Understanding the new health reconciliation bill
18 March
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.
Related Posts
(best matches are listed first)- Understanding the Baucus health bill
- A new $29 B gimmick in the reconciliation bill
- Understanding the Kennedy health care bill
- Understanding the House Democrats’ health care bill
- Ten more things about the official Kennedy-Dodd health care bill
- The second health bill contains billions in stimulus funding for 16 States & DC
- CBO calls a TKO on the House health bill
- Major tax increases in the Reid health care bill
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.
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:
http://hyphenatedamericans.blogspot.com/2010/03/h...
Roanoke__You're right, some of those old folks were vets, from all the wars including WW2. Some told me they were on Normandy, or Africa, or China, and more recently Vietnam. I was honored to treat them, and always sad to see them pass on. When I had to close my practice because of the declining re-imbursement and rising costs, it tore me up, but I realised I could not stay open with nearly zero income. This was back in 2004. Nowadays I don't see any old vets, but I take care of active military, younger vets and their family members. They are always thanked for their service, and of course, given a Military discount.
When will the CBO do a final analysis or score of the new health reconciliation bill? It was my understanding that what the CBO released this morning was a preliminary analysis.
I think the reconciliation bill is farce. I think there is no way that the Senate will put health care back on its agenda after the recess. The only reason it is being talked about is to distract House Democrats from the real issue, which is the Slaughter rule. My prediction is that if the the House passes the Senate bill. The President will sign it and that will be the end.
Mr. Hennessy writes that the Cadillac plan tax has been "weakened" and that the tax "cap" has been increased. I don't read the bill that way. Perhaps this is because I tend to think in terms of real money rather than nominal money.
The bill (section 1401) actually does two things with respect to the caps. First, the caps are raised from $8,500 to $10,200 (single insured) and $23,000 to $27,500 (family plan). At the same time, the effective date is delayed from 2013 to 2018. Thus, the bill takes into account assumed premium inflation of 20 percent (4 percent per annum) during the 5 year delay period. And, if calculated from today, the presumed annual rate is only about 2.5 percent. This is a very optimistic assumption.
Second, the bill provides that these increased caps will only be further increased to account for additional premium inflation if a typical plan (Blue Cross is the standard) increases by more than 55 percent from 2010 to 2018. Thus, there is a whopping difference of 35 percent between the presumed inflation rate and the relief provision. Also, the relief provision only increases the cap TO THE EXTENT the inflation rate is greater than 55 percent. Thus, the bill provides a potential additional DECREASE of the cap of 35 percent in real money terms between now and 2018.
Obviously, voter-constituents will compare their current premium rates with the nominal caps and many will conclude they are in safe territory. In reality, this provision has been designed as a Trojan Horse ("the horse which once Odysseus led up into the citadel as a thing of guile, when he had filled it with the men who sacked Ilion" ).
Mr. Hennessey
As I see it, this Bill is NOT a big win for the AMA. In fact, I think the AMA is mortally wounded. There is still no "SGR Fix." This simply opens the door for true rationing. The AMA's participated in Physician Assisted Suicide.
ELC
The Senate Bill must be signed into law BEFORE the Reconcilliation Bill goes to the Senate. That's why the hesiattion in the House and rightly so: they do not trust the Senate to pass their changes. Think about it…why should the Senate pass anything more if what the Senate passed becomes the law. And inbedded in that law is the provision that nothing can be changed BY ANYONE on certain parts of it. This is not hard to understand: The Senate will not touch the bill after the President signs it – period – or this battle will rage on through the election in November (as if it won't anyway) – "to infinity and beyond".
The final battle for all the marbles in the House on Sunday.
Since no administrative costs are included in the CBO's report, this whole claim of deficit neutral is a complete and utter joke! I'm sure republicans are not pointing this out because the same is done for them when they ask for the CBO to analyze their bills? Just the cost to increase the size of the federal government to implement this joke of a bill should stop everyone in their tracks from passing this!!