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White House Health Proposal – The Basics

The White House’s health reform plan is up at, or you can take a peek here. This represents a compromise document, one prepared to pass by using the Senate bill as a base and making changes that the Administration thinks could pass through the reconciliation process if need be, “informed by the process” that has already taken place of the House and Senate bridging their differences, according to WH communications director Dan Pfeiffer.

What’s in this bill that differs from the Senate bill? Let’s take the main pieces:

• Affordability. The subsidies improve upon the Senate bill, particularly at the low end, but also between 250-400% of poverty, where the maximum amount of income paid out of pocket as in insurance premium dips from 9.8% to 9.5%. The actuarial value also increases at the low end slightly, from 133% to 250% of poverty. For instance, instead of a 70% actuarial value at 250% of poverty, the number rises to 73%. These are cosmetic but tangible changes upward from the Senate bill.

• Donut hole. The donut hole, where Medicare Part D subscribers pay out of pocket for prescription drugs above a certain amount, would now get closed by this legislation.

• Community health centers. Bernie Sanders worked hard to get close to $10 billion in additional funding for community health centers, some of the most efficient money in the entire bill, offering universal coverage to low-income community residents. The House bill allocated $12 billion for CHCs. The compromise proposal sets the number at $11 billion.

• Rate review: This is the Health Insurance Rate Authority proposal from Sen. Feinstein that I mentioned last night. Again, I cannot see how this becomes germane through a reconciliation process. I asked Dan Pfeiffer today if they took that into account when crafting the proposal, and he said they did, although he added that “These calls are made by Senate parliamentarian.” In other words, this piece may get flagged by the parliamentarian, in which case the Senate could vote on waiving the Byrd rule, which would take 60 votes to overcome. That could be the plan, to force a clean vote for Republicans between the people and the insurance industry. This part of the bill would also require states that do not currently conduct rate review to do so.

• Losing the Cornhusker Kickback. The bill cancels the Nebraska deal to pay out their expansion of Medicaid coverage in perpetuity. However it adds serious assistance to states for the expansion, adding a year to cover the full cost (until 2014), upping funding to 95% through 2018 and 90% thereafter, with more money for states that already have expanded their coverage. Basically, the “unfunded mandate” of expanding Medicaid is extremely small. While this does not just take over Medicaid funding as a federal concern (which it should), it goes pretty far in that direction.

• Excise tax. Essentially, the changes mirror the deal already worked out between the White House and labor to tweak the excise tax, although the bill raises the threshold for the excise tax all the way up to $27,500, higher than previously suggested. Nothing in the excise tax exempts collectively bargained plans – the changes specifically for labor now apply to all plans. This will allow the tax to, in the words of Jason Furman of OMB, “focus on the costliest plans, not the costliest workers.”

• Individual and employer responsibility. To make up some of the money from the tweaks to the excise tax, increase in FMAP funding for states and the improved affordability credits, the bill adds a variety of provisions. One of the ways is by increasing the penalties for the individual mandate and the employer responsibility. The hard dollar amounts are actually smaller for the individual mandate, but the percentage of income has increased. Basically it adopts the percentages from the House bill. The “hardship” exemption on affordability, exempting those who cannot find coverage that costs a certain percentage of income, remains.

On employer responsibility, the penalties are jacked up significantly, though there’s an exemption for the first 30 employees). The penalty goes from $750 per worker to $2,000.

• Waste, fraud and abuse in Medicaid/Medicare. Basically they adopt a bunch of Republican proposals from old bills to crack down on waste, fraud and abuse in public health programs.

• Other offsets. There are increased savings through lower Medicare Advantage payments (basically, lower subsidies to private insurers to run that program). They’ve added an extra $10 billion in givebacks from branded pharmaceuticals (basically increasing the givebacks in the PhRMA deal). They’ve extended the Medicare HI (Hospital Insurance) tax, the payroll tax for Medicare, onto unearned income, and increased it for high-income earners – there’s even a 2.9 percent assessment on dividend and capital gains income. And the “black liquor” exclusion is included, along with a provision ending certain tax shelters.

That’s most of the important provisions in the bill. This supplement would then get tacked on to the Senate bill, presumably through a reconciliation sidecar, and passed as an overall comprehensive piece. The total bill, the White House calculates, would cost $950 billion, an increase over the House and Senate bills as well as Obama’s former baseline number, and would be fully offset.

You’ll notice I’ve left off the public option. It’s not in this bill. Neither is any change beyond the Senate bill of the abortion funding provisions.

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David Dayen

David Dayen