At last, the Senate Finance Committee (SFC) has put forth its health proposal and began marking up and debating the proposal on September 22.  It is the last of the five committees in the House and Senate with jurisdiction over health care reform to consider legislative language. For months now Chairman Max Baucus (D-MT) had been in negotiations with five other SFC Senators – Jeff Bingaman (D-NM), Kent Conrad (D-ND), Michael Enzi (R-WY), Chuck Grassley (R-IA), and Olympia Snowe (R-ME) – hoping to devise a bipartisan proposal. However, with time running short on the Congressional calendar and no clear indication that the Gang of Six would be able to reach consensus, Senator Baucus decided to move ahead and introduce his own bill. Thus far, Senators Grassley and Enzi have said they would not support it. Senator Snowe could be the only Republican on the Finance Committee to vote for the legislation. She and a handful of centrist Senators issued a statement on September 17 expressing cautious support for the bill.
The bill Senator Baucus released on September 16 would cost $774 billion and reduce the deficit by $49 billion over a decade, according to the Congressional Budget Office (CBO). The bill is financed almost entirely by cost savings – primarily in Medicare – and revenue increases within the health sector. The revenue raisers include annual fees on insurance companies, pharmaceutical manufacturers, makers of medical devices and clinical laboratories starting in 2010; and a new non-deductible 35 percent excise tax on the value of insurance plans that exceed $8,000 a year for individuals and $21,000 for families, starting in 2013. Although this tax on high-priced plans would be levied on insurers, critics argue that insurance companies are likely to pass on these costs to consumers.

Like the House’s H.R. 3200 and the Senate Health, Education, Labor and Pensions (HELP) Committee’s plan, the Baucus proposal would establish health insurance exchanges where uninsured individuals will be able to shop for health plans. But unlike these other proposals, which would create a new government-run insurance plan to compete with private insurers, the Baucus plan instead opts for establishing consumer-owned nonprofit health cooperatives, an insurance model that the CBO has said is unlikely to establish a significant market presence in many areas of the country. Insurance market reforms to eliminate discriminatory practices and guarantee coverage for everyone are also features in the Baucus plan. New restrictions imposed on insurance companies would only allow premium rating variation to be based on age (limited to a 5 to 1 ratio), tobacco use (limited to 1.5 to 1 ratio), family composition, and geography.

In the Baucus proposal, four different plans with varying benefit levels plus a separate “young invincible plan” would be offered in the exchanges. Subsidies would be offered on a sliding scale basis to limit premium costs to 3 percent of income for individuals and families with incomes at 100 percent of the federal poverty level (FPL) to 13 percent of income for those between 300-400 percent of FPL. Workers with employer-based coverage will not be eligible for the subsidies unless the employee share of premiums in these plans exceeds 13 percent of income. Only U.S. citizens and lawfully present immigrants will be able to purchase coverage in the exchanges and qualify for subsidies.

Medicaid would be expanded to cover all individuals with incomes up to 133 percent of FPL. Adults with incomes between 100-133 percent of FPL will be able to choose between receiving coverage through Medicaid or with a subsidy through the exchange. In 2013, when the Children’s Health Insurance Program (CHIP) is set to expire, CHIP eligibility would be expanded to 250 percent of FPL and all children enrolled in the program would be moved into the exchange. States would be required to provide Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) as wrap-around benefits for the children who would have been eligible for CHIP, services which would not be available in plans in the exchange. CHIP’s more generous limits on the total paid by families for their children’s health care would also be maintained.

There are also requirements for individuals to have health plans. In the proposal, U.S. citizens and legal residents would be required to have qualifying health coverage, otherwise they could face an annual tax penalty of $750 ($1,500 for families) for those with incomes between 100-300 percent of FPL or $950 ($3,800 for families) if their incomes are above 300 percent of FPL. Hardship exemptions would be given to certain individuals who are unable to afford coverage or who encounter other constraints. There is also a narrow and problematic employer mandate in the proposal, known as the ‘free rider’ provision.  This provision would only require employers with more than 50 employees to pay a fee if they have low- and moderate-income employees who receive federal subsidies. The fee would be levied on both employers who do not offer coverage, as well as employers who do offer coverage but who have workers receiving subsidies because the employer plans exceed a certain percentage of their income.  Employers would have to pay a larger fee for workers who receive subsidies for family coverage. This provision is highly problematic because it would create incentives for employers to avoid hiring or to lay off low- and moderate-income workers, especially those with children.  Because racial/ethnic minorities and single mothers are much more likely to have low family incomes than non-minorities and two-parent families, the provision would have unintended discriminatory effects on hiring and firing.

While Baucus’ plan offers a number of significant provisions to improve our health system, various serious criticisms have been waged against the proposal. Issues of concern to the advocacy community, in addition to the free-rider provision, include making sure that children are not worse off when it comes to access and benefits as they transition from CHIP into the exchange; removing the existing five-year waiting period in Medicaid for lawfully-residing, low-income immigrants; eliminating onerous and costly documentation verification systems that  often restrict access to benefits and services among U.S. citizens and lawfully residing immigrants; and ensuring that children and other eligible family members living in mixed-status households do not see their subsidies reduced or eliminated because of the immigration status of other members in their household. Although undocumented immigrants currently receive no federal coverage in any of the health proposals, there are strong economic, public health, and moral arguments that can be made for allowing them at least to purchase unsubsidized coverage in the new exchanges.

Another significant issue of concern has to do with affordability. Under the Baucus plan the required premium contribution from low- and moderate-income individuals and families is likely to be above what most of them can afford. Making matters worse, a Center on Budget and Policy Priorities analysis finds that the premiums in the Baucus plan would be three times more costly than under the House bill and nearly five times larger than under the Senate HELP bill. So for example, under the Baucus plan a family of three at 133 percent of FPL with a gross income of $24,312 would have to pay $1,132 or 4.7 percent of its income annually in premiums.

Some members of the Senate Finance Committee have been critical of the Baucus plan for not making the plan more affordable to low- and moderate-income individuals. Because of the push-back he received, Baucus released a modified proposal on Tuesday prior to Committee mark-up that reduced the tax penalties for not having coverage, increased the threshold at which high-priced plans would be taxed, and altered the definition for what would make an employer plan unaffordable so that more moderate-income workers would be eligible to purchase coverage through the exchange and receive subsidies.  Despite these changes, some Senators are prepared to offer amendments to make the package more affordable to low- and moderate-income families.

Baucus has asked that the cost of all amendments be fully paid for by savings or new revenues. That requirement is prompting some Senators to make use of progressive changes to the tax code in amendments calling for improvements in the bill.

Timing

With over 500 amendments filed, the Finance Committee mark-up is expected to last through the end of the week. The amendments have been grouped into three categories. The Committee will first take up amendments dealing with the delivery system, then move on to amendments related to coverage and finally address amendments dealing with the financing of the bill.  Senate Leadership hopes to have a bill on the Senate floor before Columbus Day.

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