Thursday, January 21, 2010

Fixing Health Reform Through the Reconciliation Sidecar: 13 Improvements, 6 Ways to Save Money, 4 Important Benefits

By FireDogLake's Jon Walker FDL

Today’s reports continue to point to the reconciliation sidecar strategy as the preferred option on Capitol Hill for moving forward with health care reform. The strategy requires the House to pass the Senate bill “as is” only after the Senate has passed measures with several fixes to the Senate bill that can then pass the senate through budget reconciliation. Reconciliation measures can’t be filibustered, so they only need a simple majority in the Senate, but because of the Byrd Rule, most only deal with budgetary matters. The reconciliation measure would also need to be net budgetary neutral.

There is a lot that needs to be fixed in the Senate bill–and now it can be fixed, using reconciliation to make it palatable. As voted out by the Senate on Christmas Eve, their version of health reform legislation suffers from many problems:

1.It lacks a public option.
2.It contains insufficient affordability tax credits.
3.It lacks a single, national exchange.
4.It has no Medicare buy-in or Medicaid buy-in.
5.It needs a stronger employer mandate.
6.It needs an excise tax fix.
7.Special Nebraska Medicaid funding needs to be removed or more fairly allocated.
8.It contains an insufficient expansion of Medicaid.
9.It lacks a go-ahead for drug re-importation.
10.It does not contain provisions for direct Medicare drug price negotiation.
11.Annual limits on out-of-pocket costs are much too high.
12.Its expansion of community health care centers is insufficient.
13.It needs stronger risk adjustment mechanisms (cost neutral, but affects the budget).
Some of these fixes will cost the government money, but many of them will result in substantial savings. The goal should be to pay for the things that cost money with the savings from the things that save money.

What Costs the Government Money?

1.Fixing the excise tax (as per agreement with labor unions)–cost $60 billion.
2.Extending extra Nebraska Medicaid money to all states–cost $35 billion.
3.Increased affordability tax credits and lower annual out-of-pocket limits (there is no one “right” amount, but for the sake of argument I will set a number)–cost $150 billion.
4.Increased funding for community health care centers–$10 billion.
5.Creating a national exchange (no official CBO score, but cost should not be more than $1 billion).
Total cost: roughly $255 billion.

What Saves Money or Increases Revenue for the Government?

1.A strong public option–saves $110 billion (only $25 billion if it is the “level playing field” public option).
2.Replacing Senate “free rider” provision with employer mandate–generates an additional $107 billion.
3.Medicaid expansion from 133% to 150% FPL–saves $25 billion (in truth, Medicaid should be extended to 200% FPL, or whatever percentage it stops being more cost effective for the government).
4.Allowing drug re-importation–saves $19 billion.
5.Direct Medicare drug price negotiation (no official CBO score, but should save several billion dollars).
6.Early Medicare buy-in for 50-65, after the exchange starts (no official CBO score, but should save several billion dollars).
Total savings/revenue generated: roughly $260 billion (with additional but yet-un-scored savings from Medicare/Medicaid buy-in, and Medicare direct drug price negotiations).

There are many progressive changes that need to be made to the Senate bill. Fortunately, many of the changes that are overwhelmingly supported by the American people–like the public option–would save the government money. That money can be used to fix other problems in the bill, like the structure of the excise tax. The smart move for Congressional Democrats would be to fully pay for any reconciliation sidecar using progressive cost-saving solutions.

This strategy will have four important political benefits:

1.Would put popular provisions back in the bill, and therefore could make the whole idea of health care reform more popular.
2.Will help save hard-working Americans money.
3.Will signal that Democrats are finally standing up to the pharmaceutical and health insurance industries.
4.Will not require inclusion of any new tax increases in the reconciliation measure.