How reconciliation irons out the House and Senate health bills

Democratic leaders pushing health care reform this year like to argue that a vast majority of the proposals represent uncontroversial changes backed by most Capitol Hill lawmakers. And while that might be true, it hasn’t prevented some sharp disagreements between House and Senate Democrats over a handful of high-profile reform provisions.

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Indeed, the House-passed reform bill strayed from the Senate proposal on a number of key issues, from children’s coverage to Medicaid payments to the creation of a public health insurance plan. Here’s how the reconciliation bill — which House leaders unveiled today to address what they considered weaknesses in the Senate legislation — would tweak (or not) some of the most contentious provisions in the upper chamber’s bill.

Paying the Freight

A central disagreement between House and Senate Democrats has been over how to pay the substantial costs associated with covering tens of millions of uninsured Americans. The House paid much of the tab with a 5.4 percent tax on the nation’s highest earners — individuals making more than $500,000 per year, and families pulling in more than $1 million. The Senate, meanwhile, passed a 0.5 percent hike on Medicare’s payroll tax for individuals earning more than $200,000 and families earning more than $250,000. But a larger chunk of funding under the Senate bill would come from an 40 percent excise tax on high-cost insurance plans — a provision that’s wildly unpopular among a key Democratic constituency: Organized labor.

The reconciliation bill alters both funding mechanisms. First, it scales back the insurance excise tax by increasing the dollar thresholds from $8,500 to $10,200 for single coverage, and from $23,000 to $27,500 for family coverage. It also delays the application of that tax until 2018. To make up the revenues lost by changes to the excise tax, the reconciliation bill also expands the Medicare tax to include net investment income (i.e. unearned income).

Kids’ Care

After years of promoting the virtues of the Children’s Health Insurance Program, House Democrats did a strange thing: They proposed to eliminate CHIP altogether, instead moving those kids into either Medicaid or private plans on newly created insurance marketplaces, dubbed exchanges. The Senate bill took a different tack, reauthorizing CHIP through 2019, while funding it through 2015. Despite a more recent White House proposal to provide an extra year of funding (through 2016), the reconciliation bill doesn’t touch the issue, leaving the original Senate provision intact (and kids welfare advocates happy).

Pharma Deal

A behind-the-scenes deal cut last year between Sen. Max Baucus (D-Mont.) and the pharmaceutical lobby drew a good deal of attention: The nation’s drug makers, under that agreement, would dedicate $80 billion toward health care reform over the next decade if Democrats would oppose further industry reforms — including a proposal allowing Americans to buy their prescriptions from abroad, and another empowering states to negotiate directly with companies on behalf of their lowest-income seniors.

While the White House endorsed the deal, House Democrats didn’t. Instead, Rep. Henry Waxman (D-Calif.), chairman of the House Energy and Commerce Committee, included the state negotiation provision as part of the House-passed bill. While the reconciliation bill does tap the drug makers for $28 billion over 10 years ($5 billion more than the original Senate bill), it doesn’t dabble with the other terms of the Pharma deal.

Abortion

Always the hot-button issue, abortion has emerged as the one topic that still really threatens House passage of health care reform. Late last year, Speaker Nancy Pelosi (D-Calif.) had negotiated a delicate compromise designed to satisfy a number of anti-abortion Democrats — notably Rep. Bart Stupak (Mich.) — who were concerned that the reform bill would allow taxpayer dollars to subsidize abortions. The so-called Stupak amendment would ban exchange plans from offering abortion coverage, forcing women to buy a separate policy covering abortion services. The Senate bill is a bit less strict, allowing abortion coverage on the exchange, but requiring women to write a separate check for those services to ensure that no federal funds go toward them. It’s the Senate provision that’s going to the floor of the House early next week, leaving Stupak and roughly a dozen other House Democrats vowing their opposition.

Anti-Trust Exemption

For 64 years, the health insurance industry has reaped the benefits of a rare exemption to federal anti-trust laws, which allows companies to share cost and coverage information without scrutiny from Washington. And for a number of years, Democrats have had their eyes on repealing it. The House bill would have done just that, but the provision didn’t make the cut in the Senate, due largely to the opposition of Sen. Ben Nelson (Neb.), the moderate Democrat whose close ties to the insurance industry include a stint as CEO of the Omaha-based Central National Insurance Group.

Like many other insurance reforms, this provision is one of those non-budget related items not eligible to move under the reconciliation process. The Democrats, though, are hoping to repeal the exemption later this year through separate legislation. Indeed, the House has already passed such a bill last month.

Medicaid Rates

The headlines today will likely focus on the plan to eliminate the sweetheart Medicaid deal that Senate leaders cut with Nebraska’s Nelson — a deal so unpopular that even Nelson himself claims now to oppose it. But much more significant for purposes of ensuring care is a provision of the reconciliation bill that hikes Medicaid rates to primary care physicians to at least the level of what Medicare pays for those same services. That provision was contained in the House bill, but not the Senate proposal.

The issue isn’t trivial. Medicaid rates are so low that many doctors refuse to see Medicaid patients. Only about 40 percent of physicians accept all new Medicaid patients, versus 58 percent for Medicare patients, according to a September study from the Center for Studying Health System Change, which randomly surveyed more than 4,700 physicians. And that number drops to about 31 percent among family doctors and general practitioners.

For dental care, the numbers are even worse. Only 27 percent of the nation’s dentists will treat Medicaid-insured patients, according to a 2007 survey by the American Dental Association survey. Those trends raise important questions about the value of an insurance program that nobody accepts — and led directly to the Democrats’ decision to hike Medicaid rates.

Closing the Doughnut Hole

Though seniors participating in Medicare’s prescription drug program are generally happy with their benefits, a painful thorn plagues the program: Seniors are forced to pay the full cost of drugs when annual expenses hit $2,700, and the subsidies don’t return until total costs hit $6,154 — a coverage gap known (not endearingly) as the doughnut hole. The Senate bills took steps to reduce the size of that gap, relying mostly on the pharmaceutical companies, who offered a 50 percent discount through the doughnut hole as part of their $80 billion deal with Democrats.

The reconciliation bill expands on that plan, offering seniors an additional $250 rebate in 2010, and closing the doughnut hole entirely by 2020.

Illegal Immigrants

While both the Senate and House bills would prohibit illegal immigrants from receiving federal subsidies on the exchanges, the Senate took the restriction a long step further by preventing those folks from buying insurance from the exchanges at all — even if they paid the full price of coverage using their own money. (The House bill would allow such unsubsidized purchases.) Although some members of the House Hispanic caucus have advocated for the House language in the reconciliation bill, it didn’t make its way in.

Public Option

The House bill included the creation of a government-backed insurance plan to compete with private companies on a national exchange, while the Senate bill contained no such thing. Despite a late push from liberal groups to include the House provision in the reconciliation bill, House Speaker Nancy Pelosi (D-Calif.) declined, citing a lack of support in the Senate.

House Majority Leader Steny Hoyer (D-Md.) said today that the lower chamber hopes to vote on the reconciliation bill Sunday afternoon.

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Mike Lillis

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