in the Senate, Majority Leader Reid has at various times refused to commit to completing action on a conference report by the end of December.  Yesterday, Senate Majority Whip Dick Durbin (D-IL) confirmed that the schedule has slipped by saying Democrats' goal is now to pass its own version of health care reform by the end of the year -- pushing the House-Senate conference off to next year. 

Conference

After the Senate completes action, House and Senate conferees will have the politically complex task of negotiating a compromise bill that can obtain 218 votes in the House, 60 votes in the Senate (or 50 votes if the Senate utilizes the budget reconciliation option), and meet the President's requirements that the legislation not cost more than $900 billion over 10 years and not increase the deficit now or in the future.

Concord Coalition Side-by-Side on House-passed and Senate health reform bills

There is little dispute that the pending health reform bills would make significant progress in expanding health insurance coverage.  According to the Congressional Budget Office, the House-passed bill would increase coverage of legal, nonelderly from 83% to 96%;  and the Senate Finance bill from 83% to 94%.

However, critics of the pending bills contend that while they significantly increase coverage, they fail to sufficiently contain rapidly rising health costs. More specifically, critics say:

• The Senate bill's plan to tax high-priced insurance policies is insufficient in scope to dramatically change medical consumption and the House bill lacks any such provisions;
• Proposals to require comparative-effectiveness research have been watered down and fail to tie approval of new therapies to cost effectiveness and improved outcomes;
• The Senate's Independent Medicare Commission has insufficient authority to make needed changes to rein in Medicare cost growth and hospitals have been exempted from the Commission's scope, while the House bill has no commission at all;
• Medicare pilot projects aimed at bundling fees and paying doctors and hospitals for quality outcomes -- rather than the quantity of tests and procedures -- could take years to be implemented nationally, if ever;
• Neither the House nor the Senate bills address medical malpractice reforms as called for by the President;
• Promised savings in Medicare payments to health providers come from squeezing the payments a bit, but do nothing to fundamentally reform the system's incentives--and even those minimal savings may never come to pass given recent experience with scheduled--and abandoned--cuts in Medicare physician payments; and
• Health industry groups' pledge last May to voluntarily trim the growth of health care spending by 1.5%, or $2 trillion over the next decade is unenforceable and unlikely to materialize.

The New York Times yesterday reported that "experts--including some who have consulted closely with the White House, like Dr. Denis A. Cortese, chief executive of the Mayo Clinic--say the measures take only baby steps toward revamping the current fee-for-service system, which drives up costs by paying health providers for each visit or procedure performed."  However, according to the Times, "drastic changes in the health care reimbursement system could cost the White House the support of doctors and hospital groups, who have signed onto the legislation and are lobbying hard to keep the current fee-for-service system from being phased out too quickly."

The Washington Post last week quoted Ralph Neas, head of the nonpartisan National Coalition on Health Care, as saying "these bills do very little in terms of reining in long-term cost growth," adding "there is not enough in the public sector and virtually none in the private sector."

Concord Coalition background papers and other resources on health reform

The "Rule" the House adopted last Saturday for consideration of the health reform bill, also set the terms of debate for next week's consideration of legislation to "fix" the Medicare physician payment system and enact pay-as-you-go (PAYGO) legislation that would generally require offsets for tax cuts and entitlement spending increases.

Background on Medicare Physician Payment System.--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" (SGR) and tied future Medicare physician payment rates to past spending.

Doctors complained about the SGR formula because it did not allow doctor's payments to keep pace with medical cost growth and Congress has stepped in periodically since 2002 to stop the SGR automatic cuts from being implemented.  This has caused a widening gap between current Medicare physician payments and the SGR rate required by the 1997 law.  For example, payment rates under the SGR physician fee schedule are due to fall by 21 percent in 2010 and by 5 percent annually for at least several years thereafter.  Additional Background on Fixing the SGR:  See Option 59

Last month, Senate leaders attempted to pass legislation to permanently repeal the SGR payment system, which would have cost $247 billion.  However, Senate Budget Committee Chairman Kent Conrad (D-ND), 12 Democrats, and independent Joe Lieberman (I-CT) joined Republicans to defeat an attempt by Majority Leader Harry Reid (D-NV) to invoke cloture (end debate) and bring the measure to a vote. Conrad and others objected that the $247 billion 10-year cost to override the SGR payment schedule would not have been paid for.

The Concord Coalition strongly agrees with Chairman Conrad that the measure would have added significantly to the already spiraling federal debt.  Concord Coalition Statement on Medicare "Doc" Fix

The House is now poised to vote next week on similar legislation to permanently cancel the required SGR physician pay cuts.  In order to address the concerns of fiscally conservative Blue Dogs, the House Democratic leadership will attach to the measure legislation to re-enact a 1990s-style PAYGO (pay-as-you-go) law--requiring that the costs of new tax cuts and entitlement spending increases be fully offset by tax increases and/or spending cuts.

The Concord Coalition strongly supports the re-enactment of a statutory PAYGO requirement.  However, we are deeply concerned that the PAYGO bill heading towards adoption in the House next week would exempt the Medicare SGR fix from the PAYGO requirement, costing $210 billion.  Moreover, the bill would also exempt: extension of the Bush tax cuts (at a 10-yr cost of more than $2 trillion), a fix for the estate tax before it jumps back to pre-2001 levels (at a cost of more than $250 billion), and a fix for the Alternative Minimum Tax (AMT) so it doesn't impact middle income taxpayers (at a 10-yr cost around $500 billion).   See The Concord Coalition Issue Brief on PAYGO

Unemployment - Homebuyer - NOL Bill Passes

Last week Congress passed and the President signed legislation (HR 3548, PL 111-92 ) that would extend unemployment benefits, extend and expand the home buyer tax credit,  and expand the net operating loss carryback rules to give a boost to struggling businesses.  The bill was fully paid for, consistent with House and Senate PAYGO rules.  Details follow:

The unemployment measure will allow workers in all 50 states to draw 14 weeks of federal unemployment benefits after exhausting their regular 26 weeks of state compensation.  It will also provide an additional six weeks in states with unemployment rates higher than 8.5%.

The legislation will provide a continuation of the $8,000 first-time home buyer tax credit through April 30, 2010, and would create a new $6,500 tax credit for existing homeowners who want to purchase a different house as their primary residence.   In addition, the legislation would increase the income caps for home buyer credit eligibility to $125,000 for individuals and $225,00 for couples.

HR 3548 will also expand the net operating loss (NOL) carryback provision from the 2009 stimulus legislation by allowing any business with a loss in either 2008 or 2009 to claim refunds of taxes paid within the prior five years.  Under current law, only small businesses were permitted to claim the five-year NOL carryback.

Senators Continue Call for Deficit Reduction Task Force / Commission

At a Senate Budget Committee hearing today, Chairman Kent Conrad (D-ND) reiterated his call for a bipartisan fiscal task force -- composed of lawmakers and Administration officials -- to develop a deficit reduction comprehensive package.  Conrad yesterday called for legislation creating a task force or commission to be added to impending legislation to raise the nation's debt ceiling.  According to the Treasury Department, Congress must increase the debt ceiling in December in order to avoid a Treasury default on U.S. securities.

The statutory debt ceiling does not have any practical impact in controlling the growing U.S. debt since -- as a practical matter -- the amount of debt is driven by spending and revenue decisions.  However, the periodic need to increase the statutory limit on the debt serves as high profile reminder of the rapid increase in U.S. debt.  The debt ceiling legislation has been used several times as a vehicle for budget process legislation aimed at containing growing deficits.

Conrad said he has joined with 10 other Senators in a commitment not to vote for a debt ceiling increase without also having a vote on creating a special process to deal with the long-term deficit outlook.

Charts Used at November 10th Senate Budget Committee Hearing

Related Statement by House Majority Leader Steny Hoyer (D-MD)

Financial Reform Bills

Congress Daily reports that Senate Banking Committee Chairman Chris Dodd's (D-CT) draft financial reform legislation "largely hews to an Obama administration overhaul plan and a package crafted by House Financial Services Chairman Barney Frank.  But it contains a few key differences. For example, the Dodd draft would establish an Agency for Financial Stability to monitor threates to the financial system like the other plans. But it would create an independent director selected by the president to head the agency.  The Dodd bill also consolidates banking regulation at the federal level much more than other proposals, merging the duties of four different agencies into a new Financial Institutions Regulatory Administration. Small banks oppose the change."

Banking Committee Press Release

Concord Coalition Releases New On-Line Version of Principles and Priorities Budget Game 

The Concord Coalition and Next 10, a California group, are offering a new do-it-yourself on-line tool to balance the federal budget.

Called the Federal Budget Challenge, the Web site leads users through a series of policy choices ranging from health care to national defense to tax deductions. At each step along the way, a graph displays how their choices impact federal budget deficits over the next 10 years. Users can opt to receive a detailed explanation of each choice that offers arguments for and against each option.

“With the federal deficit soaring, the baby boomers beginning to retire and both houses of Congress debating the cost of health care, it is now more critical than ever that Americans understand the way our nation’s finances work,” said Robert L. Bixby, executive director of The Concord Coalition.

Added F. Noel Perry, founder of Next 10. “Our nation’s finances impact all of us and it’s our responsibility to understand how the federal budget works. This tool allows users to set their own priorities and make policy choices that reflect their values and vision for the future.”

New On-Line Version of Principles and Priorities Budget Game