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The White House Weighs In On Health Reform -- What's Next?

The President is outlining what he considers a reasonable resolution of the two bills. Will it work? Consider this: The alternative is no legislation at all.
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The White House has just released "The President's Proposal" on health reform. It must be considered in context, and the context is this: The House and Senate have each passed a bill and they're deadlocked on the differences between them. The President is outlining what he considers a reasonable resolution of the two bills, with the expectation that it will be used to guide the remaining negotiations.

Will it work? Consider this: The alternative is no legislation at all.

The President is using the Senate bill as the template for the final legislation. But that bill will need to be amended, using reconciliation, in order to be acceptable to the House. So the only way to pass this legislation is by designing a reconciliation bill that will be acceptable to both chambers. Success will depend on the extent to which the President's proposal meets the House's biggest objections, which can then form the basis for a reconciliation bill that will pass in the Senate.

There were four major areas of difference between the House and Senate bills that caused problems for House progressives. The House members wanted to close the "donut hole" on Medicare drug costs, eliminate the excise tax on high-cost health plans, make coverage more affordable for lower and middle-income Americans, and have the Federal government pick up more of the increase in Medicaid spending. How successfully does the President's Proposal address these four issues?

The President's draft unequivocally closes the "donut hole," which is estimated to cost $38 billion over 10 years. Score one for the White House. It will be very difficult for the Senate to push back on this change, which is politically popular, so hopefully this is a done deal.

What about the excise tax? The White House proposal says that reform will "make insurance more affordable by providing the largest middle class tax cut for health care in history." They're no doubt referring to the proposed tax credits for health premiums, but the effects of those credits are likely to be heavily diluted by Obama's proposal to retain the excise tax on so-called "Cadillac" health plans, which will fall most heavily on the middle class (and, as was demonstrated in a new report last week, not on union members.)

The excise tax is still in the President's Proposal. So are the improvements to the tax negotiated by unions, from the look of things. The Proposal appears to retain adjustments for geography and for retired workers between the ages of 55 and 65 (although we're still awaiting confirmation of that.) The negotiated five-year delay until 2018 for applying the tax to union-negotiated health plans is still there, but broadened out to cover all plans, not just collectively-bargained ones. So the net result of the labor/White House agreement is that unions scored a victory for every worker who receives health benefits through their job, protecting them from the risk of having their benefits cut due to forces beyond their control.

The White House Proposal also says that it "increas(es) the threshold ... on the most expensive health plans from $23,000 for a family plan to $27,500." But that's just salesmanship: The original plan had the tax beginning in 2013 - the delay of the tax to 2018 puts the threshold at which the tax applies at virtually the same level as that already negotiated with labor.

The good news on the excise tax, then, is that it has been delayed and its effects have been moderated. The bad news is that it's still a bad idea. Rep. Joe Courtney is already pushing for a delay, saying in a statement today that "the excise tax issue should be set aside and studied rather than imposing a tax eight years in the future. Delaying the tax by nearly a decade and hoping that it doesn't hurt working families is like throwing a dart in the dark."

So at least some members of the House are likely to push back on this aspect of the President's draft.

What about affordability? The jury's still out on this one. Through a combination of tax credits, assistance, and costs borne by insurers, families making less than $44,000 and more than $66,000 per year would pay less in premiums under Obama's plan than they would under the Senate bill.

Families making less than $55,000 would still fare better under the House bill, but those earning more than $55,000 appear to benefit more under the President's plan (according to Igor Volsky). The impact on lower-income families may create some difficulties in the House, but that remains to be seen.

The White House appears eager to eliminate any proposals which suggest there's been horse-trading or deals with "special interests." That's probably why the excise tax has been delayed for all workers until 2018, and it is certainly why the special Medicaid deal with Sen. Ben Nelson - the so-called "Cornhusker Compromise" - is gone. Instead there are stronger and fairer subsidies for Medicaid nationwide, and that's a good thing. Specifically, the President's proposal provides uniform Federal support for Medicaid enrollees (the Senate's support levels varied by state) at higher initial levels than the Senate bill.

There are other improvements and other problems too. On the plus side, the President's draft broadens the Medicare Hospital Insurance (HI) tax above the Senate's, so that it applies to unearned income (right now it only applies to wages) above certain income levels. It also increases Community Health Center funding to $11 billion over five years, which is nearly at the House's $12 billion level.

On the minus side, there's still not nearly enough genuine cost containment. Paramount among the missing cost containment measures is the public option - and not a restricted public option, but a robust one. The White House clearly doesn't intend to act on it unless its hand is forced by progressives. Other negatives: The Health Insurance Rate Authority appears to have less genuine regulatory power than it should. And mandates are still too employer-friendly and too tough on individuals.

Can all of these changes be included in reconciliation, which according to Senate tradition must address only issues that affect the Federal deficit? Arguably yes, since each of these changes has an impact on the Federal deficit. While there are no official cost estimates available, it appears that each of them would increase the deficit compared to the Senate bill but decrease it compared to the House bill. That would arguably qualify the proposal as a deficit reduction measure.

The House will no doubt push back on the excise tax and several other points - and it should. But if you believe that this is our only chance to enact health reform, and that a flawed bill can be fixed after it has been passed, then the President's Proposal will look pretty good to you. With the introduction of its proposal, which will probably be used as a discussion draft on Capitol Hill, the White House has clearly increased the likelihood that a bill will be passed this year.


Richard Eskow, a consultant and writer, is a Senior Fellow with the Campaign for America's Future. One of his projects is an initiative to stop the health excise tax. He blogs at: