Despite the support of many Senators, led by Sens. Rockefeller and Schumer, the effort to add a public option to the Senate Finance bill fell short. Significant opposition from conservative Democrats both on and off the committee makes it hard to see how a public option as currently formulated can pass the Senate as long as 60 votes are needed.
Nonetheless, the strong showing in the Finance Committee has led to an ongoing search for a formulation that will satisfy both the left and right in the party. One possibility is that conservative Democrats would agree to vote with the majority of Democrats to break a Republican filibuster, but would still be given a chance to vote against the public option. Another approach is to find one or more new approaches that can satisfy both wings of the party. With that end in mind, both Sens. Cantwell (D-WA) and Carper (D-DE) have offered new ideas for consideration. (See below).
Cantwell: harnessing state purchasing power, but consumer protections needed
An adopted amendment sponsored by Sen. Cantwell (D-WA) would allow states to negotiate for coverage on behalf of low-income enrollees instead of having them buy coverage through the Exchange. Presumably states would contract with Medicaid managed care organizations (MCOs) (at rates higher than Medicaid, but lower than commercial insurance) or directly with organized networks of providers. The proposal is similar in structure to the Washington Basic Health Plan and, in some respects, to Commonwealth Care in Massachusetts.
While it would likely put some downward pressure on insurance rates, the Cantwell amendment has some significant weaknesses. First, unlike a Medicaid waiver, which must be budget neutral, the federal government gets a cut off the top. States would receive only 85 percent of the money that would otherwise be available for subsidies for low-income people. If a state chose this option, savings would accrue automatically to the federal government while the state would be at financial risk for providing a benefit package equivalent to what would have been available in the Exchange, but with less money. This could give states incentives to skimp on coverage for enrollees.
To the extent states are able to negotiate additional savings, nothing in Cantwell’s proposal requires that any portion of those savings be used to reduce premiums, cost-sharing or improve benefits for the low-income enrollees who would be required to participate in the plan. Finally, the process for building the program at the state level and room for consumer input there are unclear. In order to make this proposal work for low-income enrollees:
• States should get 100 percent of tax credit, maintaining budget neutrality to the federal government
• Savings should be required to be reinvested in better coverage for program participants
• Access to providers in the “basic health plan” should be at least as good as in Exchange plans for higher-income enrollees
• States would need to ensure that the Basic Health Plan was coordinated with both Medicaid and the Exchange to ensure seamless coverage for enrollees
• Rules should be put in place to make the program development transparent at the state level and ensure opportunity for public input.
Carper: State flexibility to create a public option
Another idea making the rounds, but not included in the SFC bill, is a proposal offered by Sen. Carper as an alternative to forming insurance co-ops. It would allow states to offer either a public option or open the state employee program to the Exchange population. While this would give some states an opportunity to experiment with a public option, Sen. Carper’s proposal gives governors a veto that cannot be over-ridden. a public plan would be available only if a governor and the legislature agree. (Presumably, though it’s not clearly-worded in the proposal, the co-op would be put in place in the absence of an agreement). As with the Cantwell amendment, the Carper proposal has some merit, but it doesn’t make a public option available uniformly across the country. As a result, it is likely to get a cold reception from advocates of the public option, both in and outside Congress.
But a proposal like Sen. Carper’s, if it can pass the Senate, does have the advantage of “raising the floor” in eventual negotiations with the House. In the meantime, Senators and advocacy groups will continue their efforts to secure as much support as possible for the public option in the Senate. Even if it does not pass, getting a yes vote from over 50 Democrats will strengthen the public option’s prospects in House-Senate negotiations.
As we’ve observed here before, Sen. Snowe has been the most closely-watched member of the Senate. Despite all the tea-leaf reading of her committee votes, her position on the SFC bill is still unclear. But the time for Sen. Snowe to either fish or cut bait is rapidly approaching.
If she votes with the rest of the Republicans against the SFC bill, it will be very hard to convince other members of the Democratic caucus, already frustrated by long months fruitlessly courting the GOP, that they should continue to offer concessions with no assurance of support. On the other hand, if she votes for the bill coming out of SFC there will continue to be substantial deference to her views, both during the merger with HELP and beyond.
A closer look at the age-rating debate
Sen. Baucus revised his original proposal to narrow the permissible variation in premiums from 5:1 to 4:1 based on age – a move in the right direction though such a wide rating band will still leave insurance unaffordable for many, and should be brought in line with the 2:1 rating proposed in the Senate HELP and House bills. But even 4:1 drew a sharply-worded letter from the insurance industry claiming that it would cause young people to drop out of the risk pool and make coverage more expensive overall. It’s worth reality-testing this common argument against tight rate bands.
The experience that insurers draw on to support their claim is what happened to costs in some states with guaranteed issue and community rating. But these states were operating without the benefit of income-related subsidies or an individual responsibility requirement – both components of national reform. With reform, age will be irrelevant for most people with income below 400 percent of the federal poverty line (FPL) buying non-group insurance; They will pay an income-related premium regardless of age. Only above the subsidy line does age become a meaningful factor, and there the difference is stark.
A 25-year-old making $45,000 buying insurance with a 2:1 rate band (as in the House and HELP bills) would pay about 6.75 percent of her income for coverage). A 64-year-old with the same income would have to pay about 13.5 percent of hers. If the age bands remain at 4:1 as Senate Finance proposes, the 25-year-old will be able to get insurance for less than 5 percent of her income, but the 64-year-old would have to pay 19 percent of her income just for premiums.
So despite the insurers’ claims, a 2:1 age band will not make insurance prohibitively expensive for young people, but failing to reduce age-related discrimination more than the Senate Finance bill has so far will leave older adults without affordable options.
House Update: tough sledding ahead
During the Senate Finance mark up, the House has been working out of spotlight, a lack of attention that has probably been welcome to House leaders, who face major challenges to putting together final version of bill. A debate reminiscent of the Energy and Commerce committee one in July is going on, and has so far kept House leaders from settling on a public option approach. House Democrats can only lose 39 votes and still retain a majority. More than that have already committed to oppose a plan that does not tie reimbursement in the public option to Medicare rates, but it’s not clear that there are enough votes from Blue Dogs and other more conservative members to pass such a strong public option.
Several other contentious issues remain unresolved, especially how the House will lower the price tag of their bill without gutting affordability protections, and how to resolve concerns about the financing provisions. A bill isn’t expected on the floor for at least two weeks (although once a bill does go to the floor, the House can move much more quickly than the Senate).
(from the Health Reform Insider, which you can read in full here).
–Michael Miller, Director of Strategic Policy