On Thursday, October 1, the Senate Finance Committee heard the last of amendments to the America’s Healthy Choices Act of 2009. Senators continued to hammer out the details of health policy, even as they continued to openly contradict many of the President’s high profile promises on health reform, including his promise to refrain from imposing more taxes on America’s middle class.

A State-Based Government Run Health Plan (Cantwell Amendment C15)
Following the failure of the Rockefeller and Schumer amendments to creates a national government run health plan to compete against private health plans, Senator Maria Cantwell (D-WA) introduced an amendment to create a state-run, federally-funded public health care plan that the states can choose whether or not to adopt.

Sen. Cantwell’s amendment would give states the “choice” of operating within the insurance rules of the Baucus’ bill or of using federal funds to create a government-run “Basic Health Plan” in their state. Sen. Cantwell’s amendment would allow states to use federal funds to create a non-Medicaid state plan. Individuals eligible for the Basic Health Plan would include all uninsured citizens under the age of 65 who are not offered health insurance through their employer, and whose income falls between 133% and 200% of the Federal Poverty Level (FPL). This means that any family of four making under $44,100 that does not qualify for Medicare, Medicaid, or SCHIP would be eligible for enrollment in the government –run health plan. According to Sen. Cantwell, a special government-run plan for lower-income Americans would prevent them from being “limited to independent negotiating through the Exchange with individual tax-credit subsidies”.

Within the framework of the Baucus bill, Sen. Cantwell’s amendment has curious consequences. Under the Chairman’s mark, all uninsured individuals under 400 percent of the federal poverty line, who do not receive employer-sponsored insurance would be offered a tax credit to buy health insurance. In opting to establish the Basic Health Plan, states would withhold the individual and family tax credits allocated to those persons with annual incomes between 133% and 200% of FPL. Instead of letting persons have the tax credits to buy health insurance, the states would use the money otherwise allocated for tax credits to pay the premiums of the state’s Basic Health Plan. Consequently, anyone making above 200 percent of FPL would have the personal freedom to choose their health plan, while lower income individuals, making below 200% of FPL, would not. In other words, if lower income persons wished to get any government assistance for insurance, they would have no choice but to enroll in the state’s government-run health plan. With the Cantwell amendment, then, personal freedom becomes a class phenomenon: available to middle and upper income individuals and unavailable to lower income persons.

The inspiration for Sen. Cantwell’s proposal comes from the Basic Health Plan in her home state of Washington. In Washington state, however, the program’s costs have soared. Nonetheless, Sen. Cantwell’s amendment passed with a vote of 12-11, with Senator Blanche Lincoln (D-AR) voting with Senate Republicans.

Middle Class Tax Increases. (Crapo Amendment F1, Ensign Amendment F2, Bunning Amendments F1 and F2)
During the 2008 presidential campaign, then candidate Barack Obama promised repeatedly that he would not raise taxes on middle class Americans: “If you’re a family that’s making $250,000 a year or less, you will see no increase in your taxes.” The Senate Finance Committee “mark” includes several fees and taxes that would affect Americans of all incomes. Some are imposed directly on consumers, such as the penalty for not carrying congressionally – approved insurance. Others, such as taxes on health insurance providers and manufacturers of health products, would be passed on to consumers. In effect, these additional “fees” would serve as tax increases on lower and middle income classes, in direct contradiction to the President’s promise to increase taxes only on America’s upper income families.

Senator Mike Crapo (R-ID) introduced an amendment that would ensure that no tax, fee, or penalty included in the bill could be applied to any individual making less than $200,000 or any couple making less than $250,000. This amendment failed with a vote of 11-12, with Senator Blanche Lincoln (D-AR) voting with Republicans.
Senator John Ensign (R-NV) offered an amendment to exempt persons in the same income bracket as Sen. Crapo’s amendment from the tax penalties of the individual mandate. Sen. Ensign’s amendment also failed with a vote of 11-12, with Sen. Lincoln voting again with Senate Republicans.

Senator Jim Bunning (R-KY) introduced two amendments. Both of Sen. Bunning’s amendments would have imposed a “sunset” on any tax that increased the health care costs of Americans or any tax provision that would encourage employers to invade the privacy of their employees. The sunset date would have been December 31, 2019. If Congress wanted to insist on any such tax increase, it would have to vote to increase it.

Included on Sen. Bunning’s list of applicable taxes were: the excise tax penalty on uninsured Americans, the excise tax penalty on business with low-income workers receiving subsidy for Exchange-bought health insurance, the excise tax penalty on high-cost insurance plans, the excise tax on drug manufacturers, the excise tax on health insurance providers, the excise tax on medical device manufacturers, and the excise tax on clinical laboratories. Both of Bunning’s amendments failed.

The Senate Finance Committee’s mark-up of the America’s Healthy Choices Act of 2009 was thus completed. The amended version of the “mark” is to be scored by the Congressional Budget Office. The Committee is expected to vote on the mark next week.

The Senate Finance Committee sessions have given ordinary American an excellent insight into the way in which members of the Senate are addressing crucial issues in health care policy. While member of the Senate have often used words like “affordability” and “choice and “competition”, and even invoked the name of Adam Smith, the greatest of free market economists , to justify an expansion of government control, the reality has been very different. Amendments which would have increased the choice, affordability, and portability of Americans’ health care were turned down. Provisions to increases taxes and limit personal freedom were sustained.

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

The Senate floor debate on health legislation could start as early as next week, but more likely they will consider Obamacare starting on October 13th. The Senate Finance Committee has been held up and will not have a final vote on the Committee bill until next Tuesday, therefore the Senate will have to wait another week before the debate starts.

Here is what we know. Sources on K Street and on Capitol Hill have confirmed the following scenario:

1. Senate staffers from the Senate Finance Committee and the Senate HELP (Health, Education, Labor and Pensions Committee) are in the process of writing the bill RIGHT NOW that the Senate will consider the second full week of October;
2. Senator Reid will have to move to proceed to a House passed tax measure to avoid a “Blue Slip” problem. The term blue slip describes the procedure the House uses to stop the Senate from originating a tax bill. The Constitution states “All Bills for raising Revenue shall originate in the House of Representatives.” The House passed tax measures that are on the Senate Calendar are as follows:
   - H.R. 1664 The AIG Bonus Bill;
   - H.R. 2751 A tax bill promoting fuel efficient cars;
   - H.R. 2454 House passed Global Warming bill; and,
   - Any other tax measure that comes from the House in the next few days.
3. Senator Reid uses all the procedural tactics in his toolbox to shut down debate and control the Amendment process to get this Senate debate completed by the end of October. They can add the Public Option as an amendment on the Senate floor with a simple majority if they have the will.

Our sources further tell us that moderate Democrats are experiencing heartburn over the cost aspect of the bill. If the bill gets a big score from the Congressional Budget Office, moderate Democrats in the Senate are going to rebel. Also, the “Read the Bill” movement in the heartland is having an effect inside the halls of the Capitol. This bill is going to come back over to the House and they are going to have to consider taking up and passing the Senate passed bill or bounce it back to the House. Worst case scenario, a bill may be on the President’s desk by November 1st, because the House will have the opportunity to take up and pass the Senate passed bill to get it to the President.