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.

Affordability. All versions of the health care reform bill require virtually every American to possess health insurance. It is therefore no small challenge for Congress to make sure that the private and/or public health insurance policies made newly available to the uninsured be affordable. The House bill provides tax credits on a sliding scale for incomes up to about $88,000 for a family of four. These would limit out-of-pocket costs for premiums to 1.5 percent of income for the poorest families and 12 percent of income for families earning $88,000. The Senate finance committee bill, which likely will set the affordability guidelines for the blended bill, offers a similar sliding scale of subsidies for incomes up to $88,000, but it's stingier. The subsidies start at 2 percent of income, not 1.5 percent, and they hit the 12 percent ceiling at $66,000, not $88,000.

Abortion. During House debate, Republican leader John Boehner of Ohio pestered House Democratic leaders about whether the anti-abortion amendment, which is not in either version of the Senate bill, would remain in the bill after House-Senate conference. Obviously they hope it does not, but it remains to be seen whether the Senate can resist pressure from the U.S. Conference of Bishops.

The 1976 Hyde amendment already prohibits the spending of Health and Human Services funds to pay for abortions. But 17 states have gotten around that prohibition in the Medicaid program (the Hyde amendment's principal target) by paying for abortions not with federal funds but with state funds. (Medicaid is jointly funded by the federal and state governments.) Health reform advocates had hoped to achieve a similar workaround in the House bill by segregating federal funds from private funds generated through premiums in the new health insurance exchange. Many bill supporters no doubt also hoped the Hyde amendment might eventually be repealed, freeing health reform from this cumbersome requirement. But Michigan Democrat Bart Stupak blocked both paths with an amendment that states no funds made available through the bill "may be used to pay for any abortion or to cover any part of the costs of any health plan that includes coverage of abortion" except where the mother's life is endangered or the pregnancy is the result of rape or incest—the same exceptions codified in the Hyde amendment. The amendment theoretically allows private insurers to offer policies covering abortion within the exchange provided the policyholder receives no federal subsidy, but that caveat is sufficiently restrictive that no insurer is likely to bother.

Negotiated drug prices. The House rejected a bad deal that the White House and the Senate finance committee cut with Billy Tauzin, president of the Pharmaceutical Manufacturers of America. Under the deal, the drug manufacturers would not be asked to give up more than $80 billion over 10 years to pay for health care reform. In exchange they would support health reform. As part of the deal, the government would not try to eliminate a prohibition in the 2003 law creating a Medicare drug benefit preventing Medicare from negotiating what it pays for drugs. The House bill, however, eliminates this idiotic prohibition. As I've noted before, the blended Senate bill will likely honor this costly bargain.

I don't mean to be too hard on the Senate. The Senate finance committee bill imposes necessary cost controls on Medicare that are at least theoretically tougher (assuming Congress has the stomach to stand by them). It also rescues the State Children's Health Insurance Program from oblivion, whereas the House bill eliminates it, redeploying some of its low-income beneficiaries to Medicare and some to the new health insurance exchange. Saving S-CHIP, the Congressional Budget Office found, is the cheaper option, because of efficiencies inherent to government-supplied health insurance that all parties to this debate refuse to dwell on (except perhaps Rep. Dennis Kucinich of Ohio, a single-payer advocate who voted against the House bill).

On the whole, however, most parts of health care reform that the Senate will now remove would be better left intact. Let's hope something's still left when it's done.

E-mail Timothy Noah at chatterbox@slate.com.

Timothy Noah is a former Slate staffer. His  book about income inequality is The Great Divergence.