In advance of a meeting scheduled for Thursday, the Senate Finance Committee has released a 62-page description of policy options for expanding health insurance coverage. It is a revealing document, because we can glean from it the outlines of where the process now stands in the Senate--the body that will determine whether President Obama's top domestic priority lives or dies. Here is some of what we learn:
1. There is a substantial amount of bipartisan common ground, at least between committee chair Max Baucus and ranking member Charles Grassley.
2. The basic approach of the emerging bill tracks the system that Massachusetts enacted in 2006 with bipartisan support, including that of then-Governor Mitt Romney and Senator Ted Kennedy. The most important similarity is that individuals without coverage would buy plans through a "health insurance exchange" similar to the Massachusetts Connector. (One version of the plan contemplates a single national exchange; another proposes state-based exchanges with some connective tissue at the federal level.) Plans would be subject to uniform rules and would be required to offer at least four benefit options paying from a low of 76 percent to a high of 93 percent of anticipated health care expenses.
3. The approach is also broadly consistent with Barack Obama's campaign pledge that Americans satisfied with their current coverage (including public programs such as Medicare and Medicaid) can keep it.
4. To make plans affordable, individuals and families with adjusted gross incomes between 100 and 400 percent of the federal poverty level would receive sliding-scale subsidies in the form of refundable tax credits, paid in advance.
5. Everyone would be required to purchase a plan at least equal to the lowest-cost benefit option (the so-called "personal responsibility coverage requirement"). Non-compliers would be assessed an excise tax starting at 25 percent of the lowest-cost premium in the first year and rising to 75 percent by year three.
6. There is no agreement on the role of employers. In one option ("pay or play"), employers with more than $500,000 in annual payrolls who do not offer coverage at least equal to the lowest-cost option to their workers would be required to pay a sliding-scale excise tax based on total annual payroll. (Smaller businesses would pay $1,200 per year per employee; the largest firms would pay $6,000 per year per employee.) Another option exempts businesses altogether. Clearly this will be a flash-point in the forthcoming debate.
7. Nor is there agreement on the inclusion of public plans among the insurance choices. The document lays out three public options, ranging from a federal plan modeled on Medicare to plans run by the states, perhaps on an optional basis. The alternative to the public plan approach reads, in its entirety, "Option B does not include a public insurance option and instead relies on private options in a reformed and well-regulated private market." As has been widely reported, this issue will be hotly debated and may determine whether any final plan will receive support across party lines.
8. Medicaid eligibility and funding would expand significantly. For example, states would be required to make parents, pregnant women, and all children eligible if they are within 150 percent of the federal poverty level. And states would be required to maintain eligibility for all groups currently included in Medicaid. For the first five years, the federal government would bear the added costs. The state share would be phased in over the next five years: In each of those years, states would become responsible for an additional 20 percent of costs.
9. The state children's health insurance program S-CHIP would survive in modified form. While income eligibility would expand to 275 percent of the federal poverty level, the program would serve as a secondary payer, because enrollees would obtain primary coverage through the health insurance exchange.
While there is no discussion of costs in the document, most estimates of additional expenditures over the first ten years of the plan are in the neighborhood of $1.5 trillion. This may prove an insuperable stumbling-block to comprehensive reform, especially if bipartisan cooperation breaks down and the Democratic leadership resorts to reconciliation as the vehicle for getting a bill done. (The reason is that the reconciliation process requires legislation to be deficit-neutral.) Congress has thus far given the cold shoulder to most of the administration's proposals for raising revenues dedicated to health reform--and the options that the administration has yet to embrace but still might (such as capping the tax exclusion for employer-provided benefits) also appear to be unpopular among many members of Congress. The Congressional Budget Office, moreover, is unlikely to certify that the new plan will yield significant offsetting savings. And, finally, sticker shock over constantly rising estimates of budget deficits precludes enacting an unfunded health insurance plan that would pile $150 billion per year on top of an annual deficit already projected to average more than $900 billion a year during the next decade. (The release of a worrisome report about the deteriorating fiscal condition of Social Security and Medicare has only intensified these concerns.)
It is entirely possible, then, that we could end up with substantial agreement on the architecture of reform and little agreement on how to pay for it. If so, Congress and the administration will have to decide whether to accept an affordable package of incremental gains that falls short of universal coverage. This would be a bitter pill for many health reform veterans to swallow, but eventually they may have no choice.