Doing health care through reconciliation is even harder than I thought

Doing health care through reconciliation is even harder than I thought

Over the past two days I have posted about the President’s new health care reform message, the Senate reconciliation process and how it might affect this fall’s health care debate.

Yesterday’s Byrd rule examples would allow a bill to pass the Senate, but with major parts possibly excised. A smart friend wrote that while Senator Reid may not be able to get the whole car through reconciliation, he could probably get the chassis, wheels, and engine. He could then come back in separate future bills to add things like seats, steering, and brakes.

And two smart friends wrote to tell me they think that clever Senate Democratic staff can draft around some of the Byrd rule problems I raised. They have convinced me that the public option can be drafted so that it is not vulnerable to the Byrd rule test I described yesterday. I still think the “health insurance consumer protections” are vulnerable. I received mixed views on the individual and employer mandates from a few experts.

But I missed the most important point. I was so focused on provisions that would not affect the budget and might therefore have to be removed, that I forgot to think about provisions that would affect the budget.

You will remember from the past two days that the reason Senator Reid might decide to use reconciliation is that he would then need only 51 votes to pass a bill through the Senate. If he cannot build a 60-vote coalition, either with Republicans or among his 60 Democrats, then he may feel his best option is to try a 51-vote strategy. Reconciliation is the only way he can do that.

If any rules place 60-vote requirements on a reconciliation bill, they seriously foul up that strategy. Yesterday I explained why certain non-budgetary provisions would violate the Byrd rule because they don’t affect the budget. If Senator Reid has 51-59 Senators in his coalition, then those provisions will drop out.

I missed that there are two other 60-vote requirements that are triggered by the spending in such a bill.

  • There is another prong of the Byrd rule test, which in our case says in effect that if the reconciliation bill increases the budget deficit in any year after 2014, then the spending parts of the bill can be removed unless there are 60 votes to waive the Byrd rule.
  • There is a separate Senate point of order against legislation that increases long-term budget deficits. If CBO says that this bill increases the budget deficit by more than $5 B for any of the following periods: 2020-2029, 2030-2039, 2040-2049, or 2050-2059, then the bill dies unless there are 60 votes to waive this point of order.

So imagine that Senator Reid has had clever staff redraft the Senate HELP Committee and Senate Finance Committee language to avoid most of the Byrd rule problems I described yesterday. Assume that he knows from the Senate parliamentarian that, while he will lose some components of the bill if he cannot get 60 votes to defend them, with 51 votes he’ll be able to pass most of the bill.

But then along comes Senator Loper, who is deeply concerned about the fiscal impact that long-term budget deficits will have on her three children. She raises the long-term budget point of order against the reconciliation bill. Assume she has an estimate from CBO which shows that the bill increases budget deficits by more than $5 B in the period 2020-2029. It might look like this key quote from CBO’s analysis of the House Tri-Committee bill, H.R. 3200:

In sum, relative to current law, the proposal would probably generate substantial increases in federal budget deficits during the decade beyond the current 10-year budget window.

If Senator Reid cannot find 60 votes to waive that point of order, the entire bill dies.

Alternately, Senator Loper could raise Byrd rule points of order against the major spending components of the bill. But if she’s just trying to kill the whole thing, the long-term budget deficit point of order is a bigger weapon.

Since we do not yet have a full Senate bill to analyze, we can look at the House Tri-Committee bill for comparison. That bill fails the Byrd rule test: CBO says it would increase deficits in each year from 2015 to 2019. The above quote from CBO suggests CBO would also conclude the bill fails the second test.

Now the House bill’s authors would concede the House bill is incomplete, and that they intend to find bigger offsets. In recent weeks we have seen House Democrats struggle with the political pain of cutting spending or raising taxes. The bigger the gap that has to be closed, the more one has to cut spending or raise taxes, and the harder it is for Democratic leaders to muster the needed votes.

More importantly, income tax increases won’t do it, for reasons I have described before. Income taxes grow about 5% per year. The new proposed spending grow 8-9% per year. This means that, even if you meet Director Orszag’s “10th year test” and match spending and revenues in the 10th year (2019), the two lines will start separating and you’ll get increasing deficits in the long run. It is extremely difficult, and may be impossible, to meet the Senate’s long-term deficit test if the bill uses income tax increases as offsets.

Unless Senator Reid can find ways to make these bills not violate these two tests he will need 60 votes even to pass a reconciliation bill. All of a sudden reconciliation may not allow him to implement a 51-vote strategy.

If Senator Reid wants to use reconciliation to pursue a 51-vote strategy:

  • He will have to redraft certain provisions (like the public option) to maximize their chances of surviving Byrd rule challenges. This is relatively easy.
  • He will have to assume that certain other provisions will get knocked out of the bill by the Byrd rule. I think the health insurance consumer protections fall into this category.
  • He will have to make sure the bill bill does not increase the long-term budget deficit, in any year beyond 2014 or by more than $5 B in any of the four decades beginning in 2020.

This last one is difficult. Extremely difficult. It may be practically impossible.

The President told MSNBC yesterday that in September Democrats might abandon their bipartisan talks with Republicans and choose a partisan route. If they do go partisan, they can either use the reconciliation process or try to get all 60 Senate Democrats to support a single bill. The President and his advisors would be wise not to underestimate the difficulty of the reconciliation path.

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

33 responses

  1. I heard a report on MSNBC’s Morning Joe a deal was struck in the Senate overnight. They had no details. We heard this once before but, they just reported again, outlines will be coming out today.

  2. They gave a sketch that would include dropping public option, cutting $100 billion in costs, cover most uninsured, and taxing health care benefits. Seems like there is something for everyone to hate. Good thing the reconciliation is looking rough, they would have a hard time getting votes for this compromise.

  3. Logically a major national issue like health care reform should be done with a broad consensus of at least 60% or more. Doing it piecemeal through parliamentary maneuvering represents everything that is wrong with the Beltway.

    Choosing a partisan path is disgraceful and should be considered a very black mark against this President in terms of leadership and character. Let’s hope that he has the emotional maturity to understand this.

  4. Thanks Keith–I knew there had to be something like that! Reconciliation just didn’t make sense otherwise.

    Let’s just hope Mr. Elmendorf continues to be the unsung hero of integrity and autonomy in this whole sordid business. In a way, he’s the most powerful man in the country right now. Amazing.

  5. It seems that, if Senator Reid were to do all of the things needed to pass the Byrd rule, then he would have a pretty bipartisan bill and thus not need to go through reconciliation.
    -terry

  6. I think we should listen to the latest spin coming out of the White House. The focus is on the “evil” insurance companies. What 51 vote legislation could regulate the insurance parts of the health care industry to the point where it is effectively single payor?

  7. Since these rules are interpreted by the parliamentarian of the Senate, who is appointed and can be removed by Sen Reid, is there much doubt about how any gray areas will be interpreted?

  8. LEAD, FOLLOW, OR GET OUT OF THE WAY. (Thomas Paine)

    We have the 37th worst quality of healthcare in the developed world. Conservative estimates are that over 120,000 of you dies each year in America from treatable illness that people in other developed countries don’t die from. Rich, middle class, and poor a like. Insured and uninsured. Men, women, children, and babies. This is what being 37th in quality of healthcare means.

    I know that many of you are angry and frustrated that REPUBLICANS! In congress are dragging their feet and trying to block TRUE healthcare reform. What republicans want is just a taxpayer bailout of the DISGRACEFUL GREED DRIVEN PRIVATE FOR PROFIT health insurance industry, and the DISGRACEFUL GREED DRIVEN PRIVATE FOR PROFIT healthcare industry. A trillion dollar taxpayer funded private health insurance bailout is all you really get without a robust government-run public option available on day one. Co-OP’s ARE NOT A SUBSTITUTE FOR A GOVERNMENT-RUN PUBLIC OPTION. They are a fraud being pushed by the GREED DRIVEN PRIVATE FOR PROFIT health insurance industry that is KILLING YOU!

    YOU CANT HAVE AN INSURANCE MANDATE WITHOUT A ROBUST PUBLIC OPTION. MANDATING PRIVATE FOR PROFIT HEALTH INSURANCE AS YOUR ONLY CHOICE WOULD BE A DISASTER AND UNETHICAL, CORRUPT, AND MORALLY REPUGNANT. AND PROBABLY UNCONSTITUTIONAL AS WELL.

    These industries have been slaughtering you and your loved ones like cattle for decades for profit. Including members of congress and their families. These REPUBLICANS are FOOLS!

    Republicans and their traitorous allies have been trying to make it look like it’s President Obama’s fault for the delays, and foot dragging. But I think you all know better than that. President Obama inherited one of the worst government catastrophes in American history from these REPUBLICANS! And President Obama has done a brilliant job of turning things around, and working his heart out for all of us.

    But Republicans think you are just a bunch of stupid, idiot, cash cows with short memories. Just like they did under the Bush administration when they helped Bush and Cheney rape America and the rest of the World.

    But you don’t have to put up with that. And this is what you can do. The Republicans below will be up for reelection on November 2, 2010. Just a little over 13 months from now. And many of you will be able to vote early. So pick some names and tell their voters that their representatives (by name) are obstructing TRUE healthcare reform. And are sellouts to the insurance and medical lobbyist.

    Ask them to contact their representatives and tell them that they are going to work to throw them out of office on November 2, 2010, if not before by impeachment, or recall elections. Doing this will give you something more to do to make things better in America. And it will make you feel better too.

    There are many resources on the internet that can help you find people to call and contact. For example, many social networking sites can be searched by state, city, or University. Be inventive and creative. I can think of many ways to do this. But be nice. These are your neighbors. And most will want to help.

    I know there are a few democrats that have been trying to obstruct TRUE healthcare reform too. But the main problem is the Bush Republicans. Removing them is the best thing tactically to do. On the other hand. If you can easily replace a democrat obstructionist with a supportive democrat, DO IT!

    You have been AMAZING!!! my people. Don’t loose heart. You knew it wasn’t going to be easy saving the World. :-)

    God Bless You

    jacksmith — Working Class

    I REST MY CASE (http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-healthcare/)

    Republican Senators up for re-election in 2010.

    * Richard Shelby of Alabama
    * Lisa Murkowski of Alaska
    * John McCain of Arizona
    * Mel Martinez of Florida
    * Johnny Isakson of Georgia
    * Mike Crapo of Idaho
    * Chuck Grassley of Iowa
    * Sam Brownback of Kansas
    * Jim Bunning of Kentucky
    * David Vitter of Louisiana
    * Kit Bond of Missouri
    * Judd Gregg of New Hampshire
    * Richard Burr of North Carolina
    * George Voinovich of Ohio
    * Tom Coburn of Oklahoma
    * Jim DeMint of South Carolina
    * John Thune of South Dakota
    * Kay Bailey Hutchison of Texas
    * Bob Bennett of Utah

    • If I was in Chicago, I could vote against everyone on your list. Twice if I was dead. Sounds like you ingested too much of the kool aid during your latest waterboarding treatment.

  9. Pingback: tomllewis - Keith Hennessy: Doing health care through reconciliation is even harder than I thought

  10. Krugman? Chuckle. If you want to know what a healthcare system that will work, looks like, Hennessey posted one on this website on July 30th.

  11. My apologies for jumping the gun in reporting what I heard on Morning Joe. The details of the emerging plan were based on this Washington Post article. The plan would cut $100 billion off the costs over the next decade, cover 94% eventually.

    It would expand Medicaid, crack down on insurers, abandon the government insurance option that President Obama is seeking and, for the first time, tax health-care benefits under the most generous plans. Backers say the bill would also offer the only concrete plan before Congress for reining in the skyrocketing cost of federal health programs over the long term.

    Since the “gang of 6″ met earlier with the President and no announcement has since been made it is pretty safe to assume reports of a deal made overnight were exaggerated.

    The article does claim the early CBO estimates show the plan pays for itself and begins to reduce deficits after 2019. I would imagine making a deal in the current climate would leave those three Republicans facing political repercussions. I guess we will have to wait and see whether the CBO estimates really bear out.

  12. I don’t understand why insurance companies are the culprit in this debate. When someone purchases a health insurance policy, he is entering into a contract with the insurance company that sold (wrote) the policy. The insurance company promises to pay out certain amounts in certain circumstances, and the purchaser of the policy promises to pay regular premiums. The effort to paint insurance companies as villains, currently underway, is implicitly charging insurance companies with failure to honor their agreements.

    Contracts are legally enforceable agreements. When one party to a contract suffers because its counter-party has reneged on its contractual obligations, the party suffering a loss can petition a court for redress of grievances. This begs the question, since the judiciary is a key function of government, why the current administration is not making a concerted effort to step up the enforcement of contractual obligations by companies that underwrite health insurance?

  13. @Mary M – You seem to be up on the nitty gritty of what’s going on with these negotiations, so I might as well ask your opinion on what in the world Grassley, Enzi, and Snowe are doing.

    I may be too cynical, but I find it really hard to believe that they think they’re going to come out big winners in crafting a “compromise.” Correct me if I’m wrong, but once the public option and its various ghosts (government run co-ops and such) evaporate, then so does a hefty chunk of the left. It might make a filibuster more, not less, likely. But in any case, granting that the bill passes and runs the two-house gamut, won’t they just toss some ghost of the public option back in during conference negotiations?

    Hmmm… Maybe the three compromisers are counting on the dismantling of their compromise (though who knows, maybe Snowe supports a leftish bill)–if so, I guess the idea would be to give not only themselves but the GOP a cover of non-obstructionism and attempted bi-partisanship.

    I’m reaching, I know. But my little Machiavellian brain just can’t get settled on a satisfying answer to what Grassley-Enzi-Snowe are trying to accomplish.

    You have a theory?

  14. jacksmith:

    Perhaps our 37th worst care in the world is why that part of my family who lives in Canada with their free health care system travels to the United States to receive cancer and heart treatment on their own dime.
    I’m extremely happy to see that you will now be taking a second job to pay for the inevitable tax increases needed to pay for ‘free’ health care and even more pleased that some government bureaucrat will hopefully make a decision not to treat your acute illness some day in the future.
    It is apparent from your post that you believe that a government can make better decisions regarding your lifestyle than you can. It appears you are unhappy with the government intervention in your life today.
    You may want to go to the library and read the Declaration of Independence. There are two sentences in the beginning that are relevant yet today:
    ‘We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed.’
    You have the right to pursue happiness, you don’t have the right to be happy.
    And most Americans don’t consent to more government interference in their lives.
    What you are not seeing is that our government continues to erode our liberties. If you think that the system you currently receive medical care from today will be the same under a government managed process look at any government health care managed system.
    The government controls cost by rationing. If you think that during your retirement years you will receive the same health care from the government as a 20 year old, think again. Government cost control decisions will be made based on your 60+ years-of-age economic value to society. EPA currently uses a formula to ‘value’ a life relative to control of pollution.
    You may want to step back and re-assess your blind hatred of previous administrations and re-think your blind allegiance to today’s administration.
    While I am not a supporter of President Obama, he is my President and deserves my respect.

  15. Keith,

    Hope I’m not asking a question you’ve already answered! I am wondering if the reconciliation process has been used in the past to pass substantively new legislation on the same level as health care reform? Specifically, have Republicans used it this way? I plan to attend my senators’ townhall meetings (if they hold them…) and plan to ask if they would be proud to illegitimately use the reconciliation process instead of doing it the proper way. Want to be prepared, if they respond “Well Republicans use it all the time!” to ask them to cite examples of comparable use.

  16. @MM – Republicans used them to pass tax cuts in 2001 and 2003. You might get that response.

    I would reply that tax cuts are fundamentally about the budget. That’s different than pushing non-budgetary policy changes through reconciliation, which is what this would be.

  17. Chris,
    I am sorry I didn’t see your question earlier. Since Hatch walked away and Jim DeMint has since said even without the public option, the Senate Finance proposal is a “Freddie Med,” I imagine there are aspects that will make conservatives wince. I still wince thinking about the so called “stimulus” so I have concerns about Snowe’s capacity to see the ultimate peril in giving bipartisan cover to reform that does more harm than good.

    Despite the White House and Speaker’s efforts to paint insurance companies as villains, I think that behind the scenes all the health care industries recognize the genuine need for reform and in fact are supportive. I would like to give the benefit of the doubt that those left in the negotiations are at least trying to come up with something that would genuinely address the problems in health care. However, after reading the article mentioned in Greg Mankiw’s blog yesterday, I am more convinced than ever that unless reform does whatever possible to minimize government involvement in health care and unwinds some of the damage done in previous intervention, no reform may be better than another bad intervention. Harry Reid has said co-ops or exchanges were roughly equivalent to the public option, (remember “call it what you will”) at least gives me some understanding where the peril lies in the co-ops and explains why the more conservative Hatch walked away. I don’t think those in the middle lean enough toward free market solutions to see the peril.

    Interesting note though, I am watching an interview on MSNBC with Kent Conrad and Chuck Shumer about reconciliation. Conrad is saying that he doesn’t believe a public option will pass the Senate and that reconciliation is fraught with peril. He actually used the words “Swiss Cheese,” which is exactly what Keith has been saying here all along. The interviewer takes that back to Shumer and asks him if he has the votes 50+1 and can he do the legislation with reconciliation. Surprise, surprise Shumer started to hedge all over. I think that proves Shumer is blowing smoke about reconciliation. He started to talk about the difficulties and then tries to sum up saying it was a possibility. He doesn’t really believe it, you could just tell.

    The balancing act of finding something that will pass the house and Senate is as fine a line as I can possibly imagine. It is murkier than reading tea leaves trying to predict what might happen here. I think though we can at least take the reconciliation tea leaf out of the cup.

  18. Mary M–

    No problem, and thanks for replying.

    For the record, I’m exactly where you are on this, which I guess is why I’m so bemused by the GOP 3 continuing to negotiate, as if there’s some chance that the result will be anything but Leviathan times Behemoth to the second power. They simply don’t have the muscle to achieve much aside from burnishing the inevitable with a ridiculous luster of bipartisanship. Which suggests that they probably believe in something, though lord knows what.

    As you aptly put it, the middle doesn’t lean enough toward free markets to see the peril. Certainly Snowe doesn’t, and I don’t know enough about Grassley and Enzi to comment. But yours is a plausible explanation, and it’s the best I’ve heard–they’re simply not on board with this whole kooky decentralization idea, so they truly see some possible merit in a compromise bill. They may be right (I have to admit that much), but I’m just too kooky to believe it.

    The calculus looks fairly simple to me: there are 3 options with respect to governmental power. The health care bill will either 1) increase it, 2) keep it the same, 3) decrease it. No one will pass a bill that does 2), which leaves 1) and 3). Are we to believe that this congress and this president will give up any power? The mind boggles. Hence, the first option follows practically like a conclusion to a syllogism.
    And that conclusion, if I read it properly, looks like it spells “Disaster.”

    I want to add too that something in me just revolts at the thought of some benevolent technocrat getting that close to anything having to do with my decisions about my health care. Even if it was “better” for me, it comes a little too close to the old slavemaster rationale about how servitude actually civilizes the great unwashed. So to speak, I’d rather be unwashed. Mark Steyn wrote a good article about this a week or so ago, “It’s a liberty thing.”

    Schumer has been the biggest huffer and puffer on the whole reconciliation thing. I’m happy to hear he’s finally being pressed a bit harder. It’s rather annoying to hear, “Oooooh, they might use reconciliation! Snap!,” day after day, without anyone on TV bothering to ask how exactly they plan to do it, and what exactly it is they are threatening to do. Surely, great fun it would be to hear an attempt to justify it.

    Keep up the good fight.

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