How reconciliation might be used for health care reform

How reconciliation might be used for health care reform

This is the second post in a series of two. For a primer on reconciliation, please start here: What is reconciliation?

Let’s look at how reconciliation might apply to this fall’s health care reform debate.

Suppose in September Senate Finance Committee Chairman Baucus cannot reach an agreement with Republican Senators Grassley, Enzi, and Snowe. Suppose Senate Democrats are still not completely unified, and Senate Majority Leader Reid is afraid to bring a health care reform bill to the Senate floor under the normal rules, because he fears that his 60 Senate Democrats won’t stick together. His biggest fear would not be the vote on final passage – he would have a fairly high probability of getting 51 Democrats to vote aye, if he ever got that far. It’s the intervening amendment process and a potential filibuster that kill him.Republicans could craft amendments that moderate Democrats would support, and in effect rewrite the bill on the Senate floor. At a minimum, Senator Reid could fear that a large majority of more liberal Senate Democrats would be furious. Or you might expect that a large share of the 40 Republicans would refuse to end debate (they would be filibustering the bill), and Sen. Reid might not be able to get 60 votes to shut off debate. If the bill still contained a public option, or if it increased long-term budget deficits, or if it raised taxes on small businesses or increased private health insurance premiums, it’s easy to imagine some moderate Senate Democrats voting no on cloture.

Fearing this scenario, Senator Reid might instead choose to use the reconciliation instruction created last spring in the budget resolution for just this purpose, as a backup plan in case Democrats could not broker a deal with Senate Republicans, and in case they couldn’t hold all of their own caucus together.

This year’s reconciliation instruction orders two committees, Senate HELP (Kennedy/Dodd) and Senate Finance (Baucus) to report legislation to the Senate Budget Committee by October 15th. Each committee’s bill must reduce the deficit (through either spending cuts, tax increases, or a combination) by a net of at least $1 billion over the period 2009-2014.

Hold on. $1 billion?!? I thought this was supposed to be a budget bill? I thought these were trillion+ dollar bills?

You can see that Senator Reid created this instruction not to create a fast-track legislative vehicle for deficit reduction, but instead to create such a process for a bill that is basically deficit neutral.

We already have a bill from the Senate HELP Committee. Senate Finance Committee Chairman Baucus would have to get his committee to report a bill no later than October 15th.

It’s safe to assume that such a markup would be partisan. Reconciliation is a hardball process that shuts down the rights of the minority party. Using it would likely provoke a unified response from Senate Republicans, who would react quite negatively to being cut out of the legislative process. Senator Baucus has a 13-10 partisan majority on the committee. He could lose at most one of his 13 Democrats and still report out a bill.

The Senate Budget Committee would then make sure that both the HELP Committee and Finance Committee bills meet the instruction: that each reduces the deficit by at least $1 billion over the next five years. These two bills would be stapled together and become the reconciliation bill for consideration on the Senate floor.

Note that these two bills would likely be incompatible. They may have duplicative sections or conflicting provisions. There is nothing that requires the bill to be internally consistent.

From Senator Reid’s perspective, so far, so good. Before bringing the reconciliation bill to the Senate floor, I would expect that he would draft an alternative to the two bills, called a substitute amendment. He would take components of the two committee bills and combine them in a way that best achieves his policy goals and, more importantly, maximizes his probability of holding 51 Democratic votes on the Senate floor. As long as he stays close to the confines of the two committee-reported bills, he has nearly complete freedom to draft the substitute amendment any way he likes.

We learned in the first post that the reconciliation rules protect the bill from a filibuster and endless and non-germane amendments. If Senator Reid can hold 51 votes to defeat amendments, and to vote aye on final passage, then he’s home free. He has a further advantage in that the rules make it hard to add things to a reconciliation bill.

His problem is the Byrd rule. Any one Senator (presumably a Republican who opposes the bill) can surgically use the Byrd rule to remove sections of the bill. Senator Reid will need 60 votes to defeat each of these attempts, and there could be a lot of them. If Reid’s coalition is shy of 60 votes, the bill could end up being Swiss cheese by the end of the process and before Senate passage. The reconciliation bill that passes the Senate could contain enormous gaps from provisions stricken by skillful use of the Byrd rule.

We’re really down in the weeds, but this is critically important, so I’m going to dive a little further into the specifics of the Byrd rule and how it might apply to health care reform.

We learned in the first post that any provision which does not affect spending or taxes is “extraneous,” and therefore violates the Byrd rule, and therefore can be removed by a single Senator raising a point of order unless 60 of his colleagues vote to “waive” the point of order and leave that provision in the bill. Note that the Byrd rule has nothing to do with whether a provision is good or bad policy. It’s mechanical.

Here are the three most important parts of the Byrd rule:

  1. If a provision has no effect on spending or revenues, then it’s extraneous and violates the Byrd rule …
  2. … unless it is a necessary term or condition of another provision that does affect spending or revenues.
  3. If a provision has a small budget effect that is merely incidental to its broader non-budgetary policy effect, then it is extraneous and violates the Byrd rule.

Looking at the provisions of a likely reconciliation bill, here are my preliminary judgments. The ultimate arbiter is the Senate Parliamentarian. “OK” means that I think it doesn’t violate the Byrd rule, not that I think it’s good policy.

  • Medicaid expansions – The spending is clearly OK. Some of the detail changes within the Medicaid expansion are not.
  • New health insurance “exchange” subsidies – OK. Same as for Medicaid. Lots of the non-spending related details could violate the Byrd rule.
  • Tax increases – OK.
  • Individual & employer mandates – OK. They’re basically taxes with conditions.
  • Small business tax credits – OK

Here are provisions that I think violate the Byrd rule:

  • Exchanges / Gateways, and all the requirements imposed through them – They’re separated from the subsidies.Someone might argue that the exchanges are a “necessary term and condition” of making the subsidies work. That’s a huge stretch.
  • So-called health insurance consumer protections – Insurance mandates such as those requiring guaranteed issue and guaranteed renewability, no lifetime or annual limits, extension of coverage to 25-year old dependents, and modified community rating – As I wrote yesterday, I think these clearly violate the Byrd rule. A couple of friends pointed out that these provisions would make health insurance more expensive. That depresses wages, which reduces income tax revenues, which is a budgetary effect. I think this fits in the merely incidental bucket – these provisions would fundamentally restructure the insurance industry with a minor budget effect.
  • The public option – As currently drafted, it’s designed to be independent of federal spending. If so, it’s extraneous. I imagine they could redraft it to link it more closely to the spending so it doesn’t violate the Byrd rule.

In addition, I imagine that each of the broader spending and tax provisions that I labeled as OK, including the Medicaid expansions and the health insurance subsidies, would contain components that are not strictly necessary for the spending. I imagine that some of those provisions might be vulnerable to the Byrd rule as well.

Now you can see Senator Reid’s challenge. If he goes with a 51-vote strategy through reconciliation, he may lose large parts of his bill. In particular, he’ll have to figure out how to protect the public option from the Byrd rule, because a Left-side strategy only works if the public option stays in the bill.

I will conclude by repeating a point from yesterday. It is too soon to predict how this fall will play out. I hope these process details help you understand some of the rules of the game.

(photo credit: “The Ohio Clock Corridor” by mr_mayer)

29 responses

  1. Keith, as I was one of the commenters begging for some further elaboration, I thank you.

    Not to be a pest, I will ask this question to other commenters, since I’m still confused on one point. As follows:

    Keith notes repeatedly that reconciliation only accepts provisions that have an “effect” spending and taxes. But at the same time, the whole point of reconciliation is to reduce or not increase deficits–that is, not merely to have an “effect” on them, but to keep them static or decrease them.

    You see where I’m going with this. Expanding medicaid, tying the public option to spending, subsidizing exchanges–all of this increases spending, big time. The taxes are aimed to balance this, but what if they just don’t put any taxes in the bill, theoretically? You’d wind up with all this new spending, no new revenues, and a bill that meets none of the targets of the reconciliation instructions.

    That’s just a thought experiment, and my question is, Is it possible? Or is there something in the process that prevents it from happening?

    Second, let’s say that the reports meet the budget instructions, and in particular have a spending-independent public option that would be nixed by the Byrd rule. Realizing this, Reid crafts his substitute amendment with a spending-relevant public option.

    Well, damn–that’s a rather large amendment. All else equal from the committee reports, this move would seem to obliterate any claim to reducing or holding neutral the deficit. Doesn’t that mean that you just don’t have a real “reconciliation bill” anymore? Couldn’t the parliamentarian approve all of it, since it all has “an effect” on spending and taxes, and leave us with a bill that puts us into the deepest red?

    I mean, the second leg of the process seems to not gel too well with the first leg. The first leg mandates some kind of fiscal responsibility. The second stage seems to permit complete irresponsibility (in theory, of course. In practice, it would probably cost votes most of the time).

    Shouldn’t the Byrd rule apply to the whole package? For instance, it could approve x,y,z provisions, and then have a total CBO score that would measure whether the bill actually meets it reconciliation instructions–whereupon the Senate would have to basically do what the committees already did, namely, follow the instructions.

    As it looks now, they can basically CALL a bill a “reconciliation bill,” with certain implications of fiscal responsibility, and then proceed to make a budget busting behemoth, sail it through with 51 votes, and go on their merry way.

    See what I’m getting at, even if I express it poorly? Any thoughts?

  2. Mr. Hennessey,

    Thank you so much for the two blog posts on the reconciliation process. You have successfully lifted some of the fog that seems to surround the legislative process. I do have some follow up questions.

    It seems as if the Senate Parliamentarian could play a significant role in the outcome of the health care debate. Who is this person? How is he/she appointed? Could he/she be removed if Senator Reid did not like a certain ruling? Is there any appeal that can be made from a Parliamentarian ruling by a disappointed Senator?

    Again, thanks for your posts and keep up the good work!

    Lee Hicks

  3. Keith, thanks again for such great explanations.

    My question concerns the next possible step. What if Reid does just what you describe, although many parts are removed due to the Byrd Rule. Couldn’t the Democrats just combine the “Swiss cheese” bill they passed with the House version during the reconciliation process, and bring essentially the House version to the full Senate for a vote? Is this still subject to the filibuster rules, or do the Democrats just need 51 votes to pass the final measure?

  4. @Lee Hicks
    Exactly what I was thinking. Is it possible/likely to engineer the current parliamentarian’s retirement and replace him with a “yes” man who would essentially gut the protections of the Byrd amendment. (In a similar way that the plain meaning of the Constitution has been gutted by Supreme Court activists.)

  5. Thank you Mr. Hennessey for all of your work on this. I have one question. Why wouldn’t Harry Reid just go for the jugular and attempt the nuclear option? He could pass the bill in its entirety.

  6. @chris
    1. In your first example, the bill would not meet the reconciliation instructions. If that bill came to the Senate floor, the Senate Parliamentarian would rule that it is therefore not a reconciliation bill. It would then be fully amendable and debatable, and Senator Reid would need 60 votes to pass it.

    2. Friends have pointed out (since I posted) that the public option generally does have a budget effect, and that it can be easily redrafted as needed to comply with the budget rules. Yes, this spending would have to be offset. My friends have convinced me that the Byrd rule will likely not be an effective weapon against the public option.

    3. The bill as a whole has to comply with the instruction — in this case, to reduce the budget deficit by at least $2 B over the period 2009-2014. If Reid’s substitute amendment increases spending so that it no longer meets this target, then the amendment as a whole, and individual parts of it that spend money are vulnerable to Byrd rule points of order.

    More generally, the Byrd rule is drafted very tightly, and the Senate precedents that have been established over the years shut out games such as those you’re suggesting. They could probably redraft certain provisions, within limits, to link the policy tightly to the spending so that the policy is not vulnerable to the Byrd rule. But breaking the basic budget limits in the reconciliation instruction is, I believe, infeasible.

    There are a lot of skilled Senate staff on both sides of the aisle who have spent thousands of hours exploring every nook, cranny, and devilishly clever tactic and counter-tactic in these rules. I know — I used to be one of them. They’re solid rules.

    There are plenty of other avenues to explore in this complex world of legislative and budget process. Trust me when I say that there are other things that should concern you more than the scenarios you raise (which are, by the way, quite insightful.)

  7. @Lee Hicks & D Lawrence – The Senate Parliamentarian plays a crucial role in every reconciliation bill, and in many other legislative battles. It is one of those largely anonymous but incredibly powerful jobs in our government.

    The current Senate Parliamentarian is Alan Frumin. He’s been doing this for years. Yes, the Majority Leader can fire him. There are two reasons why this is unlikely to happen. (1) It would be a transparent abuse of power. I expect some of my readers will say that nothing is beyond the pale. I worked for a Senate Majority Leader for several years, when agenda-setting legislation and other ultra-high-stakes situations like the impeachment trial of a President were in play. There are few things a Senate Majority Leader would less rather do than fire a Parliamentarian. (2) He doesn’t have to. The extreme, abuse-the-process-for-the-result path is to leave the Parliamentarian in place, put VP Biden in the Chair as the Presiding Officer of the Senate, and have him ignore the Parliamentarian’s advice. The Presiding Officer can then make whatever ruling he wants.

    Both of these scenarios are truly in extremis. I’m not saying they’re impossible, but they are extremely rare, even in huge nasty partisan fights over issue of enormous policy and political importance. I am not being naive when I say that both scenarios are unlikely.

    • If the parties were reversed, I'm inclined to think that Dick Cheney and Karl Rove would be willing to follow this "in extremis" strategy if it accomplished their goal. Why shouldn't the Democrats? What would be the downside, i.e. the political or other risks?

  8. KBH: Thanks for both posts. Very helpful to have this background info while following the process.
    If the Byrd rule is used effectively can it swiss cheese the original bill(s) enough to have Sen. Reid simply withdraw for a time?

  9. Great work, but I must comment on your last sentence:

    “I hope these process details help you understand some of the rules of the game.”

    Friend, this ain’t no game. It’s deadly serious stuff. If Harry Reid is actually stupid enough to use reconcilation–and I don’t put anything past that fool–the GOP and many Americans will consider it nothing less than a declaration of nuclear war resulting in some nasty fallout.

  10. Pingback: AIP Blog

  11. Pingback: Doing health care through reconciliation is even harder than I thought |

  12. This is a wonderfully enlightening series of posts. I have a question about the next stage of the process. Let’s suppose that Majority Leader Reid goes ahead with the reconciliation approach, that Republicans manage to extract chunks of his bill through Byrd challenges, and that a swiss cheese bill ultimately passes with 51 votes.

    That would then go to conference, where presumably some of those excised chunks could be restored. There would have to be major surgery to reconcile with the House bill anyway.

    What would then happen to the bill that emerges from conference committee? Would it require 51 votes or 60 for approval?

    • Phil, if they put the things back in that are stripped out, I'm pretty sure they will need 60 which they couldn't get in the first place.

  13. Pingback: What is reconciliation? – Blog Title  |

  14. Shouldn't Harry Reid just ask Senator Byrd whether this health care bill violates the rule instead of Reid making things up as he goes along. After all it is Bryd's rule and it seems that healthcare violated his rule back when Clinton tried to pass it. I don't think much has changed since then, do you? If the reconciliation process shuts out the minority it's just like the shutting out the constituents the minority represents and therefore doesn't sound very constitutional to me no matter who is using it , Democrats or Republicans. Anyway, I appreciated reading both of your articles.

  15. @kbh

    Consider the following provision: In the event an individual is legally denied coverage by at least one private insurance carrier, then the government must either provide coverage through a public insurance option or reimburse the individual for any and all medical expenses incurred after the date coverage was initially denied.

    In the case where a public option is unavailable: removal of any coverage guarantee would greatly increase the cost of the provision.

    In the case where a public option is available: removal of any subset of the coverage guarantees would shift a significant number of high-cost individuals onto the public option, which would greatly increase the cost per person on the public plan.

    In both cases, removing coverage guarantees would likely raise the cost of the bill to where it no longer met the reconciliation instructions. If so, does that mean the coverage guarantees are necessary conditions for the provision I gave, and would therefore meet the exception from the second point of Byrd's rule from your post?

  16. ObamaCare Can Be Stopped Dead In It’s Tracks:

    This is extremely under-reported. I received this information via Lewis K. Uhler. The information is provided by Dr. Lawrence Hunter (former policy advisor to President Ronald Reagan). In the link above are other links with bios for Dr. Hunter, Lewis K. Uhler, and the organizations they represent. They are desperately trying to take this message to the national level.

    "During deliberations on the Senate Budget Resolution earlier this year, Senator Jim DeMint (R-SC) introduced a point-of-order amendment that would require a 60-vote majority to pass “any bill, joint resolution, amendment, motion, or conference report that eliminates the ability of Americans to keep their health plan or their choice of doctor (as determined by the Congressional Budget Office).” The Senate approved the DeMint Amendment unanimously.

    Subsequently, before the Senate Budget Resolution went to a Conference Committee where differences with the House Budget Resolution were to be worked out, DeMint offered a motion to instruct the Conferees not only to insist on retaining the 60-vote provision in the final Conference Report but also to widen the scope of the provision to cover any provision and so forth that decreases the number of Americans enrolled in private health insurance while increasing the number enrolled in government-managed, rationed health care. The Demint motion to instruct passed the Senate by an overwhelming vote of 79 to 14.

    As a matter of congressional comity, the House ordinarily would have been expected to accede to the Senate provision since it affected Senate rules that applied only to the Senate. Remarkably, Senate Budget Committee Chairman, Kent Conrad, allowed the Demint 60-vote requirement to be removed from the Budget Resolution in Conference."

  17. Keith, thanks so much. Though I'd looked many places, your two posts finally put the pieces together.

  18. Pingback: Understanding the President¬ís legislative options for health care reform  |

  19. Pingback: The Baucus Plan is out - Page 20


Get every new post delivered to your Inbox.

Join 6,545 other followers