How the Senate will whittle away at the House health care reform bill.

How to fix health policy.
Nov. 8 2009 5:41 PM

Watch It Shrink

Think the House health care reform bill's too long? Not after the Senate whittles away at it.

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

US House of Representatives.
The U.S. House of Representatives

Yes, it's long.

During House debate over the health care reform bill, Republican after Republican stepped up to denounce the legislation's intolerable 1,990-page length (text). Before it passed the House by a  narrow margin of 220-215, the bill actually got a wee bit longer with the addition of a manager's amendment, a few modifications to the manager's amendment, and another amendment effectively barring private insurers who participate in the bill's new health exchange from covering abortions. That the floor vote adopting the anti-abortion amendment received not a single Republican nay suggests brevity wasn't the GOP's true concern. You want short? "Medicare eligibility shall henceforth extend to the entire U.S. population." Go find a Republican vote for that.

The thing to worry about the House health reform bill isn't what the Senate will add but what it will take away.

The Public Option. House speaker Nancy Pelosi tried and failed to round up sufficient votes to create a robust public-option government health insurance program that would link its doctor and hospital fees to Medicare rates. But within the Democratic caucus solicitude toward private health insurers outweighed fiscal conservatism, and Pelosi had to settle for a somewhat anemic public option (the preferred jargon is "level playing field") that would have to be self-sustaining and negotiate rates independent of Medicare.

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A dispiriting analysis by the Congressional Budget Office (see Page 6) concluded that the Pelosi public option would charge premiums that were higher than those of its private-sector competitors, not lower, as anticipated. That's because the health reform bill, despite outlawing various cruel practices by private health insurers (rejecting customers based on pre-existing conditions, charging significantly higher premiums to individuals in high-risk demographic groups, voiding the policies of customers who get sick based on petty flaws in their paperwork), is not expected to eliminate all possible means health insurers have to avoid signing up people likely to incur high medical expenses. As a consequence, the public option will end up taking on a large proportion of people who need a great deal of medical care, thereby driving up premiums, a grim scenario anticipated months ago by Princeton sociologist Paul Starr.

In a better world, the Senate would interpret the CBO's findings as a reason to strengthen the public option—which Senate majority leader Harry Reid has vowed to include, with an opt-out provision for states that don't want to participate—in the bill to be fashioned from the Senate health committee version (which includes a public option) and the Senate finance committee version (which does not). Instead, the public option is likely to be watered down even more, assuming Reid has the votes to keep it in the bill at all, which at the moment is looking doubtful.

The Millionaire's Tax. About half the House bill's trillion-dollar 10-year price is paid with a 5.4 percent surtax on family incomes over $1 million ($500,000 for individuals). In the Senate, this highly progressive tax will likely be replaced with a less progressive tax on so-called "Cadillac" health insurance policies (i.e., those whose value exceeds $8,000 for an individual and $21,000 for a family). Recognizing belatedly that many people receive higher-value health insurance policies because their work is more dangerous, the Senate 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. As I've noted previously, this is far too short a list, excluding, for instance, all heavy manufacturing. The Cadillac-plan tax would raise less than half what the millionaire's tax would raise. Even so, it's the tax likely to prevail in Reid's blended bill.

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