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February 22, 2010

This week could be pivotal in the health care reform debate, and could mark whether reform efforts proceed to a final law or are ultimately declared dead.

President Obama began the week by releasing a set of health reform proposals, in anticipation of Thursday's bipartisan health summit. Until then, Nancy Pelosi, Speaker of the House, and Harry Reid, Majority Leader of the Senate, will continue working on compromise legislation. This Stat! will discuss the President's Proposal and the status of the congressional legislative initiative.

The White House's weekly address on February 20, 2010 was entitled "Premiums, Profits, and the Need for Health Reform." Accompanying the address, the Department of Health and Human Services (HHS) released a report on recent insurance premium increase announcements, called Insurance Companies Prosper, Families Suffer: Our Broken Health Insurance System, available online at http://www.healthreform.gov/reports/insuranceprospers/index.html. Building on this issue, the White House on February 22, 2010 released the President's Proposal for health reform, available online at http://www.whitehouse.gov/health-care-meeting/proposal.

The President's Proposal uses the Senate-passed health reform legislation as a starting point but also folds in some of the provisions from the House-passed bill. This makes sense, because the political strategy for enacting health reform after the summit could proceed as follows:

  1. The House would pass the Senate-passed health reform legislation "as is," and
  2. The House and Senate would both pass a bill that amends the Senate bill. This second bill would be passed through the budget reconciliation process, which means it only needs 51 votes, but also means it can only contain measures related to spending or revenue.

Key provisions in the President's Proposal include the following:

  • The President's Proposal endorses the 40% excise tax on the cost of health plans above a threshold, but there have been several changes: The thresholds are increased to $10,200 single/$27,500 family, from previous levels of $8,500 single/$23,000 family; the tax would not apply to anyone until 2018; the high-risk profession additional threshold remains; geographic adjustments which were previously only three years would be made permanent; and the threshold would not include dental and vision benefits.
  • For high-income individuals, the Medicare Hospital Insurance tax would be increased .9%, for a total employee assessment of 2.35%; and there would be a 2.9% tax on income from interest, dividends, annuities, royalties, and rents.
  • Proposed new taxes on health insurers and medical device manufacturers would be delayed until 2014.
  • The President's Proposal appears to adopt the Senate Free Rider Employer Mandate, but makes the terms more favorable to small businesses. The penalty on an employer would decrease, and the Senate bill's lower employer size threshold for the construction industry (lowered from 50 down to five employees) does not appear to be in the proposal. A prohibition on a waiting period for employer coverage longer than 90 days remains.
  • Closing the Medicare Part D "doughnut hole" – the gap before Medicare Part D pays nearly all of an individual's prescription drug costs. The Senate bill would decrease the doughnut hole by $500, but the President's Proposal and the House bill would eliminate it over a phased-in period.
  • The President's Proposal would increase subsidies to assist lower-income individuals to purchase health insurance in the Exchange, and would provide lower cost sharing for them once enrolled in the plans.
  • The Nebraska Medicaid funding preferred arrangement would be eliminated, and additional Medicaid funding would be available to all States.
  • Several other provisions were endorsed that are in both the Senate and House bills, including a limitation of $2,500 per year for health flexible spending arrangements (FSAs); a reinsurance program for pre-Medicare retirees; and a provision that would tax the Medicare Part D Retiree Drug Subsidy (RDS) effective in 2012.

While preparations continue for Thursday's summit, House and Senate negotiators continue to work on a reconciliation bill that would embody compromises by both sides. It is reasonable to assume that the President's Proposal reflects compromises agreed to by House and Senate negotiators, but the final terms of a reconciliation package have not yet been announced. After the summit, it is likely that the reconciliation bill could be released by Congress.

Summaries of the House and Senate bill are available on our website at the following links:

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