What If Reconciliation Fails?

Created: March 22, 2010 10:55 | Last updated: July 31, 2020 00:00

With the House last night passing its health care reconciliation bill, the measure moves to the Senate this week, where Democratic leaders are claiming they’ve got the 51 votes needed to pass it. We’ll take them at their word. But just in case, it’s worth noting what it would mean if the larger, Senate-passed reform bill (which the House also approved yesterday) becomes law by itself. The biggies:

1) Insurance Subsidies: The Senate bill, while requiring most Americans to buy health insurance, also subsidizes plans for those living below 400 percent of the federal poverty level ($88,200 for a party of four). The subsidies would come on a sliding scale such that premiums would be capped at 2.8 percent of income for those living at 134 percent of poverty, and 9.8 percent of income for those living between 300 and 400 percent of poverty.

The reconciliation bill increases those subsidies for most income brackets. Those living between 300 and 400 percent of poverty, for example, would pay premiums capped at 9.5 percent of their income.

2) Funding: The Senate bill would hit the wealthiest Americans — individuals earning more than $200,000 and families earning more than $250,000 — with a 0.5 percent increase in the Medicare payroll tax. The reconciliation bill would add a 3.8 percent tax on unearned income — a category that includes things like interest, dividends and capitol gains on investments.

The Senate bill also applies a 40 percent tax (beginning in 2013) to the highest-priced insurance plans — those costing more than $8,500 for individuals and $23,000 for families. The reconciliation bill keeps the tax, but hikes the dollar threshold that trigger it — to $10,200 for individuals and $27,500 for family plans. In both the Senate and reconciliation bills, the thresholds are even higher for those in high-risk jobs like coal mining and firefighting. The reconciliation bill also postpones the tax until 2018.

3) Doughnut Hole: As part of its $80 billion deal with Sen. Max Baucus (D-Mont.), the pharmaceutical lobby agreed to cut the cost of name-brand drugs by 50 percent when seniors hit the doughnut hole, which is the not-meant-to-be-flattering name of the coverage gap in Medicare’s prescription drug benefit. And that’s where the Senate bill leaves it.

The reconciliation bill builds on that foundation, giving seniors in the doughnut hole an additional $250 toward their drugs in 2010, and then hiking that amount incrementally until the doughnut hole is fully closed by 2020.

4) Individual Mandate: The Senate bill requires most Americans to buy health insurance or pay a financial penalty of either $750 or 2 percent of income, whichever is larger. The reconciliation bill would alter the penalty slightly, to the larger of $695 or 2.5 percent of income.

5) Medicaid Rates: While expanding Medicaid coverage to include most folks living below 133 percent of the federal poverty level, the Senate bill would leave Medicaid rates alone. This is a problem, because Medicaid rates are so low that more and more doctors are refusing to see those patients. Recognizing that there’s little value in a health insurance program that doctors don’t accept, House leaders in their reconciliation bill hiked Medicaid rates for primary care services to at least the level that Medicare pays.

6) Cornhusker Kickback: The Senate bill includes the now infamous sweetheart deal that Democratic leaders carved out to win the vote of Nebraska Democrat Ben Nelson. Under that provision, the federal government would pay 100 percent of the cost of expanding Medicaid in Nebraska — forever. (By contrast, the other states would begin paying a portion of those costs over time.)

The reconciliation bill strikes the Cornhusker Kickback dead.

Senate leaders are hoping to pass the reconciliation bill before the Easter recess, which begins Friday. Republican leaders, though, are working to prevent that from happening.