How the two Senate bills measure up

Two Senate bills that Democrats will try to merge this week symbolize the divide in the party over how to proceed on healthcare reform.

White House officials and Senate Democratic leaders are  attempting a balancing act. They want to meet the goal of extending health insurance to nearly all Americans while reforming the system to rein in runaway costs. But they can’t burst the budget in doing so.

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They risk losing support with every move; a shift to the right costs votes on the left, and vice versa.

Most senators favor beefing up benefits, but few are eager to pay for it with spending cuts or tax increases. The White House also wants to retain the tenuous support of Sen. Olympia Snowe (Maine), the only Republican to offer support for a bill in committee.

A glimpse at the most contentious issues illustrates how much work is in front of Senate Majority Leader Harry Reid (D-Nev.) and his main partners, White House Chief of Staff Rahm Emanuel, Finance Committee Chairman Max Baucus (D-Mont.) and Sen. Chris Dodd (D-Conn.) of the Health, Education, Labor and Pensions (HELP) Committee.


AFFORDABILITY

Making health insurance and the healthcare goods and services it pays for more affordable is the underlying goal of the reform enterprise.

A big part of that is what healthcare wonks call “bending the cost curve down,” or reducing the future rate of growth in healthcare spending.

But when senators talk about affordability, they seem to be thinking mainly about subsidizing health insurance for low- and middle-income people.

The HELP Committee offers subsidies on a sliding scale for people with incomes between 150 percent and 400 percent of the federal poverty level and caps premiums at a maximum of 12.5 percent of income. The Finance Committee bill’s subsidies range from 133 percent of poverty to 400 percent with a maximum premium of 12 percent of income.

The bottom line is simple: HELP offers more generous subsidies for insurance premiums and out-of-pocket costs than Finance. It’s also much costlier.

Under the HELP Committee bill, 27 million people would buy insurance through an exchange, using subsidies that would cost the government $723 billion over 10 years. The Finance Committee bill would spend $461 billion for the 23 million people who would enroll in insurance through an exchange.


PUBLIC OPTION

Creating a government-run health insurance program to compete with private insurance is a must for liberals, so Reid’s decision on this question could be the most difficult.

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The HELP Committee approved a public option, and most Democrats view it as the only way to place a check on private insurers in the marketplace, to give people an alternative to unstable private coverage, and as a way to save healthcare costs through efficiencies. The HELP Committee’s public option would negotiate payment rates with medical providers and have to follow the same rules as private insurers in the exchange.

The Finance bill includes funding for nonprofit healthcare cooperatives and enacted language permitting states to establish public plans for people between 133 percent and 200 percent of poverty.

Several compromise positions have gained some traction and might provide Reid with a way of leaving the final decision for the Senate floor.

Snowe herself has proposed establishing a “trigger” that would launch a public option in states underserved by private insurance. Others, such as Sen. Tom Carper (D-Del.) have floated the notion of setting up a public option and letting states decide whether to participate.


INDIVIDUAL RESPONSIBLITY

The HELP Committee bill includes an individual mandate that requires nearly everyone to obtain some form of health coverage or pay a $750 penalty, with a maximum of $3,000 for a family. The principles behind this policy are simple: Only by getting everyone covered can the cost of healthcare be spread more equitably and the health of Americans improved. The bill includes exemptions for financial hardship and objections on religious and other grounds.

The Finance Committee started out with a very similar proposal, but it was watered down because of worries that people would be punished if they simply could not afford insurance. More people were exempted and penalties scaled back.

This has created different problems, such as reducing the number of people who would be covered under reform and providing incentives for young and healthy people to opt out entirely.


EMPLOYER RESPONSIBILITY

The HELP Committee bill includes a strict “play or pay” employer mandate: All companies with 25 or more employees must provide health benefits and pay 60 percent of the cost. If not, they face a $750 penalty for each uninsured full-time worker and $375 for each part-timer.

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The Finance Committee eschewed a legal requirement for employers but did not let companies with more than 50 workers off the hook.

Under this bill’s “free rider” policy, a company would pay the full cost of the federal subsidy for each employee (though the first 50 are not counted) or $400 a person, whichever is smaller. In addition, companies with more than 200 employees would have to automatically enroll their workers in a health plan.


FINANCING

Figuring out how to pay for the new benefits may prove the biggest obstacle to a healthcare bill.

The Finance Committee, which has jurisdiction over Medicare and other health programs, identified $404 billion in spending cuts. Republicans have attacked those cuts as harmful to seniors, which could make them  tough to keep.

Democrats also decided to raise taxes to finance $900 billion in new spending.

The biggest revenue raiser in the Finance Committee’s bill affects insurance plans that cost $8,000 for individuals and $25,000 for families. Under the bill, the cost of the insurance above those amounts would be subject to a 40 percent tax. This provision would raise $201 billion over 10 years, in part based on the expectation that people would choose cheaper insurance and demand higher wages from their employers instead, which in turn would be taxed as income.

But the tax is staunchly opposed by labor unions, a powerful Democratic ally.

How to make up that lost money could lead the Senate in a direction Baucus avoided: Raising money from outside the healthcare system. HELP Committee Chairman Tom Harkin (D-Iowa) recently suggested borrowing the “millionaires’ tax” from the House’s healthcare bill.