Thursday, March 11, 2010

Will House Democrats stomach Senate health care bill?

In response to President Obama’s call for substantial progress on health care reform by March 18, Democratic leaders are scrambling to determine the best way to move legislation forward.

House Democrats would like to pass a reconciliation bill before passing the Senate reform bill to ensure their changes are made, but doing so would go against the definition of reconciliation—a process intended to amend existing law. The alternative requires the House to pass the Senate bill first and hope that the Senate follows through with reconciliation to make the final bill amenable to House Democrats.

Regardless of whether reconciliation takes place before or after the Senate bill is signed into law, it will be difficult to alter the Senate’s legislation drastically using this method. Reconciliation is intended to be a budgetary process, requiring that the bill pertain to provisions that affect spending, taxes and deficits. While measures such as delaying the tax on Cadillac health plans meets these constraints, other sticking points such as abortion and tort reform may not.

To review, the Senate bill was passed back in December and is proposed to cover 31 of 54 million uninsured with an estimated cost of $871 billion over 10 years. The funding mechanisms and key provisions of the Senate bill are highlighted below.

Funding mechanisms of the Senate bill
• 40% excise tax on any employer-based health plans valued at over $8,500 for individuals and $23,000 for families
• Annual fees on drug companies, medical device manufacturers, and health insurers (excluding some non-profit plans)
• 0.9% increase to Medicare FICA tax for joint filers making $250,000/single filers making $200,000
• Increased threshold for medical expense tax deductibility to 10% (for individuals)
• 10% tax on tanning bed services
• Decreased Medicare Advantage program spending
• Decreased Medicare provider reimbursement
• Discounts for Medicaid and Medicare Part D from drug companies

Key provisions of the Senate bill
• No public option; federal government to oversee state/region-based exchanges and insurance premiums
• No denial of coverage based on pre-existing conditions
• Individual mandate and insurance subsidies for low-income Americans
• 60% minimum actuarial value for benefits
• No employer mandate but employer pays a fine to cover government subsidies if not providing group coverage
• Limit on premium differential criteria to tobacco use, age (3:1), geography, and family composition for small groups and individuals
• 2 year subsidy for low-wage small employers providing group coverage

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