Understanding the new health reconciliation bill

Congressional Democratic leaders just released their summary of Bill #2, the health bill they intend to move through the reconciliation process.

Here is their description document. I caution you that this is a sales pitch aimed at Congressional Democrats.

Here is the preliminary CBO analysis.

Here is the legislative text, on which I am just now about to begin chewing.

Since things are moving quickly, I’m going to repeatedly update this post. You might want to bookmark it and return for updates.

The following notes are fairly technical. Most will be interesting only to policy practitioners.

Preliminary, technical, and disorganized very rough notes on the outline

  • There are several Byrd rule violations. This means the House will have to vote on this bill twice. The second time would be after Senate Republicans use the Byrd rule to strike these provisions from the bill, then the Senate passes the modified bill and returns it to the House. And no, I won’t tell you where all of them are. Sorry. I don’t want to help the Democrats find and fix them. Some of these are only arguable violations. I have found at least three that are clear violations.
  • Weaker individual mandates means more healthy people will stay out of the system and pay penalty fees until they get sick. This means premiums for the rest of us in the system will be higher, because there are fewer of us being forced to cross-subsidize the predictably high cost people (because of the guaranteed issue and community rating mandates).
  • Bigger employer penalties for not complying with the mandates are unsurprising when you think about the politics of the House Democratic Caucus. I’ll bet someone running a 53-person company doesn’t think he runs a big business.
  • More $ for poor.
  • One-time $250 “rebate” in 2010 for beneficiaries who reach the [drug] “coverage gap” is pure politics. Send seniors a check in an election year.
  • More savings from Medicare Advantage plans means fewer Medicare Advantage plans. Massive changes to the Medicare Advantage payments formulas will fundamentally change these markets. Seniors in MA plans should expect significant changes as plans adapt to the new payments rules. This is a little-discussed but significant effect of these bills, if they become law.
  • More savings from hospitals are unsurprising.
  • Strengthens the Independent Medicare Advisory Board by making SecHHS a backstop. He/She can cut Medicare provider payments proportionally if the IMAB doesn’t deliver recommendations. Providers won’t like this. They probably had to add it for CBO to score it.
  • Cadillac tax is delayed until 2018 and the threshold is increased. Both these provisions weaken the Cadillac tax (unions like this). But they raise more money by reducing the indexing growth rate of the cap from (inflation+1) to (inflation). This is part of how they solve their long-run deficit problem of spending money on other stuff. This is good for those with high cost plans in the short run, bad for them in the long run. (I actually favor a much (X10) more aggressive version of this tax, so I like the lower growth rate. I don’t like the delay or the cap increase.)
  • Raise Medicare payroll tax by 0.9 percentage points for individuals with income > $200K and couples with income > $250K. This means you and your employer pay a combined 3.8% payroll tax on wages above these amounts. (This is the President’s proposal.) This is what they mean by “taxing the rich.” It is also crossing a decades-old line separating Social Security and Medicare funding from the rest of the budget. I would not have expected Democrats to cross that line and violate what was for them an important principle of “social insurance program,” but they really needed the money.
  • Beginning in 2013, the bill creates a new 3.8% tax on some capital income for individuals with income > $200K and couples with income >$ 250K. This applies to interest, dividends, annuities, royalties, and rents. Big tax increase.
  • Strengthens the Independent Medicare Advisory Board by giving the Secretary of HHS backup authority to proportionately cut Medicare payments to providers if the Board fails to make recommendations that hit the savings target.
  • Expands the Cornhusker Kickback to cover all States. This was the wrong way to fix it. It would have been much less expensive to eliminate it.
  • Increases Medicaid match rates for States already covering low income adults. This spending is, in effect, just fiscal stimulus: The second health bill contains billions in fiscal stimulus for sixteen States & DC
  • Spends money on doctors in 2013 and 2014, but leaves out the permanent fix, as expected. This means there’s another $300-ish B of Medicare spending that is not counted in this bill. So much for true deficit neutrality.
  • Big win for the AMA at the expense of States: In the late 90’s the feds gave up authority to determine Medicaid payments to providers, leaving all that authority in the hands of States. States liked this because they could squeeze providers to save money. Providers wanted federal “protection” from cost-conscious Governors. This bill prohibits States from paying primary care doctors less through Medicaid than they receive in Medicare (for two years). This is the camel’s nose under the tent to a long-term increase in Medicaid payments to providers. This means a loss of expenditure control for Governors, higher Medicaid costs for States and the federal government, and higher incomes for doctors. This is also the beginning of the reversal of a strong bipartisan mid-90’s policy consensus. This is terrible policy.
  • Net effect of Bill #2 on taxes: +$156 B higher taxes. While that’s the effect over a decade, the bulk of the tax increases occur in a six-year period beginning in 2014.
  • Adopts a version of the President’s proposal for feds to regulate health insurance premiums in addition to States. Secretary of HHS could “review potentially unreasonable premiums and may take corrective actions, such as requiring the insurer to pay a penalty, denying or modifying the premium or ordering the plan to pay rebates to consumers.” What is a potentially unreasonable premium?? Congratulations, AHIP. You have made your industry a federally regulated utility. Have fun with that.

53 thoughts on “Understanding the new health reconciliation bill

  1. John Farmer

    Ditto to GG — great job as usual, Keith.

    If this monstrosity becomes law, I'll look forward to posts on whether it can be repealed by reconciliation. Perhaps a Republican President in 2013 plus 50 Republican senators and a Republican House can repeal the subsidies to buy insurance — via reconciliation — because that's a spending cut. What is born by reconciliation dies by reconciliation. That will cause Dems to want to eliminate the obligation to buy insurance. Republicans can then say "sure, if you give up guaranteed issue and community rating."

  2. Ed.

    You've GOT to kill it. You won't be able to repeal it. You'd need 2/3 of the Senate to override the President's veto, and Obama would veto, and you won't be rid of him until 2012 at the earliest. It's unrepealable. Call your congresscritter and get it killed.

  3. Fredrik Nyman

    Who decides if a Byrd rule violation has occurred or not? Can Biden override?

    Also: if the House either votes directly for the Senate bill, or indirectly through the "deem" thingy, the President has to sign it before any amendments can happen, right? Does anything keep Obama from just signing the Senate bill and calling it a day (i.e. the whole reconciliation thing is just another ruse)?

  4. Gretchen

    "Who decides if a Byrd rule violation has occurred or not? Can Biden override? "

    Biden first has to wish Senator Byrd "rest in peace", realize he's still alive and awkwardly say "oh, God Bless you Bob, you are still with us", then they can get back to the business at hand. Remember, Palin was the stupid VP candidate.

  5. JGH

    Medicaid payments are going to be as high as Medicare payments?

    Finally, I'll be rich!

    Oh … wait … Medicare payments don't even cover my overhead? Crap!

  6. Dee in CA

    Why would the President sign any 'bill' other than the Senate bill? The Senate bill is what will pass, with all the bribes and corruption in it … IF the House Democrats are that 'stupid' to depend on the Senate to 'Reconcile' all of this, they don't deserve to be in the 'House' in the first place!!

  7. Gus

    "couples with income > $ 250K"

    This is how it's usually put, but it's misleading. What's a few thousand bucks TO SOMEONE WHO'S MAKING $250k ?

    Better and more accurate to subtract out the taxes and say "A few thousand more for people with an after tax income of $150k" — or whatever it works out to

  8. clue by four

    This will be as big a mess or worse that the IRS or BATF.
    They'll have fun interpreting the rules and regulations that contradict each other.

  9. Andrew Patton

    Why wouldn't you want them to know where the violations are? The last thing we want is for the Senate Bill to pass and the Reconciliation Bill not to. Point out every single violation to stall them as long as possible. If they amend it, they'll have to resubmit it to the CBO. By the time they amend the bill and rescore it, they won't have 72 hours before the recess, so they'll have to wait two more weeks, listening to constituents berate them, before bringing it to a final vote. We need to make every single play for time we can.

    1. ELC

      I may be mistaken, but I believe that the whole point of the "deem and pass" trick is that the Senate bill as is won't be "deemed" to have passed UNLESS the Senate passes the reconciliation bill. That's why the (reports of) the Senate parliamentarian's opinion that the Senate could not consider the reconciliation bill until the original bill had been signed into law is thought to be an insuperable stumbling block to the "deem and pass" chicanery.

  10. faldoc

    As an MD, I used to participate in Medicare and Medicaid. The re-imbursement was horrible, having no relation to the actual cost of taking care of the patients. Even if it did cover costs, that means I do things without taking anything home. To say that there is anything to squeeze out of provider payments, (other than fraud, obviously), particularly in Medicaid, is absurd. Worse yet, the private insurers look to Medicare for fee guidance, so of course they paid less and less over time too. I no longer participate with Medicare and Medicaid (or any insurance for that matter) and I have been liberated. My only regret is that I miss the people I used to take care of, but I could no longer make ends meet with what they paid. The major problem is Medicare patients pay about $100 of premiums a month for $8300/year of costs, the balance of course paid by taxes. And of course Medicaid patients pay no premiums since they are by definition poor. If the cuts as planned go through, which I doubt, there will be fewer already maxed out providers working harder for their money, a recipe for longer waits to see a Doctor and rationing through payment starvation.

  11. roanoke

    To the Doc-

    What is really sad is some of those Medicare patients are veterans.

    Veterans of WW II, Vietnam and Korea.

    They were told that their health would be covered for life.

    I guess not enough of them died-and the money was running out to cover them-so they kick them out to Medicare once they reach-65. or so

    Those guys paid for their health care with blood sweat and tears and what did they get for it?

    They have a hard time finding a doctor that will take them and they get at times treated like charity cases.

    These are people that thought they had a contract with the government-they never had an option to buy health care insurance because they assumed they were covered.

    They believed Uncle Sam.

    You can see where they just keep promising more and rolling over their debts.

    They are going to bust Social Security at this rate-and that's money they took from everyone because certainly the individual could not be trusted to plan for their own future.

    Now Medicare is going bust so they roll that over to this monstrosity.

    1. USAF Gulf War Vet

      The Same Government reneged on most of it's promises to my people the Cherokee and other Indian Tribes. The US Government has has lots of practice in the smoke and mirrors campaign. Now I'm a retired Gulf War vet and I have a difficult time getting help through the VA. Plus they won't honor my disability pay either. No one should be stupid enough to believe anything our government promises anymore!

  12. Hyphenated American

    I've written this on my blog yesterday…

    Hyphenated American votes "yes" on Obamacare

    After considerable mental pain and suffering, Hyphenated American decided that the passage of Obamacare will be in the long-term interests of America. I will applaud if the Obamacare passes – particularly if it passes through the infamous Slaughter Rule. My readers surely would want to know the reasons for my sudden turn-around – it is obvious from my blog that I am a strong opponent of socialized medicine. In all honesty I must confess that Obamacare is a wrong idea at precisely the right time. It is beyond dispute that Obamacare will be devastating to the American healthcare – but at the same time it will most likely destroy the Democratic Party for the next 50 years – and that assuming that Democrats are lucky. Back in November 2008, when conservatives predicted doom and gloom, I believed that Obama's presidency would seriously weaken the liberals – and I am proven right with each passing day.

    Read the rest of the article here:

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  17. Debbie A

    If all states are covered in the Nebraska Kickback, that adds 45X50 million more to the bill. Also, the Student loan bill is imbedded in the Recon part – where's the funding for that?

  18. Al Reasin

    Time to surround the Capitol and let no one in or out. A delegation would give the congress, our employees, an order, dump this bill/vote it down or else no government until you do. TN did this during the Tax Rebellion in 1999 when the legislature and Repub governor decided to impose a state income tax. Still no state imcome tax.

    So far our grassroots leadership refuses to use MLKs final tactic, shutting down businesses (now government) that withheld equal rights for all citizens (ignores the will of the people). We are now talking about our basic economic freedoms and civil liberties. If we are not willing to confront congress, we deserve the fate they are handing us. They have NO regard for the millions of Americans who have died or suffered life long disabilities for defending our freedom, and my family, who has for at least 4 generations, served to protect our country and constitution from foreign threats. We now have a domestic threat and my oath is sacred.

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