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On Health Care, The Prognosis Is Compromise
Hill Negotiators Must Reconcile Plans

By Shailagh Murray and Lori Montgomery
Washington Post Staff Writers
Monday, July 6, 2009

For the next five weeks, Congress will attempt the daunting feat of turning a mishmash of half-written proposals into health-care reform legislation that can pass the House and the Senate before the August recess.

Let the trade-offs begin.

Who would benefit from expanded coverage, who would pay for it, and how extensively the insurance and health-care systems would be restructured were a few of the big questions left unresolved when House and Senate negotiators took a break for the Fourth of July recess. In the Senate, Democratic leaders face the additional tasks of merging vastly different proposals from two committees and foiling efforts to shrink or derail the bill as it advances on the floor.

Final versions of legislation rarely live up to the lofty expectations set by drafts -- as many on the left might say of the weakened climate-change bill that passed the House last month. The health-care debate may follow a similar trajectory, as policy ideals meet political and fiscal realities, and wholesale reform gives way to a more limited, if still ambitious, bill.

In the days to come, Democrats will make critical decisions that will begin to define the bill's winners and losers. One moving target: who receives insurance subsidies. The Senate Finance Committee is considering an income threshold of 300 percent of the poverty level, or $54,930 in gross annual income for a family of three, to keep the legislation's 10-year cost at $1 trillion. For example, a single person earning $35,000 per year who does not have coverage today would be required to buy it under the legislation but would probably not receive help in offsetting a policy's cost, which averaged $4,704 in 2008.

The committee also is considering provisions that could lead to higher insurance rates for adults in the 55-to-64 age category and higher out-of-pocket costs for certain people who buy their own insurance.

Meanwhile, the House is considering a national value-added tax (sometimes called a national sales tax), a tax on sodas and other sugary drinks, and an increase in alcohol taxes -- all measures that would break President Obama's campaign pledge not to raise taxes on households with annual incomes below $250,000.

"The president's going to watch the process," White House press secretary Robert Gibbs said last week of the debate. "He's going to be flexible, and we'll evaluate as we go."

While Obama may be prepared to compromise, it is not clear whether the public is ready for a less-than-perfect outcome, a key factor in determining the bill's long-term political success. "You're going to have losers, and the administration hasn't prepared people for that," said Michael D. Tanner, a senior fellow at the Cato Institute, a conservative think tank. "So far this is pain-free health-care reform."

In an analysis of the Finance Committee draft, the liberal Center on Budget and Policy Priorities found that families with modest incomes that buy the lowest-cost coverage could face steep out-of-pocket costs if they experience a serious medical problem. And families who are just outside the 300 percent subsidy threshold could face daunting bills, with no relief.

The lowest-cost plan would have an actuarial value of 65 percent, meaning it would cover 65 percent of the medical costs of a typical population, the report showed. One scenario in Congress proposes capping out-of-pocket costs at $11,600 for a family and $5,800 for an individual.

Judith Solomon, author of the report, noted that 82 percent of uninsured people have incomes below the 300 percent threshold -- meaning the Senate bill would still cover millions of new people. But, she added, households with slightly higher incomes include many "working-class people in high-cost-of-living states. And they need help, too."

Other Democratic concerns include how changes to Medicaid could affect individual states. The program, which helps low-income people pay for health care, is likely to be expanded under the emerging legislation to include childless adults, who make up many of the uninsured. But Sen. Dianne Feinstein (D-Calif.) has raised concerns that her struggling state could lose up to $5 billion a year, depending on how Medicaid is restructured. "Now how could I support that? Because it would take down the state," Feinstein told CNN last month.

Other Democrats worry about the unintended consequences of requiring employers to offer health coverage, such as an inclination to hire fewer low-income workers. But as negotiators are discovering, it is difficult to dilute core provisions, such as the individual and employer mandates, as well as the government insurance option that Republicans have rallied against because they interact with so many other pieces of the legislation, such as insurance reform.

The Senate is considering two alternatives to a government plan: a network of member-run health-care cooperatives and a fallback option that would allow the government to offer health coverage if the private market does not offer adequate choices on the new insurance "exchange" that Democrats envision.

Advocates of the government plan, known as the public option, counter that unless the government is given a central role at the outset, the cost reductions and quality improvements that are fundamental goals of the legislation could be sacrificed. "The incremental path doesn't fix the very serious problems," said Harold Pollack, a University of Chicago professor and chairman of the Center for Health Administration Studies.

Remove the public option, and "you've just taken away the most important and valuable tools that you have to make good policy," Pollack said.

A hastily assembled alternative, such as the co-op idea, could lead to an array of unanticipated problems. "We've had two years of complex policy debate among experts about what a public plan should look like," Pollack said. "If you jettison that, and you come up with a late-in-the-day compromise, you're going to come up with something that has received much less careful thought."

In the Senate, liberal Democrats are pushing party leaders to make a fast-track maneuver called "reconciliation" to protect health-care reform from a GOP filibuster. The procedural advantages are substantial: A reconciliation bill must be brought to a vote after 30 hours of debate in the Senate and it cannot be filibustered, meaning it could be approved with just 51 votes rather than the usual 60.

But the disadvantages would be considerable and could result in a much-diminished final bill. For instance, reconciliation measures are permitted to include only provisions that affect the federal budget. That means opponents could move to strike any language with no budgetary impact, such as the coverage mandates or a new rule barring private insurance companies from turning away people with preexisting conditions -- "anything that's regulatory," said G. William Hoagland, a former senior Senate Republican budget aide who is now a health policy specialist for Cigna.

Reconciliation also would require the measure to reduce the deficit by at least $1 billion, according to instructions included in the budget resolution. And it would have to balance over five years instead of 10 -- a requirement few believe could be met.

Senate Budget Committee Chairman Kent Conrad (D-N.D.), a Finance Committee member and ardent foe of reconciliation, said the shortcut would lead to "dramatically reduced coverage. Or much increased taxes. Or some combination thereof. . . . Many of the advocates of major health reform would be quite disappointed with what came out of the use of reconciliation."

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