Tuesday, August 11, 2009

The Senate's Gang of Six Stays Inside for Recess

While the rest of the Senate left town for their August recess, six Senators stayed behind. The bi-partisan Senate Finance Committee negotiators are reported to be making progress on their healthcare reform plan.

Max Baucus, the Finance Committee Chair has given the negotiators a September 15 deadline for completing their work. And Chuck Schumer has weighed in that “If they can’t do it by Sept. 15th, I think the overwhelming view on the Democratic side is going to be, then, they’re never going to get it done... And there’s always a worry that, you know, delay, delay, delay, you lose any momentum whatsoever.”

Douglas Elmendorf, CBO Director, has testified that other healthcare legislation in Congress would raise costs. Before the House Ways & Means Committee, he said that "we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significiant amount. And on the contrary, the legislation significantly expands the federal responsibility for health care costs." All of which raises the bar for the Senate negotiators to come up with a plan which bends the cost curve in the right direction.

Shailagh Murray and Lori Montgomery recently reported on the Senate negotiators' progress towards eventual coverage of 94 percent of Americans that "would expand Medicaid, crack down on insurers, abandon the government insurance option that President Obama is seeking and, for the first time, tax health-care benefits under the most generous plans." Excerpts of the negotiators' policy positions follow.
  • "Seeking compromise on some of the most complex issues .. including how to compel employers to continue providing insurance to their workers; how to more fairly distribute government subsidies for coverage; and who and how many should be allowed to remain uninsured."
  • "Limit (congressional) authority over Medicare by empowering an independent commission to extract savings from the program..."
  • "Rejected a government-run health insurance plan in favor of a network of member-owned cooperatives..."
  • "Outstanding issues include how to structure a Medicaid expansion to make it fair to individual states; how to establish subsidy levels to maximize assistance to the uninsured; and how to squeeze savings from Medicare without imposing an undue burden on seniors or compromising the quality of care. Another flashpoint is whether government insurance subsidies could be used to pay for abortions."
  • "Agreed to about $500 billion in changes to existing federal health programs, including Medicare and Medicaid. For example, negotiators would require wealthier seniors to pay more for prescription drug coverage under Medicare, and they would charge co-payments for clinical lab procedures. The lab co-pays are potentially lucrative, raising about $20 billion over 10 years."
  • "Other new sources of revenue include penalties on individuals who do not obtain health insurance, and a "free-rider" provision that would require employers that currently offer health insurance to continue to do so, or to reimburse the federal government for workers who switch to subsidized coverage through an insurance exchange. Both provisions could yield about $43 billion over 10 years."
  • "The rest of the additional revenue -- about $250 billion -- would come from new taxes, primarily from an excise tax of up to 35 percent on insurance companies that sell extremely generous policies worth at least $21,000 a year for family coverage or $8,000 a year for individuals, according to aides involved in the discussions. About 7 percent of taxpayers hold such policies... Insurance companies are likely to pass the cost of such a tax to policyholders, raising the price of those plans. That would create a strong incentive for employers to stop offering them, thus driving down overall health-care costs. With employers paying less for insurance, tax analysts predict, they would pay workers more in wages, increasing income tax collections by as much as $180 billion over the next decade."
  • "Smaller tax provisions (include) a $2,000 cap on flexible savings accounts -- which are currently unlimited -- and a plan to improve tax compliance by requiring businesses to tell the Internal Revenue Service when they pay corporations for services."
  • "Studying a plan to fine insurance companies that do not pay providers electronically, a plan to reduce payments to providers to force them to increase efficiency and a plan to study the comparative effectiveness of various medical treatments."
  • "Set a target for savings through those reforms. If the target is not met, they would create a panel, called the Medicare Preservation Commission, that would recommend ways to obtain additional savings."
It's doubtful that liberal democrats and conservative republicans will be able to endorse the resulting plan. However due to the Senate's key role in enabling any healthcare legislation, and the Senate Finance Committee's key role in funding healthcare reform, their recommendations are sure to be influential in this fall's debate.

Let's see whether Senate negotiators reconcile with key elements being touted by Obama in his "What's in it for me?" stage of the debate: "(1) ending the practice of denying insurance coverage to people with a pre-existing illness; (2) keeping people from losing their coverage if they get sick; and (3) protecting Americans who face high out-of-pocket medical costs." The Democratic National Committee released a new television ad today with the same message:

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