House Speaker Nancy Pelosi just unveiled a hulking 1,990 page House health care bill (H.R. 3962). The latest product, which dwarfs the 1,342 page Clinton Health Plan of 1993, is the latest evolution of the House process, which started with H.R. 3200. The House Speaker made a number of general comments, saying that the legislation would lower costs for American families, enhance the solvency of the Medicare program, and add 36 million Americans to the health insurance rolls.

On the crucial question of financing, the Speaker made a point of saying that the bill is fiscally responsible and comes in under the $900 billion target set by President Obama, and would not expand the deficit. Of course, the Congressional Budget Office has not yet issued a formal “score”- or estimate- of the final product. So, it is hard to determine how, or if, the legislation would bend the health care cost curve downward, as President Obama has promised as a key ingredient in health care reform.

The House Speaker and the rest of the Congressional leadership want to fast track the legislation, and get it up on the floor for a vote as early as next week, if possible. Meanwhile, health policy analysts, economists, Congress watchers and ordinary citizens, will have limited time to examine the bill and make their own judgments. Taxpayers need to do their part. Here are some suggestions:

1. Check the Details for Yourself. The bill is now posted. You can find it at fixhealthcarepolicy.com. Congressional leaders were literally working on this bill late into the night before unveiling it this morning. At 1,990 pages, reading this will be an arduous task. But it will affect 300 million Americans and overhaul one sixth of the American economy. It is hard to imagine any piece of legislation having a bigger impact on one’s personal life, let alone the national life, of the country. Vigiliance, as Thomas Jefferson warned us, is the price of liberty.

2. Keep an Eye Out for Budget Gimmicks. Rest assured that there is already evidence that the Congressional leadership is going to resort to shell games and budget gimmicks to make the bill look like it doesn’t add to the deficit. This will be evident in how the bill is structured; it appears that they have decided to front load the revenues in the first five years, and run surpluses in the first five years, and put off the costs until the second five years, and then start running the deficits. So, while this might meet the temporary requirements of the first ten year Congressional Budget Office (CBO) score, it does not mean that the bill would really start to bend the spending curve downward, or that it will not contribute to the already devastating deficits Congress and the Administration have already incurred.

3. Pay no Attention to Words, Check the Actions. Congressional Leaders say a lot of things. But taxpayers need to pay close attention to what they do. It is evident that they are already breaking their promises to the representatives of the doctors and the pharmaceutical companies. Recall that they promised the doctors a permanent fix to Medicare payment. But, according to the October 29th Politico Pulse, now they have taken it out of the bill, and are going to do offer it in separate legislation. This is exactly what the Senate leadership tried and failed to do last week, in order to reduce the apparent cost of their health care agenda, and run up the spending on a separate bill to keep the Senate health care bill “deficit neutral.” Since the House leaders have decided the take Medicare payment fix out of the House bill, they will attempt to run the same play, and add the huge cost (approximately $250 billion over ten years) to the deficit on a separate track. This may work in the House, where the Congressional leadership commands huge majorities; it will not work in the Senate. The doctors will be played as pawns, once again, in the congressional liberals’ budget shell game. In any case, if they take health items out of the bills and add them to the deficit, the taxpayers continue to lose big time.

4. Don’t Trust New Promises. Also according to Politico Pulse, the House leadership has decided to cut drug payments in Medicare between $125 to $150 billion, as opposed to the $80 billion cuts they agreed to with the pharmaceutical industry. That broken promise is combined with a decision to impose price controls on Medicare drugs, and do away with private sector negotiation. This was, of course, the inevitable result of the creation of a universal drug entitlement. Seniors can expect drug rationing if such a provision is signed into law; not right away, but inevitably. Perhaps other K Street lobbyists will learn from this experience.

5. Don’t Depend on Old Promises. The President and Congressional leaders have made a litany of high profile promises: no middle class tax increases; you can keep your health plan if you like it; there will be no interference with your doctor-patient relationship; no funding for abortion or illegal immigration; the health care costs will fall on a future downward curve; we are going to cut Medicare Advantage plans but not Medicare benefits. These are all empty promises, and undermined by House and Senate legislation.

6. Forget Competition. House leaders praise the “ Public Plan” as a force for competition. It won’t, of course; and that is precisely why prominent “single payer” advocates in the House and Senate, champions of a government monopoly, are its strongest supporters. The new bill would force the new public plan to negotiate private rates with doctors and hospitals, and not be pegged to Medicare rates. If that’s true, congressional liberals are then right to ask : “what is the point of the public plan?” In fact, of course, the bill would not really sell out the Lefties. It will be a legally advantaged stalking horse for a single payer system. Even though they claim there is a level playing field for the public plan and the private health plans, that was clearly not true in the earlier versions of the House bill, where the taxpayers assumed the risk.

This is the next phase of the big debate. Both the House and Senate bills largely retain the same character: more control to Washington, less personal freedom.

Photo courtesy of Congressman Rob Wittman (R-Va)

Under the Baucus plan, just about everyone who is not covered by a government health program will be required to purchase insurance by 2013. To help pay for the mandated minimum coverage, individuals and families with incomes below four times the poverty line will receive a subsidy calculated on a sliding scale worth a percentage of their income, while those with incomes up to three times the poverty line will also qualify for a cost-sharing subsidy.

However, even with help from the government subsidies, families will be required to pay substantial out-of-pocket costs for health insurance. As analysis from The Heritage Foundation has shown that on average a family of four with an income at two times the poverty line will be forced to shell out 16 percent of their income to buy insurance – and this is even after all the subsidies.

Likewise, a family of four with an income at three times the poverty line will be required to pay just less than 20 percent of their income for insurance. This escalating cost should be especially alarming in a time of economic downturn. When work becomes more expensive as a family’s income increases, some may face a disincentive to work more.

Worried Governors
The press release, however, overstates the case. The governors’ letter does not even mention Medicaid. The very general sentiments expressed in the governors letter such as “… the status quo is no longer an option …” and “[s]kyrocketing health care costs hurt families …” are broadly if not universally shared. Democratic governors from 21 states signed the letter, of which 8 will be out of office before the Medicaid expansion even begins. One Democratic governor who did not sign the letter, Tennessee Gov. Phil Bredesen warns, “I can’t think of a worse time for this bill to be coming. I’d love to see it happen. But nobody’s going to put their state into bankruptcy or their education system in the tank for it.”

Tying State Hands
The letter was also produced before the Committee completed its amendment process and before a final score by the Congressional Budget Office (CBO). A number of amendments will reduce state flexibility in the management of Medicaid. States lost flexibility in designing their benchmark plans. States will be required to extend “spousal impoverishment” rules which apply when one spouse is in a nursing home to community settings as well which will substantially shift costs from private pay to Medicaid. States will be faced with a new, broader definition of medical assistance, the implications of which will be determined through regulation and litigation. Finance is turning SCHIP into Medicaid. CBO has not yet calculated how much it will cost the states in administrative changes that will be required to comply with the new federal mandates.

Higher State Costs
Medicaid programs will be forced to absorb open-ended costs in the foster care system. In adopting the Stabenow Amendment on therapeutic foster care, the Committee is now on record to overturn litigation won by the state of California to limit Medicaid’s role in funding the child welfare system. California prevailed in part because there is no agreed upon definition of therapeutic foster care and that while it is required to provide services, it is not required to “bundle” those services as a package. The Federal Court of Appeals for the 9th Circuit determined that states still have administrative discretion in how to run their Medicaid programs. The Stabenow Amendment takes one more step towards taking that authority away.

The wide-open language of the Stabenow will likely cost states billions as providers will seek to tap into the Medicaid entitlement to fund the child welfare system, which is really what the California litigation was about. Of course the child welfare system must be adequately funded, just as education, child care programs, and the criminal justice system to name a few other government programs that are also trying to tap into Medicaid must be. But should these responsibilities fall to Medicaid? Finance has jurisdiction over the foster care system. But instead of facing its responsibilities in the program, it was apparently easier for Senators to push the issue back onto the states’ Medicaid program. Why have schools turned to Medicaid for funding for special needs children? Because Congress has never fulfilled the promises made under the Individuals with Disabilities Education Act (IDEA). Medicaid has become an enabler. Washington promises more then passes the bill to the states.

Medicaid Expansion
States cannot afford a Medicaid expansion and neither can the federal government. The Finance Committee plan includes extra federal funds to pay for most of the new costs and when the bill gets to the Senate floor, Senators will try to get 100 percent federal funding just as Majority Leader Reid has done for Nevada. But simply adding more federal funds into an unreformed Medicaid program is not the answer either.

One day perhaps, Congress will realize that expanding Medicaid comes at the expense of other state and federal priorities including education and the child welfare system. As Medicaid grows, funding for other programs shrink, which in turn, increases demand for Medicaid to become the source of funding for those other programs. Only the governors have the clout to push back and break the vicious cycle that, as Gov. Bredesen warns, threatens to bankrupt the states.

The Senate Finance Committee Hearings on Chairman Max Baucus’ (D-MT) health care proposal continued Friday morning, September 25, 2009. The amendments offered by members of the Committee continued to address issues related to growth of the federal government and limitation to consumers’ choice and freedom, changes which are likely to emerge from the passage of a Senate Finance Committee bill.

Accountability and Transparency in Government Decision-Making over Health Care (Ensign Amendment C10)

Under both House and Senate bills, federal government officials or appointees would make crucial decisions over health care benefits, treatments and medical procedures that would be available to millions of Americans. Sen. Ohn Ensign(R-NV) offered an amendment to subject these officials to Senate confirmation for their appointment. Currently, the controversial House bill (H.R. 3200) allows for the creation of a Health Benefits Advisory Committee, which would consist of nine non-federally employed members appointed by the President, nine non-federally employed members appointed by the Comptroller General of the United States, and up to eight federally-employed members, also appointed by the President. These officials would make recommendations concerning benefits standards. Similarly, the Senate HELP Committee’s proposal creates a Medical Advisory Council, members of which would be appointed by the Secretary of Health and Human Services. Members of the Medical Advisory Council would determine what services are essential benefits, what coverage is affordable and acceptable for different income levels, and who would be penalized for not buying insurance. Decisions made by the Council would be automatically adopted unless Congress passed a joint resolution rejecting them. Nonetheless, the Senate Finance Committee voted against Sen. Ensign’s amendment on a party line vote, 10-13.

Promoting Accuracy in Health Care Financing (Cornyn Amendment C23)

One of the recurrent problems of government health care costs projections is that they are often too low, giving taxpayers a false sense of the true cost of the government enterprise. Senator John Cornyn (R-TX) introduced an amendment to ensure accuracy and reliability in amendments made to the Chairman’s mark. Sen. Cornyn’s proposal would have required all amendments that have already been accepted or ruled out-of-order by the Committee be re-assessed by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT). Should the initial score of any amendment previously accepted be deemed inaccurate, Sen. Cornyn’s amendment would have required reconsideration by the Committee. This would ensure that the health care cost offsets cited in each amendment to the Chairman’s mark would be correct, and would allow the Committee to re-evaluate its decisions if this were not the case. With deficit neutrality of the Finance Committee’s bill a crucial litmus test established by President Obama, the amendment would serve to ensure accuracy in cost projections. The amendment failed on a vote of 11-12, with Senator Blanche Lincoln (D-AK) voting with Republicans for Sen. Cornyn’s amendment.

Limiting Patient Choice. (Kyl Amendment C10)

Senator Jon Kyl (R-AZ) introduced an amendment that would prohibit federal officials from defining the health care benefits, and the kinds of medical treatments and procedures Americans would get, that are offered by private health insurers. Giving the government the power to define and restrict benefits to fit into federal officials’ version of acceptable insurance plans would in effect nullify Americans’ current coverage and, given the dynamics of government benefit setting, further drive up costs. Kyl’s proposal would conserve Americans’ existing benefits by preventing federal officials from declaring them legally unacceptable. Sen. Kyl’s amendment failed with a vote of 9-14, with Senator Olympia Snowe (R-ME) voting with Democrats.

The Senate Finance Committee’s decisions on vital details of health policy reform, including transparency in new government bureaucracies and restrictions on patient choice, are revealing. Americans should continue to pay close attention to what members of Congress do, not just what they say. There is often a wide gap between congressional rhetoric and congressional action.

The Senate Finance Committee continues its mark-up of the Baucus bill on Tuesday, September 29th. Then it will consider amendments to add a government health plan to compete against private health insurance plans.

Kathryn Nix, Heritage Intern, provided the research for this blog.

On Thursday, September 24th, the Senate Finance Committee continued to vote on amendments to the “Chairman’s Mark” of the America’s Healthy Future Act of 2009. As the committee continues to consider more than 500 amendments, it is becoming clear that Senators are directly undercutting the high profile promises that President Obama made to the American people in his widely broadcasted address to Congress on September 9, 2009. Consider several health policy decisions made by members of the Senate Finance Committee:

Cutting Medicare Advantage (Crapo-Kyl-Roberts Amendment D1)

The White House and Congressional leaders routinely insist that they are not going to cut Medicare benefits, only unnecessary spending or spending properly considered to be waste, fraud and abuse in the Medicare program. Senators Mike Crapo (R-ID), Jon Kyl (R-AZ), and Pat Roberts (R-KS) proposed an amendment to change the Chairman’s mark and remove provisions in Title III, Subtitle D which would result in cuts to Medical Advantage, a program which allows Medicare users to obtain coverage through private insurers. Cuts in payments to Medicare Advantage plans would result in decreased choice and competition for seniors. This amendment failed on a procedural vote (9-9).

The Ability of Americans to Keep Their Existing Coverage. (Hatch Amendment C2, Cornyn Amendment C1)

Senator Orrin Hatch (R-UT) and Senator John Cornyn (R-TX) introduced amendments to preserve Americans’ existing private health insurance coverage. This would be in accord with the President’s promise that “nothing in this plan will require you or your employer to change the coverage or the doctor you have.” Senator Hatch’s amendment would have required that the Secretary of Health and Human Services certify to Congress that the final piece of legislation would not result in more than 1 million Americans losing their current coverage. Senator Hatch’s amendment failed on a party line vote (10-13).
Senator Cornyn’s amendment also sought to guarantee that Americans enrolled in self-insured employer coverage would be able to keep their current coverage by amending Title I, Subtitle D of the Chairman’s mark. The amendment simply provided that any health insurance plan governed by the Employee Retirement Income Security Act (ERISA) would be deemed to have met the personal responsibility requirement. This amendment also failed. It was a party line vote (10-13).

A Middle Class Tax. (Bunning Amendment C3)

President Obama promised repeatedly during the 2008 presidential campaign that, “If you’re a family that’s making $250,000 a year or less, you will see no increase in your taxes.” Since that time, the President has reversed himself on the desirability of imposing an individual mandate for health insurance. In the House bill the penalty for non compliance with the individual mandate is explicitly referred to in the legislative language as a tax. In the Senate Finance Committee “Mark” , the mechanism is an excise tax: the means of enforcing the mandate, requiring Americans who do not comply with the government purchasing requirement to pay a tax, with the size of the tax dependent on their income. During the Senate mark-up, Senator Mike Ensign (R-NV) asked Thomas A. Barthold, chief of staff of the Joint Committee on Taxation, what the penalties would be if taxpayers deliberately refused to pay the tax. In a handwritten note, Barthold replied that under current law a willful failure to pay means that the taxpayer could be charged with a misdemeanor and face a penalty of up to $25,000 and not more than one year in prison. Meanwhile, Senator Jim Bunning (R-KY) offered an amendment requiring that any taxpayer requesting exemption from the personal responsibility excise tax be granted an exemption. Senator Bunning’s amendment failed (9-14).

Medicaid Expansion and State Flexibility. (Ensign Amendment C14, Crapo Amendment C2, Enzi Amendment C9)

Medicaid is a welfare program, funded by both the federal government and the states. In many states, Medicaid spending is crowding out other state budget priorities, such as education and law enforcement. States are struggling and many want relief, as well as flexibility in the administration of the Medicaid program. Senators John Ensign (R-NV), Mike Crapo (R-ID), and Mike Enzi (R-WY) introduced separate amendments to curb the negative effects of the proposed mandatory Medicaid expansion on the states. Senator Ensign’s amendment would have allowed states that experienced an increase in Medicaid spending of more than 1 percent from the previous year to opt out of the Medicaid expansion provisions as detailed in Title I, Subtitle G. This amendment failed along a party line vote (10-13).
Senator Crapo’s amendment sought to block unfunded federal mandates on the states to expand Medicaid by amending Title I, Subtitle G. The objective was to protect the states from incurring future additional and unwanted costs. This amendment failed along a party line vote (10-13).
Senator Enzi also offered an amendment that would have protected states from the Medicaid expansion if their revenues had declined for the two most recent fiscal year quarters to the date of the enactment of the bill. Senator Enzi’s amendment also failed along a party line vote (10-13).

Curtailing Choice of Medicaid Patients. (Enzi Amendment C6)

Senator Enzi (R-WY) offered an amendment to provide for additional options for Americans who qualify for Medicaid. Sen. Enzi’s amendment would allow Americans who would otherwise enroll in Medicaid also to have the option of enrolling in a qualified private health plan. The private plan would be one available through their state health exchange, a new institution created under the Baucus bill. This amendment would have increased choice for Medicaid enrollees, as well as lowering costs for the privately insured by increasing the numbers of younger persons in the private insurance risk pools. The Enzi amendment to expand patient choice was defeated (10-13).

Next week, Senate Finance Committee will continue its mark-up of America’s Healthy Future Act of 2009. Meanwhile, ordinary Americans will be able to monitor the relationship between rhetoric and reality, the gap between words and deeds, the promises and the provisions. With each passing day, as the Senators plod through their massive health care bill, the gap widens.

This post was co-authored by Kathryn Nix

All the House and Senate drafts of health care reform include so-called “employer mandates” or “pay or play” provisions. The details vary somewhat, but all require employers to either “play” by providing health insurance for their employees or pay part of the premium or “pay” a special tax for not providing insurance, even if the employee declines it.

However, these proposals actually result in hefty tax increases on employers that will be paid for primarily by low-income and middle-income workers in the form of lower pay and lost jobs. Businesses do not have unlimited funds to dole out based on their own beneficence or the government’s instructions. When an employer decides whether to hire an employee and how much to pay, the employer has to consider the full cost of employing that person. That full cost includes not only cash wages and the employer’s cost of providing benefits, but also the employer’s share of any employment-related taxes, such as the Social Security and Medicare taxes. When the costs of benefits or payroll taxes increase, the amount of money paid to employees has to be cut to make up the difference. If the employer instead satisfies the mandate by spending more on health insurance, the effect is the same. Either way, the employee’s take-home pay has to be cut.

Even worse, employers who lack enough revenue to pay minimum wage plus the cost of other benefits and the new taxes would be forced to lay off their lowest-paid employees to comply with the law.

For example, for the House bill (H.R. 3200), Mark Wilson has calculated 5.2 million jobs at risk, because current wages minus the cost of the mandate would be less than the minimum wage.

The Baucus plan would have another, even stranger effect on hiring. Because the subsidy amount is based on family income and family size, not the wages that the employer pays, employers would naturally prefer to hire workers from higher-income families with fewer children. For example, hiring a single parent could incur a substantially higher tax penalty than hiring a worker with a working spouse or parent(s), or a worker who is single and childless. Under the Baucus bill, business would be discouraged from hiring those who need the jobs the most.