Reconciliation Bill on Its Way to the White House

For the second time this week, the House tonight passed a health care reform bill designed to complement the larger reform package that President Obama signed into law Tuesday.

The vote was a technicality. The House had passed the bill Sunday night, sending it over to the Senate. But obscure rules governing the reconciliation process forced Senate lawmakers to strip two small provisions before they passed the bill this afternoon. The changes meant that the House would have to approve the proposal again before it could go to the president’s desk — which it did by a vote of 220-207.

Here’s a recap of how reconciliation tweaks the larger bill:

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1) 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.

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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.

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2) 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.

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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.

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3) 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.

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4) 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.

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5) 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.)