The Big Push: Final Passage of Health Reform

By Political Affairs' Joel Wendland PA

As Congress prepares its final push to pass health reform, a coalition of congressional progressives, the labor movement and health reform advocates are calling for some major tweaks to several key provisions in the finished product.

Most importantly, this coalition wants to see the final package include the House funding mechanism, which would raise taxes on the wealthiest people, in place of the Senate excise tax on the costliest health insurance plans.

The Senate excise tax generates revenue by taxing so-called Cadillac insurance plans. Supporters of the idea say it would help reduce the federal deficit by trillions over the next two decades.

Many critics of the idea counter by arguing that insurance companies would pass the cost of the new tax on to employers and individuals who purchase these plans.

Former Labor Secretary Robert Reich told reporters this week, "The notion that there are 'Cadillac' plans out there is a misnomer." He argued that most high-cost plans are based on age, region and occupation rather than on the value of their benefits. He further stated that the excise tax would likely fall disproportionately on small business and older Americans who already pay a premium on health coverage.

Government data shows that small business owners currently pay as much as 18 percent for health insurance than larger businesses do. This fact alone has forced many small business owners over the past decade to drop employment benefits. Some 14 million people without coverage work in small businesses, government statistics indicate.

"The Senate bill falsely assumes that high cost plans generate high value for beneficiaries," Secretary Reich added. "The Senate tax is too blunt an instrument."

Rep. Joe Courtney, D-Conn., agreed and called for passage of the House tax on the wealthy. He cited polling data from various sources that indicated Americans oppose the Senate excise tax by about two-to-one.

Courtney further appealed to the fundamental fairness of the House plan, pointing to studies that show as many as 27 percent of family insurance plans will be taxed under the Senate plan.

"Both on policy grounds and on political grounds, I think the House approach is the right approach," Rep. Courtney explained.

Courtney has circulated a "Dear Colleague" letter to other members of the House urging passage of the House funding mechanism, which he says has garnered 189 signatures.

Lawrence Mishel of the Economic Policy Institute argued that the Senate excise tax would raise revenue to reduce the deficit but only at the expense of middle class families and small businesses. In the end, many people and employers affected by the tax would simply give up higher cost insurance and look for less expansive plans with fewer benefits.

While the excise tax might reduce healthcare costs, it won't result in healthier people with better coverage, Mishel suggested.

In a press statement last month, AFL-CIO President Richard Trumka said, "The benefits of hard-working Americans cannot be taxed to pay for health care reform – that's no way to rein in insurance companies and it's the wrong way to pay for health care reform."

Since the Senate bill first appeared in committee, Democratic leaders have scaled back on some of the excise tax and created some exceptions by region and exclusions for some high risk occupations, such as for transit workers and longshore workers. Labor leaders have argued, however, that more needs to be done to exempt working-class people, such as teachers who have won good health benefits through union contracts.

Along with the AFL-CIO, the AARP, which has endorsed both health reform bills before Congress, stated that the final bill should also include a measure to close the Medicare prescription drug "donut hole" that forces middle income seniors to pay high out-of-pocket costs for drugs. The "donut hole" was created by Republicans and George W. Bush in 2003 when they sought to gut Medicare with privatization schemes.

The pro-health reform coalition has diverged, however, on some other key points in the reform package. Labor and many progressive advocacy groups are demanding the inclusion of a public insurance option in the final bill. Most House Democrats, however, have resigned themselves to demands from Senators, like Joe Lieberman, I-Conn., who have threatened to join a Republican filibuster of the bill if a public insurance program is included.

Some media reports say that because of intransigence by Lieberman and a handful of other moderate Democrats, House progressives have reluctantly dropped the demand for a public option. Instead they want a larger expansion of Medicaid coverage and bigger subsidies for working-class families to buy insurance plans on the private market.

Other health reform advocates, such as Yale University Professor Jacob Hacker, expressed disappointment at the exclusion of a public option but praised other key reforms in the Senate bill.

Some media reports on the negotiations over the final bill indicate that the White House supports inclusion of some version of the House bill's affordability concepts.

The creation of exchanges will provide increased choices for individuals and small employers and should help control rising costs, wrote Hacker in an op-ed for Politico.com after the Senate passed its bill last month. In addition, important insurance industry regulations created by the Senate bill would guarantee a basic minimum of coverage for everyone who is able to get insurance, Hacker pointed out.

He further argued House provisions that expand Medicaid and provide subsidies to everyone up to 250 percent of poverty are important affordability provisions that need to be included in the final bill. The House bill's stronger employer mandate should also make final passage, Hacker added.

Both House and Senate Democrats also appear to favor the Senate bill's increase in the Medicare tax for the wealthiest individuals and households, according to recent media reports.

To gain speedier final passage, congressional Democrats appear to have opted to avoid the traditional conference committee process. Instead, both houses will pass amendments to their respective bills to bring them into line. The procedure would bypass Republican interference, but would still require 60 votes in the Senate to avoid a filibuster.

Republicans have complained about the procedure, but have failed to explain how they would make any contribution to its final passage during a conference committee, after refusing to vote for the bill and attempting to block its progress.

Both Republicans and Democrats have used this procedure in the past for final passage of key legislation.