While most of us were sleeping last night, the United States House of Representatives approved the Senate Health Care Bill. In a close vote—219 to 212—the Democrats saw more than 10 percent of their party vote against the bill, with no Republicans voting in favor of the legislation. As a result of this vote, the controversial bill will now be signed into law by President Obama.
Subsequent to the first vote, the House then considered the Reconciliation Bill. In a similar vote, the House passed this legislation as well—220 to 211. The Reconciliation Bill will now be considered in the Senate, where challenges are being raised by Republicans regarding budget concerns. Specifically, because the bill deals with changes in the IRS code, Republicans assert that the measure must be passed using 60 votes, instead of 51, and are expected to raise objections and points of order that may stall the bill. The longer this package is stalled in the Senate, the longer the bill, which President Obama will likely sign today, remains a law, with largely unacceptable provisions—such as deals for lawmakers in states such as Nebraska and Florida.
What to Expect
Prior to the vote last night, the Congressional Budget Office (CBO) had estimated the total cost of the health care package at $940 billion over 10 years, although many of the changes will not happen until 2014. According to CNNMoney, the bill will provide government subsidies to low- and middle-income families buying health insurance on their own, expand eligibility rules for Medicaid and provide coverage for a majority of uninsured Americans. It would also establish a number of insurance reforms.
CBO also estimated that the plan could reduce the deficit by $143 billion over the first 10 years. And over the following decade, CBO projected, health reform could reduce the deficit by more than $1 trillion, although the agency stressed that such long-term projections are highly uncertain. (Deficit experts offer a fiscal reality check.) These reductions would be achieved “mainly from more than $500 billion in savings from health programs like Medicare, and $438 billion in new tax revenue.” In other words, hardworking Americans are going to have to empty out their pockets, along with small businesses.
Opponents of reform say the CBO numbers underestimate the future costs of the bill because, they say, a number of the deficit-reducing measures aren't politically realistic and therefore won't come to pass. It is also extremely difficult to estimate what kind of costs adding 31 million people to a broken health care system will add, especially when a large number of these people have not had insurance ever or in a long time, and will likely add further stress to patient loads for doctors.
Another problem with the projections is that “Congress is likely to soon reverse a steep reduction in Medicare physician payment rates — a move that would undercut any deficit savings from health reform.”
By contrast, supporters of reform say the CBO underestimates the bill's potential savings, because the agency doesn't credit the bill's experimental measures designed to make the health care delivery system more cost-efficient.
Money
Medicare Tax: The reconciliation bill will change the Medicare tax by increasing it on high-income households, which the CBO estimates the provision would raise $210 billion over 10 years. At present, the Medicare payroll tax is 2.9% on all wages — with the worker and his employer each paying 1.45%. The reconciliation bill, like the Senate bill, raises the percentage paid by high-income individuals by 0.9 percentage points, so an individual would pay 2.35% on his wages.
The reconciliation bill, however, also would subject the investment income of high-income households, such as dividends, interest and rent, to a 3.8% Medicare tax. High-income is defined as individuals making more than $200,000 ($250,000 for couples filing jointly).
Tax high-cost medical plans: The new bill still includes an excise tax on insurers offering high-cost health insurance policies. Supporters believe the excise tax would persuade workers and employers to choose lower-cost plans. While technically a tax on insurers, they are expected to pass along those costs to policyholders. Supporters then believe that employers will use the money saved on cheaper plans to pay workers higher wages—that is, if they haven’t gone out of business first from all the new taxes. This would not be enacted until 2018.
The new thresholds would be $10,200 for singles, up from $8,500 in the Senate bill; and to $27,500 for families, up from $23,000 in the Senate bill. The thresholds would be higher still for retirees and employees in high-risk professions ($11,850 for individuals and $30,950 for families).
The CBO estimates the provision would raise $32 billion over 10 years, nearly 80% less than the $149 billion in the Senate bill.
Penalties: In 2015, individuals who choose not to buy insurance would pay the greater of $325 or up to 2% in income ($695 or up to 2.5% in income thereafter). The CBO estimates this provision would raise $17 billion over 10 years.
Media reports have already begun noting that states are expected to challenge such individual mandates in court.
Employers: The reconciliation bill would assess a penalty on employers with more than 50 workers if they do not provide health insurance coverage and have workers who would qualify for federal subsidies to buy insurance on their own. The reconciliation bill assesses a penalty of $2,000 per full-time worker. The CBO estimates this provision would raise $52 billion over 10 years. This is one of the key provisions that will raise costs for small businesses.
0:00 /4:44Health care costs will go up
Fees on industry: The reconciliation bill would impose new fees on health care companies such as pharmaceutical and medical device makers and insurers. The CBO estimates this provision would raise $107 billion over 10 years.
Trim various health-related tax breaks: The reconciliation bill would impose an additional 20% penalty for non-health withdrawals from tax-advantaged health savings accounts, up from 10% in the Senate bill. It would also limit to $2,500 the amount workers may contribute to flexible health spending accounts at work, and it raises the percentage of adjusted gross income that would have to be matched in health bills to 10% from 7.5% for those under 65. These provisions combined would bring in an estimated $29 billion over 10 years.
Long-term care insurance program: The bill would create the Community Living Assistance Services and Supports Act to help seniors in need of help with daily tasks such as bathing and dressing. In the first 10 years, the program it is expected to take in more money than it pays out, which is why the CBO says it would reduce the deficit by $70 billion. But in the second decade and beyond, the program is projected to pay out more than it takes in, and will therefore contribute to the deficit.
Health Care Reform
With the passage of last nights Senate bill, and the House approval of the Reconciliation bill, the Senate is now left with the final vote for health care reform. The President is expected to sign the first part of the legislation (senate bill) sometime today, and the Senate will then duke out the reconciliation package.
Additional Articles on Analysis of the Bill’s include:
Keith Hennesey