• House Budget Committee begins the reconciliation process
• CBO revises estimate on Senate health reform; Senate Parliamentarian wants signed bill before reconciliation
• President delays overseas trip to lobby for health care reform
• Senate extends COBRA subsidy and the delay in the physician fee cuts through 2010

• Health reform proposal would apply Medicare tax to investment income
• Virginia outlaws individual mandate
• Health reform legislation will "kill" health savings account plans

House Budget Committee begins the reconciliation process

The House's Budget Committee began consideration of a bill on Monday that would eventually become the vehicle to which language would be added to alter the health care reform bill passed by the Senate in December of 2009 and awaiting consideration by the House. The reconciliation bill does not yet have a House Resolution number.

The plan is for the Budget Committee to consider this language and move it on the House Rules Committee. At that point in time it is expected that the agreed upon language to alter the health care reform bill as passed by the Senate would be added. This bill will contain other reconciliation provisions as well and it is speculated that it might include a significant re-write the college loan program.

In another unusual move it is expected that the House Rules committee will also adopt a rule that when the House adopts the reconciliation bill it will deem the Senate bill to be adopted as well. The vote used for the reconciliation bill will be the vote that is applied to the health reform bill as passed by the Senate, so there could be only one vote and not two.

On Monday the United States Conference of Catholic Bishops (USCCB) issued a statement saying they were still opposed to the adoption of the Senate bill because language in the bill would allow federal funding for abortions. Earlier in the week Sister Carol Keehan President of The Catholic Health Association which represents Catholic health care facilities issued a statement saying now is the time to pass health care reform and that the any flaws that do exists in the bill could be fixed at a later time. The USCCB statement said, "the bishops, however, judge that the flaws are so fundamental that they vitiate the good that bill intends to promote." The bishops concluded their statement that they are currently opposed to the legislation. Votes in the House on the reconciliation and the Senate health care reform bill are expected at the end of the week of March 15, 2010.

CBO revises estimate on Senate health reform; Senate Parliamentarian wants signed bill before reconciliation

On March 11, the Congressional Budget Office (CBO) revised downward the deficit reduction achieved through health reform, in a new estimate of the budgetary effects of the Senate-passed health care bill, H.R. 3590. The CBO is expected to release budgetary estimates of President Barack Obama's proposed changes to this legislation later this week.

According to the CBO, the most recent estimate differs from the estimate released on December 19 in that it encompasses all of the amendments that were adopted by the Senate, reflects a revised assumption about its enactment date, and incorporates some technical revisions.

The CBO also notes that "the changes we have made do not result in an estimate that differs substantially from the earlier one."

The new CBO report concludes that "on balance, the direct (mandatory) spending and revenue effects of enacting H.R. 3590 as passed by the Senate would yield a net reduction in federal deficits of $118 billion over the 2010-19 period. (Direct spending, as distinguished from discretionary spending, is spending that stems from legislation other than appropriation acts.) In our earlier estimate, the budgetary impact was a net reduction in deficits of $132 billion."

Meanwhile, Congressional Democrats continue to move toward a vote on health care reform, with the House Democratic leadership trying to corral a majority of votes to pass the Senate version of health reform. Reportedly the Senate parliamentarian, the authoritative source on legislative proceeding in the Senate, has ruled that the Senate cannot consider a reconciliation bill to make changes in the health reform bill until President Barack signs the bill the House is considering.

The CBO report is available at http://www.cbo.gov.

President delays overseas trip to lobby for health care reform

President Obama delayed his trip to Indonesia and Australia until March 21 to afford him a few more days to work with Congress on "getting health care reform through the process," noted White House Press Secretary Robert Gibbs on March 12, 2010. According to Gibbs, the decision for the three-day delay was the result of a conversation by Obama with House Speaker Nancy Pelosi (D-Cal) and Senate Majority Leader Harry Reid (D-Nev). The president previously called for the Senate health reform bill to be passed through the House by March 18.

The president plans to meet individually and in small groups with House members who are undecided whether to support the Senate-passed health care bill as part of a two-step strategy for Congress to approve a second measure addressing several controversial provisions under the protection of the reconciliation process. Obama also plans to spend time with Senators to make sure they will vote for the legislative fixes in a second measure, Gibbs said.

"The President I think will take the opportunity to once again reiterate his case for why this reform is so important, why it's important to do this now, why it's important not to stop or to start over, why we're dealing with dramatic spikes in health insurance right now, and why we have to deal with this problem," Gibbs said at a press briefing.

While Gibbs said that plans for two bills would be on a "dual track" and work together, he refrained from stating that the president would not sign one bill without passage of the fix-it measure. Instead, Gibbs said he did not want to become involved in the "parliamentary politics" in Congress.

Senate extends COBRA subsidy and the delay in the physician fee cuts through 2010

On March 10, the Senate agreed to a series of tax extension provisions, including an extension of the COBRA subsidy provision through the end of 2010. By a vote of 62 to 36, the Senate passed H.R. 4213, the American Workers, State, and Business Relief Act of 2010. Because the Senate made numerous changes to the bill, which already had been passed by the House of Representatives, the House must now consider those changes before the bill can be signed by President Barack Obama.

H.R. 4213 also delays until October 1 the scheduled 21% cut in Medicare physician reimbursement.

As passed by the Senate, H.R. 4213 would extend the eligibility for the COBRA subsidy through Dec. 31, 2010.

Earlier this month, Mr. Obama signed the Temporary Extension Act of 2010 (H.R. 4691), which extended the COBRA premium subsidy eligibility period through March 31. The eligibility period, as previously extended by the Department of Defense Appropriations Act of 2010 (P.L. 111-118), had expired on February 28.

H.R. 4961 also expanded the definition of "assistance-eligible individual" to include as a qualifying event the loss of health care coverage because of a reduction in hours followed by involuntary termination of employment. The period of these individuals' continuation coverage will be determined as though the qualifying event were the reduction of hours of employment. Group health plan administrators must provide notice of the subsidy to these individuals within 60 days of the involuntary termination of employment. The notice in general must comply with the guidance for the original subsidy notices.

Health reform proposal would apply Medicare tax to investment income

How President Barack Obama's recent health reform proposal would increase the Medicare payroll tax is outlined in a recent analysis in Kaiser Health News.

Mr. Obama's proposal includes a new Medicare tax on investment income and an increase in Medicare tax rates for the wealthy. The rate increase also is in the already passed-Senate-passed bill.

Kaiser notes that a preliminary analysis by the Joint Committee on Taxation estimates the new investment and payroll taxes would raise about $184 billion by 2019.

According to Kaiser, under Mr. Obama's plan, individuals with incomes of more than $200,000 including both wages and investment returns would pay a 2.9 percent tax on interest, dividends, royalties and other unearned income that exceeds that threshold. The 2.9 percent tax would apply to couples with total incomes over $250,000.

The proposal also would increase the 1.45 percent Medicare payroll tax on workers' wages to 2.35 percent on earnings that exceed $200,000 for an individual and $250,000 for a couple. The portion of the Medicare payroll tax paid by the employer would remain at 1.45 percent, according to Kaiser.

Kaiser reports that "taken together, both the earned- and investment-income portions of the tax would hit the top 2.6 percent of U.S. households, according to The Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution. That would allow Obama to keep his campaign promise not to raise taxes for 95 percent of the country's households."

Kaiser reports that proponents of the tax say that it would hit a tiny proportion of the population, while those opposed to this tax fear that small businesses could be affected adversely.

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

Virginia outlaws individual mandate

Virginia is poised to become the first state to make illegal an individual mandate for health insurance. On March 10, the House of Delegates passed H.B. 10, a bill, previously passed in the state Senate, outlawing individual mandates. Gov. Bob McDonnell has indicated he will sign the legislation.

The bill states that no state resident "shall be required to obtain or maintain a policy of individual insurance coverage." In addition, H.B. 10 states that no resident shall be "liable for any penalty, assessment, fee, or fine as a result of his failure to procure or obtain health insurance coverage."

The Congress-passed versions of national health reform, as well as President Barack Obama's recent proposal, all include an individual mandate and penalties for failing to obtain insurance.

In response to current national health reform proposals, at least 34 other states have begun legislative action to restrict or ban an individual mandate in their states.

Health reform legislation will "kill" health savings account plans

Health reform legislation threatens to derail the adoption of health savings accounts (HSAs) and high-deductible health plans (HDHPs), and ultimately kill HSAs, according to a brief published by the National Center for Policy Analysis (NCPA).

The Senate bill includes provisions that restrict "HSA options in insidious ways that will delay, deny, defeat, and ultimately kill them," according to the NCPA brief Congress Declares War on HSAs by Ron Bachman, an NCPA fellow. Mr. Bachman is president and CEO of Healthcare Visions, Inc, a consumer-driven health care and mental health parity consultant.

"By empowering individuals, emphasizing personal responsibility, and encouraging more effective use of health care services, consumer-driven health plans have been shown to lower overall health costs more than managed care plans, such as preferred provider organizations (PPOs)," Mr. Bachman wrote. He listed what he believed would be the ultimate effects on HSA plans of the Senate health reform bill:

1. The bill favors premiums over savings—it limits the deductibles for small group plans to $2,000 for individual and $4,000 for family, much lower than the current HSA plan deductible limits. "Many people" would chose the much higher deductible possible with an HSA plan in exchange for a lower premium and to deposit the premium savings into an HSA, Mr. Bachman said.

2. The proposed legislation ignores the cost reductions HSA plans yield.

3. The health insurance excise tax on "cadillac" plans limits HSAs' potential because HSA contributions would count toward the premium cap subject to the excise tax.

4. Regulations would stifle HSAs since the Department of Health and Human Services (HHS) would be charged with defining the essentail benefits required.

5. Regulatory powers could make HSAs illegal—"With broad powers, the [HHS] Secretary could easily outlaw HSA plans by defining essential health benefits to include coverage that would violate HSA eligibility under federal law," Mr. Bachman wrote. For example, people under age 30 would be allowed to buy low-cost catastrophic coverage, but the law would require that these plans cover at least three primary care visits. This would rule out HSA plans because coverage would be available before the high deductible is met.

6. HSA funds could not be used to buy most over-the-counter drugs, which are much cheaper than their prescription-only equivalents and thus discourage cost reduction.

7. It would double from 10 to 20 percent the penalty for non-health care qualified withdrawals from the HSA.

8. Rewards for healthy behaviors would be left out because the law prohibits using health status to determine premium rates; also, employer HSA contributions are not on the list of rewards that may be offered for participation in wellness programs.

9. Price controls—"the Senate bill would require premiums for young adults that are no less than 33% of the premiums charged to older adults," Mr. Bachman noted. "This will raise the cost of single and family premiums by 50% to 100% or more. Artificial government price controls will deny equitable risk pricing and defeat efforts to lower the number of uninsured."

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