The Final Shape Of The Health Care Reform Bill

Health Care: Changes Planned to Senate Bill by House Democrats
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By Kristin Jensen and Nicole Gaouette

March 20 (Bloomberg) -- House Democrats are aiming to approve tomorrow the biggest changes to the U.S. health-care system in more than four decades, extending coverage to tens of millions of uninsured Americans and attempting to curb rising medical costs.

Insurers would no longer be able to reject new customers with pre-existing medical conditions; new restrictions would be placed on their ability to set premiums. Patients would have greater access to preventive care and young adults would be able to stay on their parents’ insurance until the age of 26.

No Republicans support the 10-year, $940 billion legislation, forcing the Democrats to finish their work with a budget process called reconciliation. Using the procedure, House Democratic leaders are pushing for approval of a Senate bill passed in December along with a series of changes in a reconciliation bill. The Senate will then take up the reconciliation bill as well.

President Barack Obama has made an overhaul of the U.S. health-care system his top domestic priority and is helping House Speaker Nancy Pelosi round up the final support she needs ahead of a vote slated for March 21. The House is insisting on the reconciliation bill, released March 18, because many members don’t like the Senate version.

The following outlines some of the biggest changes:

INDIVIDUAL MANDATE: The Senate bill requires all Americans to get health insurance or pay a penalty. Under the reconciliation bill, individuals who don’t purchase insurance would be subject to a fine of $325 in 2015 and $695 in 2016, compared with $495 and $750 in the original Senate bill. Individuals may be subject to a charge equal to as much as 2.5 percent of their income in 2016, if the total is greater than the flat payment, a change from 2 percent in the Senate version.

EXPANDING COVERAGE: With changes made by the reconciliation bill, 32 million uninsured Americans will be covered by a health plan, the Congressional Budget Office said yesterday. That means that 92 percent of all residents, or 95 percent excluding illegal immigrants, would have insurance in 2019, the nonpartisan agency said.

About 15 percent of U.S. residents, or some 46 million, lacked insurance in 2008, according to the U.S. Census Bureau.

HELPING SENIORS AFFORD MEDICINES: The reconciliation bill builds on the Senate measure to help close a gap, known as the doughnut hole, in coverage for prescription drugs for patients in the Medicare program for the elderly. Part of it is funded by the government and part by the pharmaceutical industry, which in June agreed to spend as much as $80 billion over 10 years.

TAXES: Already in the Senate bill, a higher Medicare payroll tax will be assessed on individuals who make more than $200,000 a year or families with annual income of more than $250,000. The reconciliation bill includes an additional 3.8 percent Medicare tax on unearned income such as dividends on these high earners.

The reconciliation bill would also scale back the Senate’s planned tax on so-called Cadillac, high-end insurance plans. Labor unions said the levy would affect too many workers; the reconciliation bill reduces the revenue from the tax by 80 percent by raising the thresholds at which it would apply. The measure also delays the tax until 2018.

INDUSTRY FEES: The reconciliation bill converts $20 billion in fees that the Senate planned to raise from medical device makers such as Natick, Massachusetts-based Boston Scientific Corp. into a 2.9 percent excise tax on certain devices. The revenue would be the same, with a delay on the tax until 2013.

The pharmaceutical industry, which includes New York-based Pfizer Inc., would be subject to fees starting in 2011. Lawmakers replaced a $2.3 billion annual tax in the Senate bill with a levy that would gradually increase from $2.5 billion in 2011 to $4.2 billion in 2018. Beginning in 2019, the fee would drop to $2.8 billion annually and hold steady thereafter.

Insurers such as Indianapolis-based WellPoint Inc. would face varying fees over the life of the reconciliation bill, as compared with a flat $6.7 billion annual levy in the Senate bill. The industry would pay $58.8 billion in fees over the period from 2014 to 2018; levies would be adjusted for premium growth afterward.

EMPLOYER MANDATE: Under the Senate bill, if an employer with more than 50 employees doesn’t offer coverage and has just one employee who qualifies for a new tax credit, the company must pay a fee for every full-time employee on its roster. The reconciliation bill raises the penalty to $2,000 from $750, though it subtracts the first 30 employees from the calculation.

ABORTION FUNDING: The reconciliation bill doesn’t address the issue of abortion and therefore may lead to the defection of some anti-abortion Democrats in the House who say the Senate bill doesn’t do enough to ensure federal funds aren’t used for the procedure. Top congressional Democrats say the legislation already preserves the ban on federal funding.

STUDENT-LOAN REVAMP: The reconciliation bill adds a House- passed measure to revamp the college student-loan program. The plan would end subsidies to lenders such as SLM Corp., commonly known as Sallie Mae, and instead have all students borrow directly from the federal government.

Democrats plan to use the bulk of the anticipated savings to expand Pell college tuition grants. The savings also proved critical to meeting the requirement that any health-care reconciliation bill save at least $2 billion over the first five years, the CBO analysis shows.

What’s Next

The House first needs to pass the Senate bill and the reconciliation changes. The Senate bill would become law as soon as Obama signs it. The Senate would have to pass the reconciliation bill as well before it can become law.

Republicans are vowing to use every procedural tactic they can to block the reconciliation bill and they may challenge its provisions. If the Senate parliamentarian rules with Republicans on a challenge, Democrats might have to vote on a changed bill, which would kick it back to the House again.

The No. 2 Senate Democrat, Dick Durbin of Illinois, yesterday said the Senate aims to finish its work by March 26. That’s the day lawmakers are scheduled to leave for a two-week recess.

To contact the reporters on this story: Kristin Jensen in Washing