Why the House health reform bill is better than the Senate's.

How to fix health policy.
Oct. 29 2009 7:01 PM

Why the House Bill Is Better

The "blended" House health reform bill is an argument for unicameralism.

Click here for a guide to following the health care reform story online.

Nancy Pelosi. Click image to expand.
House Speaker Nancy Pelosi

If only the United States were like Denmark, or Israel, or South Korea, or even Nebraska, health reform would be practically home free. These are all places where bills need pass only one legislative body to become law. Here in Washington, however, we're stuck with an unrepresentative upper chamber called the Senate, where one opportunistic independent and a handful of recalcitrant Democrats can block the majority's will by using a reactionary legislative maneuver with a disgraceful history that got mythologized by a conservative Hollywood populist into a cherished American tradition.

It's different in the House of Representatives, which, distorted though it may be by rampant gerrymandering, nonetheless renders a far more plausible approximation of representative government than the Other Body, even before you factor in that it has no filibuster. (The House started out with a filibuster but discarded it in the 19th century.) It therefore bears noting that the "blended" health reform bill that House Speaker Nancy Pelosi released Oct. 29 (text, summary, CBO score) is a better product than whatever's likely to emerge from the well-intentioned efforts of Senate Majority Leader Harry Reid.

Here are three reasons why.

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The public option. Like the blended Senate bill, the House bill creates a "public option" government insurance program. Unlike the Senate, though, the House seems pretty likely to keep one. The House starts out with a stronger version. The Senate bill contains a state "opt out" provision that seems increasingly likely to morph into a still-tolerable "opt in" provision before morphing into a not-at-all-tolerable "trigger" provision that effectively would eliminate the public option altogether. (The Obama White House will try to sell the trigger as a "compromise" version of the public option. Don't believe it.)

Pelosi had to compromise a bit on the public option, too, but not nearly as much as Reid. After pushing hard for a "robust" public option whose hospital and doctor payments would be linked to Medicare, thereby lowering premiums well below prevailing private-insurance rates, Pelosi had to settle for a "level playing field" version of the bill more in tune with a compromise reached by the House energy and commerce committee. Under this version, the public-option program would (through the Department of Health and Human Services) negotiate hospital and doctor payments separately from Medicare and would have to be self-sustaining financially. Its premiums would still be less expensive than private-sector premiums, but not by as much. This is pretty close to what Reid's version would be if it didn't include the opt-out provision.

Negotiated drug prices for Medicare. This past spring, the White House and the Senate finance committee cut a bad deal with Billy Tauzin, president of the Pharmaceutical Manufacturers of America. In exchange for PhRMA's pledge to give up $80 billion over 10 years to lower drug prices for seniors and extend coverage to the uninsured, the White House promised not to seek additional savings from PhRMA or to alter a provision in the 2003 law creating a Medicare drug benefit that prevented Medicare from negotiating on drug prices. (Tauzin, then the Republican chairman of the House energy and commerce committee, was instrumental in writing this law. I have yet to see anyone dispute that Tauzin's lobbying on this matter violates an unambiguous House ethics rule that's supposed to prohibit, permanently, lobbying on anything "in which the person participated personally and substantially.")

The point is, the White House got badly taken, dealing itself out of two to three times as much money as the drug companies put on the table. Even so, the Senate finance committee honored the deal. So, presumably, will Reid's bill (which, apart from its public option, reportedly resembles the finance committee bill in nearly every particular). But the House energy and commerce committee, to its great credit, did not agree to the deal, and neither did Pelosi. The blended House bill requires HHS to negotiate drug prices for Medicare, and it also requires pharmaceutical companies to rebate the government for drug overcharges that arose after 2003 when low-income elderly people who got their drugs through Medicaid (which was permitted to negotiate drug prices) started getting their drugs through Medicare (which was not).

Taxes. The Senate finance committee bill taxes health insurance companies to pay for health reform, imposing a surtax on so-called "Cadillac" employer-based plans offering benefits in excess of $8,000 for an individual and $21,000 for a family. These amounts would rise with inflation. Policy wonks (who correctly view the current tax deductibility of health insurance as a market distortion) thought this was a great idea until it dawned on them that many working people receive more expensive health insurance not because they are showered with unnecessary benefits but because their jobs put them at greater risk of injury or death. To address this problem, the finance committee raised the threshold by $5,000 for people in certain dangerous professions: law enforcement, firefighting, rescue work, ambulance services, construction, mining, agriculture, forestry, or fishing. It's far from clear these exemptions were broad enough—heavy manufacturing, for instance, is overlooked entirely—given that people who perform physical labor are more likely to require medical attention than people who perform mental labor.

Maybe this will get fixed by amendments on the Senate floor. In the meantime, though, wouldn't it be simpler just to slap a tax on high incomes? As the labor-affiliated nonprofit Citizens for Tax Justice noted in September, an income surcharge on the nation's richest 1 percent would result in this group giving back "some, but not all, of the tax cuts they received over the 2001-2010 period." The House bill follows a similar line of reasoning, imposing a surcharge not on the richest 1 percent but on the richest 0.3 percent, i.e., families earning more than $1 million. This would raise $426 billion, or more than twice the $201 billion that the Senate finance committee would raise by taxing Cadillac health plans.

Granted, Pelosi, like Reid, is a few votes shy; she has "at most, 201 votes of the 218 she [will] probably need," according to Robert Pear of the New York Times. But the fact that she's contemplating bringing her bill to the floor as early as next week, Pear observed, suggests that she's confident she can round up the rest. Even if she has to give a little here or there, she's starting from a stronger bargaining position than Reid. I don't think it's a coincidence that a decent health reform bill is proving easier to pass in our national legislature's more representative half.

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