Think Progress

by Faiz Shakir, Amanda Terkel, Matt Corley, Benjamin Armbruster, Igor Volsky, and Zaid Jilani

Decision Points

On Monday, Senate Democrats and White House officials met "to discuss how to merge the two versions of the Senate's health care legislation, and Democratic aides said they were aiming to have a combined bill 'mostly baked' by the end of this week." As the New York Times explains, "once the bills are melded, the Congressional Budget Office (CBO) will be asked to develop a revised cost analysis, which will take several days. At that point, provided everything is in order, the majority leader, Harry Reid of Nevada, will look to start the floor debate" by the week of Oct. 26. In the House, "Speaker Nancy Pelosi and her lieutenants have been at work for weeks trying to blend legislation approved by three House committees. The result is certain to include a government insurance plan, but the details of the 'public option' have split the rank and file, and leaders have spent days struggling with the issue." Throughout the merging process, lawmakers have been concerned with thee major issues: the public option and how it reimburses providers, affordability and coverage, and the employer mandate.

PUBLIC OPTION: The Senate Health, Education, Labor and Pensions Committee (HELP) included a public option to compete with private insurers on an equal playing field, while the Finance Committee did not include a public plan, instead proposing "the creation of private, nonprofit health cooperatives." Pelosi is insisting the House health care bill include a public option and has sent "three different public option proposals to the Congressional Budget Office (CBO) to assess their financial impact. The three plans vary in the way medical provider reimbursement rates are handled." A robust public option that initially reimburses providers at 5 percent above Medicare rates was originally part of the House bill. A second alternative would allow the public option to reimburse at higher than Medicare rates but could trigger the lower Medicare reimbursements if costs increased. A third option would have the public plan negotiate payment rates with providers. According to the CBO, a public option that reimburses at 5 percent above Medicare rates would generate $85 billion more in savings than a plan that reimbursed at market rates. In fact, in its analysis of the HELP committee bill, the CBO concluded that "the public plan would pay providers of health care at rates comparable to privately negotiated rates -- and thus was not projected to have premiums lower than those charged by private insurance plans in the exchanges." As a result, that kind of public option does "not have a substantial effect on the cost or enrollment projections." Conversely, the House bill's original public option "would be about 10 percent cheaper than a typical private plan offered in the exchanges," the CBO concluded. Recently, lawmakers have proposed several other alternatives. Sen. Tom Carper (D-DE) is floating a new public option compromise that would "allow states to individually decide whether to create a private-insurance competitor such as a government plan and a nonprofit insurance cooperative, or to open up state-based insurance pools for government workers to every resident." Another proposal would "establish a robust, national public option for insurance coverage but give individual states the right to opt out of the program." Early last week, Rep. Mike Ross (D-AR) -- who led a group of seven conservative "Blue Dog" Democrats who objected to a public option that reimbursed providers based on Medicare rates -- floated a proposal to replace the public option with a proposal that would allow Americans under 65 to buy into the Medicare program. Medicare would reimburse the newly enrolled population "at a reimbursement rate much greater than current Medicare rates."

AFFORDABILITY AND COVERAGE: During a conference call with reporters yesterday, Senate Finance Committee Chairman Max Baucus (D-MT) said that, in merging the two different bills in the Senate, lawmakers were looking to expand coverage and improve affordability. After all, "health reform that fails to make insurance more affordable is at best an incremental improvement." Currently, the  Finance Committee's bill would offer subsidies on a sliding scale to families between 134 percent and 300 percent of the federal poverty line (with a flat subsidy for families between 300 and 400 percent) and cap out-of-pocket spending for families in that range. According to preliminary analysis conducted by the CBO, families could still spend 10-20 percent of their income on health care coverage. In the HELP bill, affordability credits are available on a sliding scale for Americans earning up to 400 percent of the federal poverty line and are slightly more generous than the provisions in the Senate Finance Committee bill. Similarly, under the House bills, families eligible for subsidies would have to spend less on coverage and would have to reach smaller out-of-pocket spending caps. Research indicates that families that spend more than 5-9 percent of their gross income on health care begin confronting affordability problems. As affordability expert Karen Pollitz points out, "depending on what premiums are charged for qualified health benefit plans" subsidies capped above a certain level "may prove to be insufficient to ensure affordable health care for all Americans." She suggests that Congress should "consider instead a rule that no individual or family will have to pay more than 10 percent of income on health insurance premiums...cutting subsidies off entirely at an arbitrary income level can leave families vulnerable," she says. During yesterday's conference call, however, Baucus said that it would be politically difficult to increase subsidies and implied that the Senate may reduce the value of the minimal creditable coverage for Americans in the exchange to "help address affordability"; this kind of solution would shift the costs of coverage onto the enrollee.

EMPLOYER MANDATE: All three House bills and the Senate HELP bill include an employer pay-or-play provision, which requires large employers to offer creditable coverage or pay a fine. The provision establishes the principle that while individuals should be responsible for purchasing health insurance coverage -- with a waiver for those who cannot afford to do so -- large businesses that do not directly provide health care to their employees should pay into a public pool to help finance their employees' coverage. An employer mandate enhances the existing system of employer-based coverage, levels the playing field between employers "that provide insurance and those competing with them that do not," reduces "crowd-out of private coverage by new public programs," and preserves the employer contribution -- an important source of funding for health care reform. The Senate Finance bill contains a free-rider provision, which only targets employers whose workforce is eligible for subsidized coverage in the exchange. Under the provision, employers who don't offer affordable coverage to their employees, would "have to cover the cost of any government subsidy their employees would qualify for under reform." But as the Center on Budget and Policy Priorities points out, the free-rider mandate only requires employers to partly finance the coverage of lower income workers (workers who qualify for subsidies in the exchange) and  may discourage employers from bringing on new lower income hires. "It would make it considerably more expensive for employers who do not offer health insurance to hire workers from lower-income families," providing employers with strong incentives to "tilt hiring toward people who have a spouse/parent with a good income." Poor parents with children in one-earner families would be particularly disadvantaged, and "since minorities are more likely to have low family incomes than non-minorities, a larger share of prospective minority workers would likely be harmed." Sen. John Kerry (D-MA) introduced an amendment to replace the free rider provision with a pay-or-play mandate during the Finance Committee's mark-up process and promised to debate the issue on the Senate floor.
 

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"I just have this interesting idea of asking Anita Dunn if this is her idea of a cultural revolution and if she really wishes that she could get Sean Hannity and the other Fox commentators to go to a farm and work the way Mao got sent the intellectuals out."
-- Fox News' Newt Gingrich, 10/19/09, criticizing White House communications director Anita Dunn for quoting Mao Tse-tung

VERSUS

"Gingrich even quoted a political leader not previously known to be one of his influences. 'War is politics with blood; politics is war without blood,' said the Speaker, citing the late Chinese Communist leader Mao Tse-tung."
-- Roll Call, 5/29/95