And now for something completely different, Senator McCain proclaims himself a defender of Medicare

The first week of Senate debate has seemed, at times, more like Monty Python satire than serious debate. Like when Sen. John McCain took the Senate floor to decry proposed Medicare savings in the bill. Apparently, McCain forgot his own proposal as a presidential candidate to make much deeper cuts. The Medicare debate highlights the extent to which the reform debate has become much less about health care and much more about partisan positioning. The main purpose of the McCain amendment appears to have been to afford Sen. McCain the opportunity to record a “robo-call” message casting Democratic politically vulnerable Senators as opponents of Medicare.

Perhaps as a sign of the significance Politico attaches to the floor proceedings, the Capitol Hill online news rag’s weekend health reform coverage focused more on President Obama’s meeting with the Democratic caucus and whether Sen. Baucus did something inappropriate by recommending his girlfriend for a job as a U.S. Attorney than on anything happening on the Senate floor.

Health Reform Punching Bag
It’s a good thing Democratic Majority Leader Harry Reid is a former boxer. He’s going to need everything he learned in the ring to keep health reform from becoming a giant punching bag for opponents while he works to corral 60 votes. The Republican strategy seems to be to throw everything but the kitchen sink up against health reform and hope some of it sticks.

The Democrats’ counterstrategy is to file and debate their own “message amendments” meant to shape the news coverage and allow members, especially those facing difficult reelection fights, to champion popular causes. Examples include an amendment sponsored by Sen. Michael Bennet (D-CO) to ensure that there would be no cuts to Medicare benefits (passed 100-0), and an amendment by Sen. Blanche Lincoln (D-AR) to cap the tax deductibility of pay for insurance company executives (which fell short of passage by four votes, 56-42).

About those 60 votes
We’ll see a short break from these posturing and “message amendments” today as the Senate tackles abortion, one of the two main issues that appears to be hampering its ability to lock down 60 votes for reform (the other being the public option). Senator Ben Nelson (D-NE) has said that he would not support reform legislation unless it included language restricting abortion similar to the language inserted in the House by Michigan Congressman Bart Stupak. But the Senate does not seem likely to approve an amendment that mirrors the House provision.

If Reid loses Nelson’s vote, he will need to rely on the pro-choice but anti-public option Republican Senators from Maine in order to get the 60 votes he needs. In the process, he could possibly pick up the vote of Sen. Lieberman, who has said he would support a filibuster if the public option was included in the Senate bill, but Reid risks losing support from progressives who feel that the “state opt-out” provision in the Reid bill is already too weak. A new public option proposal could emerge from negotiations between liberal supporters, conservative opponents and the White House sometime this week.

Two issues that divide the Democratic caucus but are not likely to get resolved in the Manager’s Amendment are: How far to push the drug industry for savings, and how best to structure health coverage for children.

On the drug issue, many Democrats believe that the deal Senate Finance Chair Max Baucus and the White House struck with PhRMA lets the industry off too easily. They want to wring additional savings from the drug companies and use the money to close the Medicare Part D “donut hole.” Other Democrats fear, though, that if they push the drug industry too hard, the major investment the industry has been making in supporting reform will flip to opposition and could sink the bill. Even if the Senate decides to continue the kid-glove treatment for the drug companies, they will have to wrestle with the issue again because the House takes a more aggressive approach.

The children’s issue mirrors the long-running debate on affordability in that it is not so much about principle as about cash. Both Senators Casey and Rockefeller plan to file amendments aimed at making sure that kids don’t lose benefits they have now. While the Senate supports enhancing coverage for children, the amendments have not yet been scored by CBO, and it is unclear if they are budget neutral or will require an additional revenue source.

As soon as Reid gets 60 votes worth of support on these two issues, watch for a rapid increase in the pace of Senate debate, with many of the Senate Democrats’ main concerns getting wrapped into a final Manager’s Amendment.

Assuming all goes according to plan…
The Senate will conclude their debate prior to Christmas, leaving the House, Senate and White House to work through the many differences in the respective versions. Here are the key ones to watch:

Financing
The House relies largely on progressive income taxes to finance health reform, while the Senate proposal taxes health benefits. Interestingly, this chasm may be the hardest one to bridge, though it hasn’t attracted nearly the press coverage of other tough issues.

Affordability
The House does much better for low-income people, while the Senate, at least on premiums, does better for moderate-income folks—though in general, the House provides better benefits. The obvious solution is to take the best of both worlds, but the challenge goes back to the financing debate: Where will the money come from?

Exchanges and Insurance Regulation
In most ways, the House bill establishes tighter oversight and more consumer-friendly regulation of the insurance industry, including less scope for discrimination against older subscribers, or opportunities for the back-door reintroduction of the practice of charging people more when they are sick. The House also gives the exchange more power to negotiate with insurers and exclude plans from the exchange if they do not offer good value.

Abortion
As of this writing, we don’t know the outcome of the Senate debate, but odds are against the Senate adopting the House language. The question for conferees is whether there is anything in the middle that both sides can live with.

Public Option
After the Senate gets through wrangling over the public option, members will have to take the matter up again in the House, where support for a public plan runs much deeper. A number of  progressive members of Congress are on record saying they won’t vote for a bill without a public option, and advocates are working to hold them to their word.

Employer Responsibility
The House includes a “pay or play” provision, while the Senate charges employers penalties only if their employees actually access subsidized coverage.

Undocumented immigrants
Though relatively few undocumented immigrants could actually afford to pay the full cost of an insurance policy, the Senate bill prohibits them from buying insurance through the exchange, even with their own funds. During the House debate, members of the Congressional Hispanic Caucus told Speaker Pelosi that they would not vote for a bill that contained such a restriction. If the same holds true for a conference report, the Senate may have to back down.

–Michael Miller, director of strategic policy

Here’s the story: After months of laborious negotiations and weeks of debate, the Senate Finance Committee passed its version of health reform on Oct. 13.  The Finance proposal differed from the bills passed by all of the other committees in numerous ways; one of the most striking was how much less financial protection it offered to low- and moderate-income people who would be required to purchase health insurance.  Premiums under the Finance proposal were higher and benefits lower than in either the Senate HELP or the House proposal.

As Senate leaders work to merge the HELP and Finance proposal into a single bill, they are trying to reduce some of the premiums and, according to a paper by the Center on Budget and Policy Priorities and discussions Community Catalyst has had with a number of Hill staff, the focus is on reductions for people between 200-400 percent FPL—an admirable undertaking that we fully support.

However, in order to pay for those increased premium subsidies, Senate leaders are considering reducing premium subsidies for the lowest income households by as much as 50 percent more than the already low level in the Finance proposal.  If this proposal is adopted, many low-income households will have a difficult time meeting their premium obligations, or could also be faced with financial penalties for failing to purchase health insurance.  Rather than being helped by reform, they will be hurt.

Is taking subsidies away from low-wage workers really the only way the Senate can think of to finance necessary improvements in subsidies for those with slightly higher incomes?  David Stockman, Ronald Reagan’s first budget director, famously noted that once in Washington he found it was “easier to curtail weak claimants than weak claims.”  That adage appears to be alive and well in Washington today, as Senate leaders seem more willing to impose an unmanageable burden on low-wage workers than to explore progressive taxation or to wring a little more waste out of the health care industry, as their colleagues did in the House.

The Senate bill is still an enormous improvement from where we currently are and the process needs to continue to move forward.

As for subsidies, it is not too late for the Senate to change course, and for a bill to emerge that will improve affordability for both low- and moderate-income households.  But it will only happen if people raise their voices and demand it.

–Michael Miller, Director of Strategic Policy

The report, produced by PricewaterhouseCoopers, is problematic for a several reasons—it doesn’t make an “apples to apples” comparisons, it looks only at selected parts of the bill, not the bill in total, and it makes unjustified assumptions about some of the provisions.

For example, the report ignores all of the cost-containment provisions, the positive effect on the risk pool of providing subsidies or the potential for administrative savings through benefit standardization.  And it is, to say the least, disingenuous for the industry to oppose provisions that would lead to more effective cost-containment, such as a public option or an Exchange that can negotiate actively with insurers, and then complain that cost-containment efforts do not go far enough.  Hopefully, lawmakers will see through the report’s flaws and not make concessions to the industry that has finally stopped playing nice.

Food Fight
Insurers aren’t the only interest group turning up the volume as reform lurches forward.  Watch for worried governors to further press their case for Medicaid help.  Govs got the Finance Committee to move from temporary to permanent enhanced federal matching funds for the expansion population, but many remain nervous about new costs their states would have to shoulder under reform.  Governors like Schwarzenegger, who represent a much-sought-after bipartisan voice could be particularly influential, and some Senators have already committed themselves to finding extra help for the states.  Another group turning up the heat is the hospitals, upset that SFC would leave them with a substantial uncompensated care burden while slashing federal funding to hospitals that provide that care.

What this also means is that we can expect a fierce food fight for the remaining $70 billion in “headroom” – the difference between what President Obama said he would support and the CBO score of the Senate Finance bill.  Additional affordability improvements are one way that space could be filled (if revenue or savings measures can be agreed to), but others include the above-mentioned additional help for states, or rolling back fees on health industry stakeholders that are in the SFC proposal now and that have provoked vocal opposition from Senators in both parties.

House inching closer
The House continues to grapple with divisions within the Democratic caucus, aiming to send a combined House bill to CBO this week.  The key divisions remain over the revenue provisions and the public option.  House leaders are likely to scale back the surtax on wealthy households, raising the threshold to perhaps as high as $1 million, but they have yet to agree on how they would plug the resulting revenue hole.  Don’t look for a bill to hit the House floor for another couple of weeks.

Meanwhile, join us for another installment of:

As the Public Option Turns
The ongoing debate over public options sometimes feels like soap opera – lots of drama but not much plot advancement.

Previously on As the Public Option Turns, we found the importance of the issue elevated by a White House commitment to keep cost of reform under $900 billion.  That means Congress must find ways to make reform more cost effective unless they are willing to sacrifice affordability.

We now join our hero, Public Option, in the House, where the latest whip count shows the House Democratic caucus overwhelmingly in favor of a strong public option with rates based on Medicare payments, but close doesn’t count.  They have to get to 217 votes for passage and it’s those last few that will be the hardest to lock down.

While back in the Senate…
Last week Sen. Carper offered a proposal that would allow states to opt out of the public option.  This week, Sen. Schumer is floating a counterproposal which would make inclusion of the public option the default position but allow states opt out instead of having to opt in.  Schumer is also actively working to defang the Republicans’ number one emerging attack line:  that the individual mandate non-compliance penalties constitute a tax increase on the middle class.  Schumer proposes to blunt that attack by changing the penalty from a fee paid to government to a required contribution that an individual could use to purchase insurance at a later date.

In a separate but related plot line, another public insurance plan is getting a second look.  In their search for more a more cost-effective proposal, House leaders are considering a further Medicaid expansion, up to 150 percent of the FPL.  Even if the federal government paid 100 percent of the cost, expanding Medicaid is more cost-effective than putting people in private plans.

It’s Beginning to Look a Lot Like Christmas (or later)
The goal in the Senate is to have a bill on the floor next week, but it is not certain Majority Leader Reid will be able to complete the combination of the HELP and Senate Finance bills as fast as originally thought. Sen. Reid has indicated that he would like a CBO score on the blended bill, which could also slow things down depending on how extensive changes are. (It’s worth noting that work to combine the bills started even before the SFC final vote).

Add on three weeks of floor debate (maybe even more to account for procedural delays) and, assuming House can match the generally more slow-moving Senate, bills could clear the floor by Thanksgiving.  (That assumes the Senate remains on track for a 60-vote strategy and doesn’t have to pull the bill off the floor to adjust it for Budget Reconciliation).

This leaves only a few weeks before Christmas for what promises to be a protracted and challenging conference committee and final votes in each chamber. As an example of just one of those contentious issues that will have to be resolved in conference, more than half of House Democrats have signed a letter opposing the primary financing source in the Senate proposal.  With multiple and similarly thorny issues to resolve, don’t be surprised if health reform spills over into the new year.

The hurry-up-and-wait that has characterized Congress’s movement on health reform is par for the legislative course, especially a bill such as important and many-parted as health reform. But much of that waiting wasn’t on deliberations of the full committee or mark ups but watching the picky-eater-at-dinnertime progress made by the Group of Six, a set of negotiators Sen. Max Baucus handpicked and strove to keep at the table. The Senators represented a lot of wide open spaces — Montana, Iowa, Wyoming, North Dakota, Maine and New Mexico – but not very many people.  8.4 million, to be more precise, or about pi percent of the U.S. population.

As the summer turned to fall, the Group of Six came to give new meaning to “bipartisanship,” and left the committee scrambling to nip and tuck the bill in order to wring from it some small measure of Republican support.  This week, there’s news that Senate Majority Leader Harry Reid is handpicking a smaller team from the Finance and HELP committees to merge the two Senate bills. So far, he’s up to two. Part of this is just the nature of the law-making process – bills get merged in rooms with a certain number of people in them, as Jonathan Chait at The Treatment pointed out.  But from a straight representative viewpoint, a table for three or four or six from land-rich, people-scarce parts of the country necessarily excludes the interests of the majority of the U.S.

The self-winnowing Group of Six experience stands in stark contrast to another big news-making decision made last month in Pittsburgh, when the informal economic group the G-8 decided to handoff its power to the G-20. Such a move acknowledges new global economic realities: the countries in the G-8 (Canada, France, Germany, Italy, Japan, Russia, U.K., and U.S.) represent about 14 percent of the world population, while those in the G-20 represent two-thirds of the world’s people and 85 percent of its gross national product.

I admit that population and economic production are just two of many, many metrics, and do not suggest that world economic decisions, or health care ones, must be closely-tied to some population algorithm. That’s not how things work. But symbolically speaking, expanding and sharing the decision-making power respects certain global realities, can build public buy-in and is, if incompletely, more democratic.  As with many acts of small-d democratization, having more people at the table makes the group more likely to make decisions that are good for more people.

Sure, it’s utilitarian of me to say so, but health reform, too, should be based on decisions that do more good for more people. But just by the numbers, that’s not how it has played out lately. You have to wonder if the unrepresentative nature of the process made it easier for the final product out of Senate Finance Committee to be tilted more toward the needs of special interests than to those of many low- and moderate-income people, especially the uninsured.

–Kate Petersen, Health Policy Hub blogger

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.

It’s Snowe-time

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

Over the course of the debate, Snowe’s support has taken on great importance. It would help the Democratic leadership hold onto their own conservative members and could even pave the way for several more Republican votes in support of reform.  And a series of committee votes on which she has voted with Sen. Baucus has sparked speculation that Snowe is moving toward a yes vote on the overall bill.

For her part, the senior Senator from Maine is keeping her cards close to the vest.  While Snowe’s support would be a political dream-come-true for Senate leadership and the White House, liberals in and out of Congress have less reason to be enthusiastic, since Snowe has been clear that she does not support a public insurance plan except as a fallback in the event that there are not an adequate number of private options.

With the Finance mark-up  slated to wrap this week, we’ll be watching to see how the committee addresses affordability, the public option and employer responsibility – and of course, Sen. Snowe’s votes on these issues and the final bill.

For more, check out the Health Reform Insider.

By now, the key issues that the committee will have to resolve are familiar—they are most of the same ones that bedeviled the inconclusive bipartisan negotiations that preceded the release of the Baucus plan.

We recap the most significant ones and assess their prospects in this week’s Health Reform Insider.

–Michael Miller, Director of Strategic Policy