• Uncertainty highlights CMS cost estimates for health care reform
• White House acknowledges possibility of health reform reconciliation process
• Pressure mounts for "special process" in Congress to address federal debt, including health care

• Business Roundtable/Hewitt report points to potential and pitfalls in reform
• House health care reform bill surcharge on wealthy would affect very few

Uncertainty highlights CMS cost estimates for health care reform

The actual future impacts of the Affordable Health Care for America Act, H.R. 3962, "are very uncertain," according to a November 13 memorandum from Richard S. Foster, the Chief Actuary of the Centers for Medicare and Medicaid Services, which estimates the financial and coverage effects of the non-tax provisions in the proposed legislation.

In addition to echoing an earlier report, from the Congressional Budget Office which called budget estimates "subject to substantial uncertainty," the CMS memorandum notes this:

"The legislation would result in numerous changes in the way that health care insurance is provided and paid for in the U.S., and the scope and magnitude of these changes are such that few precedents exist for use in estimation. Consequently, the estimates presented here are subject to a substantially greater degree of uncertainty than is usually the case with more routine health care proposals."

Estimates provided. Despite the uncertainty, the CMS memorandum estimates that the mandates in H.R. 3962 would reduce the number of uninsured from 57 million as projected under current law, to an estimated 23 million under H.R. 3962. An estimated 21 million would gain Medicaid coverage as of a result of the provision to expand eligibility to legal resident adults with income less than 150% of the federal poverty level. Another 10 million currently uninsured persons would receive coverage through the newly created Exchange program.

The number of individuals with employer sponsored insurance would increase by about 2.5 million, reflecting both gains and losses under the House bill. An estimated 15 million workers and family members would become newly covered as a result of additional employers offering health care coverage and a greater proportion of workers enrolling in employer plans. However, about 12 million fewer workers would be covered, according to CMS, because of expanded Medicaid coverage and subsidized coverage through the Exchange.

The penalty for noncovered individuals would increase over time as a function of their incomes, according to CMS. Similarly penalties for nonparticipating employers would rise with growth in company payrolls. In both cases, penalties are estimated to grow more slowly than Federal expenditures for affordability credits.

The public plan option in H.R. 3962 would include costs that are 5% below the average level for private plans, says the memorandum, but premiums would be 4% higher as a result of anti-selection by enrollees.

CMS estimates that of the remaining 23 million uninsured, 5 million would be undocumented aliens ineligible for coverage, and 18 million would choose not to be insured and to pay the penalty associated with the individual mandate.

The provisions in support of expanding health insurance coverage are estimated to cost about $935 billion through fiscal year 2019. The net savings from the Medicare, Medicaid, and immediate reform proposals are estimated to total $529 billion, leaving a net cost of $406 billion before consideration of additional federal administrative expenses and the increase in federal income and other tax revenues that would result from the surcharge on high-income individuals and families and other revenue provisions. The memorandum notes that the CBO has estimated that the total amount of Medicare savings and additional tax and other revenues would somewhat more than offset the cost of national coverage provisions, resulting in an overall reduction in the federal deficit through 2019.

White House acknowledges possibility of health reform reconciliation process

At a press briefing on November 9, White House Press Secretary Robert Gibbs indicated the Administration would consider an alternative vehicle such as budget reconciliation for getting a health care reform bill to the President's desk by the end of 2009 if one cannot be sent through the normal legislative process.

Asked whether the President would sign a health care reform bill under the budget reconciliation process, Mr. Gibbs said that he believes Congress is making sufficient progress on health care reform, but he added that if progress stalls, "then we will look at alternatives."

Although President Barack Obama and presumably Congress do not want to go this route, health care reform legislation could follow the model of COBRA health benefit provisions, which were attached to the Consolidated Omnibus Budget Reconciliation Act of 1986. However, shepherding a health care package through the reconciliation process would place several restrictions on the legislation; the so-called Byrd rule (named after Sen. Robert Byrd (Va.), who developed the rule) puts limitations on the optional budget enforcement tool, limiting amendments to those that directly affect federal revenue, such as tax cuts. Interpretation of what is considered relevant is decided by the Senate parliamentarian.

The budget reconciliation process typically is used to align revenue and spending levels with policies of the budget resolution. It limits debate to 20 hours and eliminates the possibility of a filibuster. The enforcement mechanism initially was established to ensure that minority obstruction would not block important legislation such as a budget or reducing the deficit. It only requires a simple majority of 51 votes, versus the 60-vote margin required to allow a vote to proceed when there is no budget reconciliation protection.

Pressure mounts for "special process" in Congress to address federal debt, including health care

Noting that the regular order in Congress will not be able to deal with the increasing federal debt load, which is driven largely by entitlement programs such as Social Security and Medicare, Senate Budget Committee chair Kent Conrad (N.D.) concluded in a committee hearing on November 10 that a "special process" is needed to compel legislators to fix the nation's fiscal problems.

For more than two years, Mr. Conrad and Sen. Judd Gregg (N.H.) have pushed a "special process" proposal that would create a commission made up of members of Congress and possibly the White House that would send legislative proposals to Congress for an up or down vote with no amendments considered.

According to Mr. Conrad, "The health care reform effort currently underway has the potential to improve our long-term debt outlook. But it will not be enough. We must also address the demographic challenge we face in Social Security and the revenue challenge we face from an outdated and inefficient revenue system."

Mr. Conrad continued, "Ideally, these problems would be addressed through the regular order. The regular order would mean that House and Senate committees with jurisdiction over health, retirement, and revenue issues would individually take up legislation to address the imbalances in their particular areas of legislative responsibility, and then move that legislation through Congress. The simple reality is that will never happen."

The Conrad-Gregg special process proposal, called the Bipartisan Task Force for Responsible Fiscal Action, likely would require a supermajority (three-fifths) vote in the commission and Congress to pass legislation.

A bipartisan commission appointed in 1983 succeeded in extending the Social Security trust fund's solvency for several generations by raising the retirement age from 65 to 67, imposing a six-month delay in a cost-of-living adjustment, and requiring government employees to pay into Social Security for the first time.

According to Mr. Conrad, the task force would be focused on the debt, "every issue would be on the table," the task force's legislative proposal would get fast-track consideration, and Congress would have to vote on the proposal without amendments.

For more information, visit http://budget.senate.gov/democratic/hearingstate.html.

Business Roundtable/Hewitt report points to potential and pitfalls in reform

Effective health care reform could save as much as $3,000 per employee in 2019, according to a recent report from Hewitt Associates commissioned by the Business Roundtable. In the report, Health Care Reform: The Perils of Inaction and the Promise of Effective Action, Hewitt points out the potential benefits of revamping the nation's health care system, if done wisely, and the pitfalls of inaction.

Without fundamental reform, employment-based spending on health care at large employers will be 166% higher by 2019 than today on a per-employee basis. This equates to an average of $28,530 per employee when employer subsidies, employee contributions, and employee out-of-pocket costs are combined. Hewitt estimates that, if enacted properly, the correct legislative reforms could potentially reduce that trend line by more than $3,000 per employee, to $25,435 in 2019.

"If we are able to enact broader market reforms that eventually lower future cost increases to an average of 4% per year, we could potentially reduce average per-employee costs further to $23,151 per employee by 2019," concludes the report.

However, according to Hewitt, the current legislative proposals "are missing some ingredients needed to drive the type of system-wide change that can 'bend the future trend' significantly and permanently. For example, value-based purchasing initiatives should be expanded beyond hospitals to include other services, such as outpatient services, rehabilitation services, and long-term care. Comparative effectiveness research is vital, but we must find ways to encourage providers to adhere to evidence-based guidelines and encourage purchasers to adopt evidence-based plan designs. And release of Medicare professional services claims data, with full protection of patient privacy, should be authorized in the final legislation.

"By making this broader set of claims data available to employer-provided health plans, consumers will be able to consider the cost and quality of services rendered by providers and make informed decisions about their treatment."

For more information, visit http://www.businessroundtable.org/resource_center/all/news/all.

House health care reform bill surcharge on wealthy would affect very few

Health care reform's proposed 5.4% surcharge on wealthy couples with $1 million or more in earnings would affect only a fraction of 1% of all taxpayers and fewer than 2% of small businesses, according to a recent report from the Center on Budget and Policy Priorities (CBPP). This surcharge, included in H.R. 3962, the Affordable Health Care for America Act, is "sound and well-targeted" as it would affect "a group whose incomes have soared and tax burdens have fallen in recent years, and would have only a modest impact on small businesses," the report said.

The report noted that the surcharge, which is expected to raise an estimated $460.5 billion over ten years, "contributes significantly" to the House bill's effort to fully finance health care reform and achieve long-term savings.

The surcharge would apply only to jointly filing couples with income exceeding $1 million and to single filers with income exceeding $500,000. It would have no impact at all on more than 98% of small business owners (broadly defined as any taxpayer with any business income), the Urban Institute-Brookings Institution Tax Policy Center has reported. In addition, the Tax Policy Center noted, many of the 1.6% of "small business" owners that would be affected by the surcharge are wealthy investors with a passive investment in a business.

The CBPP pointed out that small business has more to gain from the House health care reform bill, which contains the following provisions designed to help small businesses provide their employees with health care coverage: it would bar insurers from raising premiums based on small business workers' health status; help small businesses reduce administrative costs by allowing them to buy coverage through a health insurance exchange, and provide the smallest firms with tax credits to help them offer coverage.

The surcharge would affect only the highest 0.5% of households by income in 2019, according to the Tax Policy Center; thus, more than 99% of taxpayers would not be affected. "Congressional Budget Office data show that between 1979 and 2006, the share of the nation's total after-tax income going to the top 1% of households more than doubled, from 7.5% of total income in 1979 to 16.3% in 2006," the CBPP report observed. "Altogether, households in the top 1% of the population had $617 billion more income in 2006, and the other 99% of households had $617 billion [$656 billion in 2009 dollars] less, than they would have had if the 1979 income distribution still prevailed."

For more information, visit http://www.cbpp.org/.