December 21, 2009 -- The Senate voted by a margin of 60 to 40 early Monday morning to shut off debate on a package of revisions negotiated by Senate Majority Leader Harry Reid, D-Nev. to the Senate Democratic health care overhaul bill (HR 3590). The Senate must approve two more cloture petitions shutting off debate on the base bill and the underlying House-passed bill serving as the vehicle for the base bill before a final vote can occur in the Senate on the overhaul proposal.

The second cloture vote is scheduled for 7 a.m. on Tuesday and a third cloture vote if the second one passes is scheduled for Wednesday at 1 p.m. A vote on final passage of the overhaul bill would then occur Thursday, Dec. 24 at 7 p.m.

By Alex Wayne, CQ Staff

December 19, 2009 -- Senate Democratic leaders on Saturday offered a package of final changes to their health care overhaul that represented a major concession to centrists in the party.

As expected, the manager's amendment to the bill (HR 3590) would drop a new government-run insurance plan, or public option, that is dear to liberals. In its place, the amendment would create a new system of national, private insurance plans supervised by the Office of Personnel Management, which already administers health benefits for federal employees.

The amendment also tightens restrictions on insurance coverage for abortion and would weaken new nonprofit insurance co-operatives the bill would create to compete with private insurers. Both changes were requested by Nebraska's Ben Nelson, the last member of the Democratic caucus to commit to support the measure.

Nelson also won an assortment of smaller changes to the bill that would assist rural hospitals—important to his state—and increase payments for Nebraska's Medicaid program. "I will vote for health care reform because it will deliver relief from rising health care costs to Nebraska families, workers, rural communities and employers," he said in a statement.

But with the changes, Democrats also appear to have lost any chance of passing a bipartisan bill. Olympia J. Snowe of Maine, the likeliest Republican vote for the bill, criticized provisions of the amendment that would increase penalties on employers who don't provide their workers insurance and individuals who don't purchase policies. She said "it's going to be difficult" for her to support the bill.

The Congressional Budget Office and the Joint Committee on Taxation estimated that the changes in the manager's amendment would raise its cost over 10 years to $871 billion, from $848 billion.

The manager's amendment drops a provision of the bill that would have stopped a 21 percent cut in Medicare fees for physicians scheduled to take effect Jan. 1.

Reid said the Senate will pass a separate bill in January to avert the cut for the entire year; in the meantime, a defense appropriations bill (HR 3326) that the Senate cleared Saturday would stave off the cut for two months.

Medicaid Expansion
To appease liberals disappointed by the loss of the public option, the amendment includes new financial requirements for private insurers. Beginning in 2011, insurers covering employees of large businesses would have to spend at least 85 of their revenue from premiums on medical claims, a metric known in the industry as "medical loss ratio," or MLR.

Insurers covering employees of small businesses, or selling policies to individuals, would be required to meet an MLR of 80 percent.

"It means that the insurance companies can't game the system the way they have," said Sherrod Brown, D-Ohio, a liberal who had strongly argued for a public option.

Bernie Sanders, I-Vt., a liberal who had threatened to vote against the bill if it did not include a public option, won changes that produced $10 billion combined for an expansion of government-funded community health centers and the National Health Service Corps, which provides doctors for underserved areas.

A key feature of the bill is an expansion of Medicaid to cover many more low-income families. The manager's amendment would provide additional Medicaid payments to three states—Nebraska, Vermont, and Massachusetts—to help them cover people who be newly eligible for the program.

Medicaid is normally a shared federal-state program in which the federal government picks up, on average, 57 percent of the cost. Under the bill, the government would pay 90 percent of the cost, on average, to cover people who otherwise would not be eligible for Medicaid.

But thanks to the manager's amendment, Nebraska would receive 100 percent federal financing for new Medicaid beneficiaries in perpetuity. Vermont would get a 2.2 percentage-point increase in federal payments for six years, and Massachusetts a 0.5 percentage-point increase for three years.

Majority Leader Harry Reid, D-Nev., said he negotiated with Nelson over a period of "many, many weeks," but played down the idea that Nelson received special treatment not afforded other senators. He said the manager's amendment reflected "a number of different interests" of various senators.

"You will find a number of states are treated differently than other states," Reid said. "That's what legislation is all about. It's compromise."

Reid said the legislation included various provisions designed "to get a number of different people's votes."

Arlen Specter, D-Pa., for example, announced he has won inclusion of a provision to create a grant program through the National Institutes of Health designed to help move biomedical research discoveries from the laboratory into practical applications.

Asked about the special Medicaid provisions for Nelson, Reid said, "With Sen. Nelson, that a was a minor part of the issues. We started working on that weeks and weeks ago—that provision."

Liberal Tom Harkin of Iowa said the special treatment for some states would benefit other states down the road. "In 2017 . . . when we have to start phasing back from 100 percent, and some states will go down to 98 percent, they're going to say 'Wait, there's one state that stays at 100.' And every governor in the country is going to say, 'Why shouldn't our state stay there?' And I'm going to be happy to support our state staying at 100 percent . . . That's going to be the impetus for all the states to stay at 100 percent."

Insurance Exchange Plans
The manager's amendment requires OPM to recruit at least two entities to participate in the new system of national health insurance plans, and one must be a nonprofit.

It also requires that one of the national plans not cover most abortions, a nod to abortion opponents such as Nelson.

OPM would be able to negotiate a medical loss ratio, profit margins and premiums for the national plans. The plans would also have to meet state requirements across the country.

The amendment specifies that OPM cannot divert resources from the health benefits program for federal employees that it already supervises, and that people covered by the new national plans would not be included in the same risk pool as federal employees.

That is a concession to unions representing federal employees, who are concerned that the employees' insurance premiums might rise if many sick people were to join their risk pool as a result of the changes.

Under the amendment, some individuals who can get coverage through their employers could go into the exchange to buy coverage instead. Workers with "cafeteria" plans who can choose between company-provided insurance or a voucher to go elsewhere would be able to use that voucher to buy exchange coverage.

Mandate Penalties
The manager's amendment also slightly changes the penalty on people who do not get insurance coverage, which they would be required to do by the bill. The result is a slightly stiffer penalty on higher income people.

The penalty is determined by a formula based on how many months a person or family is without insurance. Some high-income families that did not buy insurance would be penalized the cost of premiums for a "bronze" plan offered through the exchange.

Low-income families would pay a smaller penalty based on how many months they were without insurance. The maximum penalty would top out at $750 per uninsured person by 2016, after starting at $95 in 2014 and going up to $495 in 2015. There would also be a penalty based on a percentage of income that some uninsured people might end up paying, instead of the flat amount. These people would face a fine of 2 percent of their income in 2016, but only if it created a larger penalty than paying the flat rate. The changes put slightly more pressure in higher income people to buy insurance.

Penalties on employers who do not offer coverage, or have coverage restrictions, are also changed. Some large employers, especially in low-paying or service industries, require a waiting period before employees can enroll in company coverage. The manager's amendment does away with penalties for employers that have an over-30-day waiting period, but keeps the $600-per-employee penalty for employers who make employees wait more than 60 days.

There is also a special section targeted at the construction industry, to make sure that smaller construction firms with less than 50 employees are still subject to some of the employer requirements to provide coverage. According to the changes in the manager's amendment, construction companies are required to help provide coverage or pay penalties if they have more than five employees, instead of the 50-employee threshold for most other companies.
Kathleen Hunter and Drew Armstrong contributed to this story.

By Jane Norman and John Reichard, CQ HealthBeat

December 15, 2009 -- Democratic senators traveled to the White House on Tuesday for a meeting with President Obama aimed at building a united front on health care, and Sen. Joseph I. Lieberman said he'd likely join with them in backing a measure that dropped a government-sponsored insurance program.

But a firm 60 votes to limit debate remained elusive as the clock ticked down toward the Christmas recess and senators still awaited a new score from the Congressional Budget Office. Protestors gathered at both ends of the city, with liberals upset by the lack of a public option rallying at Lafayette Park facing the White House and conservatives chanting "Kill the Bill!" massed across the street from the Senate.

Obama said after meeting with Democrats that "I'm feeling cautiously optimistic we can get this done," though he also acknowledged disagreements remain that need to be ironed out. Democrats do share a broad consensus that Americans need to be protected from the worst abuses of the health care industry, he said.

"There are still some differences that have to be worked on," said Obama. "This was not a roll call. This was a broad-based discussion about how we move forward." He did not mention Democratic Sen. Ben Nelson of Nebraska, whose opposition to abortion language remains as a problem.

Senate Finance Committee Chairman Max Baucus came away from the meeting at the White House saying that members of the Democratic caucus "are more enthusiastic" about the overhaul measure. The Montana Democrat said there was a sense of "joyfulness" about moving closer toward a bill that can get through the Senate.

"This will pass," Baucus said. "This will pass. There will be 60 votes for this within the next week, ten days."

That of course would be Christmas Day. Perhaps Santa will have to be enlisted to deliver the final "yes," given how elusive 60 votes seem to be.

Democrats skittered away from a government-sponsored plan in the Senate bill (HR 3590) in the face of Lieberman's opposition, needing the independent's vote, and Lieberman said the measure now looked much better to him.

He told reporters that if a proposed Medicare buy-in for people age 55 to 64 is out and there are no similar alternatives added, "then I'm getting toward that position where I can say what I've wanted to say all along, that I'm ready to vote for health care reform."

Liberals outside Congress reacted with outrage over what they saw as a cave-in to Lieberman. Former Democratic National Committee Chairman Howard Dean said in an interview on Vermont Public Radio that the Senate legislation should die rather than go forward without a government-sponsored plan.

"This is essentially the collapse of health care reform in the United States Senate," said Dean, a physician who's been outspoken about health care legislation. "And, honestly, the best thing to do right now is kill the Senate bill and go back to the House and start the reconciliation process, where you only need 51 votes and it would be a much simpler bill."

The progressive advocacy group MoveOn.org sent an e-mail to members urging they call President Obama and tell him they are "extremely disappointed" in how the health care debate is going. "This isn't what 70 million of us voted for last year," said the e-mail.

But Democratic Sen. Debbie Stabenow of Michigan said the main goal is to see a bill approved that will extend insurance coverage to an additional 30 million Americans. "We're in a process, a legislative process, where we have to bring everyone together and get the very best we can and then keep working," said Stabenow at a press event with faith leaders. The original Medicare bill approved in the 1960s did not include many provisions it has today but it was a framework that later was strengthened, Stabenow said.

"This is about a framework," she said. "Don't underestimate the mere principle of getting into law that every American should have access to affordable health insurance, that health care is a right and not a privilege in America. That fundamental framework will change the debate going forward."

Sen. Ben Cardin of Maryland said he's "very optimistic" the Senate bill will reduce costs and more, and rejected criticism that the measure is worthless without a government-sponsored plan of some kind. "We knew from the beginning the public option would require 60 votes to move forward," said Cardin. "At this point we don't have 60 votes. Does it mean we are going to give up? No."

Jim Winkler, general secretary of the general board of church and society of the United Methodist Church, was at the event and said in an interview that the denomination is not happy about the decision to kill the public option. He and other faith leaders have been vocal in supporting a need for change in the system. "We don't like it, not one bit," said Winkler. "It could have been, and should be, a better bill."

Sen. Sherrod Brown, D-Ohio, said he made a direct appeal to Lieberman at the White House meeting to support the Medicare buy-in, apparently without success.

Amidst the turmoil over Lieberman, Sen. Roland W. Burris popped up as a worry. He issued a statement saying "the health bill has not yet won my vote." The Illinois Democrat expressed concern about whether the goals of the public option — better cost containment, more competition, and more accountability of insurers — would be met under the legislation.

"In the process of this debate, we have all made concessions," Burris said. "We have all compromised."

Quoting Mahatma Gandhi, Burris said, "but there can be no give and take on fundamentals. Any compromise on mere fundamentals is a surrender."

Earlier in the day, the two Republican senators from Maine, Susan Collins and Olympia J. Snowe, suggested they won't be playing Santa Claus for Democrats this Christmas.

Collins sought to downplay expectations that she might vote yes given her recent joint efforts with Democrats to improve cost containment provisions in the legislation. "I'm still very concerned about the enormous cuts" in Medicare, she told reporters Tuesday.

Snowe said it would be "difficult" to address her remaining concerns about the legislation before Christmas. "I'm deeply concerned about the timeline under which we are operating," she said.

Both mentioned they have been in discussions with various White House officials and Collins said she wants to continue to work on the bill. "I think something is going to pass and I would like to make that bill as good as possible even if ultimately it's not a bill I can support," she said.

"I believe I have an obligation to improve the bill, not to just say no," she said. "I've had extensive discussions with the president, with his chief of staff, with the OMB director, with the White House health policy director. Those have been helpful and I appreciate the dialogue we're having but they certainly have not moved me to support the bill at this point."

On the Senate floor, meanwhile, Sen. Frank R. Lautenberg, D-N.J., offered an amendment that would gut an amendment by fellow Democrat Byron L. Dorgan of North Dakota allowing Americans access to brand-name drugs at lower prices charged in certain foreign countries.

Lautenberg said such access could be "catastrophic" and a "matter of life and death."

"As much as we want to cut costs from consumers we cannot afford to cut corners," he said. "Drugs from other countries have dangerously high counterfeit rates."

Lautenberg's language would require the Food and Drug Administration to certify that imports of the lower cost drugs would be safe, something FDA has already said it would not do.

However the Dorgan amendment failed to get the 60 votes it needed to be adopted. A total of 51 senators voted for the amendment while 48 voted against it.

By Edward Epstein, CQ Staff

December 16, 2009 -- House Speaker Nancy Pelosi, a strong advocate of including a government-run insurance plan in health care legislation, indicated Wednesday she may not insist on including such a plan in the final version of the bill.

Pelosi, D-Calif., declined to take a firm position. "It depends on what else is in the bill," she told reporters.

The Senate is still writing its bill (HR 3590), so it remains unclear exactly what will be in the version it sends to a House-Senate conference. But Pelosi expressed confidence that Congress will send President Obama legislation for his signature early next year.

The bill being shepherded through the Senate by Majority Leader Harry Reid, D-Nev., is not expected to contain either a public option or an alternative plan that would open Medicare to those aged 55 and over.

Still, the Senate version could include a system of competing national private health insurance plans to be administered by the federal Office of Personnel Management, which currently manages benefits for federal employees.

While that is a far cry from the public option that the House included in the bill (HR 3962) it narrowly passed in early September, Pelosi indicated that it may be a satisfactory alternative. "We have to see what this OPM piece is," she said.

Some House liberals say they will insist on a public option in the final bill, or at least want the opportunity to make their case at the bicameral conference called to hammer out a final bill.

It's clear, however, that Reid has been unable to garner the necessary support for a public plan, and its inclusion in a conference report could endanger the legislation.

Pelosi said the final bill sent to Obama should not include language regarding federal funding for abortion similar to an amendment sponsored by Rep. Bart Stupak, D-Mich., and adopted by the House.

Abortion rights advocates, and the Speaker, say the Stupak language would go beyond current federal policy and further limit women's access to abortion services. While Pelosi allowed the House to consider the amendment, she says she was forced to take that step to win House passage of the measure.

Pelosi has assured abortion rights Democrats that the Stupak language would be stripped out of the final health care bill in the Senate or in conference.

Outlining a compromise, Pelosi said any abortion language should provide no federal funding for abortion services, that it should be "abortion neutral" by doing nothing to impinge on abortion rights, and that those invited to talks over the language must agree that their goal is to pass a health care overhaul.

"Stupak goes beyond those three principles," she said. "We'll come back to those principles" in the final bill, she vowed.

However, senators continue to negotiate the abortion issue, largely behind closed doors. While the Senate defeated an amendment offered by Ben Nelson, D-Neb., that was similar to the Stupak provision, another amendment is in the works.

Reid has asked a fellow abortion opponent, Democrat Bob Casey of Pennsylvania, to negotiate a compromise that could satisfy Nelson, whose vote he needs to reach the 60 votes necessary to limit debate and move toward passage of a bill.

Casey's approach may involve cutting the number of abortions by giving more aid to low-income women eligible for federal health insurance and extending tax credits for families that adopt children.

In a question and answer period with reporters, Pelosi praised Reid's efforts to move a health care bill.

"May I say how masterful he is. I think I have a challenging job, but his is even more so," she said. And she said the House bill and what she has seen of the Senate bill provide a solid foundation for the final legislation.

Pelosi insisted Congress will send Obama a health care bill that accomplishes most of the goals she set for the legislation before the president's 2010 State of the Union addressed, planned for late January. She said failure to enact the legislation would be "very bad for the American people and very bad for us," referring to Democrats.

By John Reichard, CQ HealthBeat Editor

December 18, 2009 -- Liberals need not lament the fate of a public plan in health care. Experts say that creating insurance "exchanges" that offer a menu of competing plans would do a better job of controlling premium costs in any case.

But lawmakers writing the details of the exchange provisions in the health care overhaul should be worried nonetheless. The way they design exchanges will have to be bulletproof—because insurers don't like them and are aces at killing them off.

The big health care overhaul attempt in the 1990s led to a number of state-based exchanges, called "alliances," that withered despite high hopes of policy makers.

The idea was irresistible—invite individuals and small businesses to shop in a new marketplace of health plans, and watch premiums fall as insurers fought it out to win market share in a big new purchasing pool.

"Our system pooled small employers into purchasing groups large enough to obtain the lower wholesale insurance rates that big companies get," Cappy McGarr recalled in a recent op-ed piece in The New York Times. McGarr ran a state exchange created by the Texas legislature in 1993. "Initially, the alliance worked as planned," he said. Six years later, the alliance was dead.

The problem was that insurers were able to offer policies inside and outside the exchange. They "cherry-picked relentlessly, signing up all the small businesses with generally healthy employees and offloading the bad risks—companies with older or sicker employees—onto the exchange."

Exchanges in California, Florida, and North Carolina similarly succumbed to such "adverse selection" and fatally high premiums in a phenomenon insurers call "the death spiral." But lessons from the real world also show that lawmakers can design exchanges that mix good and bad risks to make premiums affordable. David Riemer, who was involved in the design of the exchange credited with lowering premiums paid by state employees in Dane County, Wis., says the key to success is having a chunk of business too big for insurers to ignore. It also must mix good and bad risks.

Riemer, director of policy and planning at the Community Advocates Public Policy Institute in Milwaukee, says exchanges must have at least 20 percent of the local insurance market to work. The state employee exchange has 25 percent of the non-Medicare, non-Medicaid market in Dane County, the home of Madison, the state capital.

But parts of the exchange serving state employees elsewhere fall far short of 20 percent. The result: Family premiums cost state workers $3,000 less in Dane County.

By Riemer's calculation, the exchanges contemplated by Congress would be too small, with a 14 percent market share. He recently joined with Stanford University economist Alain Enthoven, widely regarded as the father of the exchange concept, in saying that the exchanges need to be open to employers with up to 100 workers.

Making Them Big Enough
Ideally, the exchanges would be the sole market for individuals and small businesses, said another Enthoven protégée, Portland-based health care consultant Bill Kramer. But that may not be realistic politically because of insurer and employer objections. Analysts like Kramer say that undersized exchanges make it much more important for Congress to adopt specific provisions to keep insurers from segregating risk by enrolling healthy people in plans outside the exchange and steering sick ones to plans inside.

Insurers can do that with tactics such as charging lower premiums outside the exchange to employers with good risks. Or, they could contract with too few medical specialists, which would have the effect of forcing companies employing workers with costly medical conditions to use the exchange. They could also simply raise deductibles for sicker people, forcing people into the exchange.

Elliott Wicks, a senior economist at the consulting firm Health Management Associates, said a flaw of the House-passed bill (HR 3562) is that it would let insurers charge lower rates outside exchanges. In contrast, the Senate bill (HR 3590) would require insurers to charge the same premium rates inside and outside the exchanges, Wicks noted.

The Senate bill "greatly reduces the likelihood that insurers could send their bad risks to the exchange," he said. But in tilting toward state-based rather than national exchanges, the measure might create exchanges that are too small in sparsely populated areas, he added. Kramer, Enthoven, and Riemer said in a recent study by the Committee for Economic Development that the Senate bill should add House language prohibiting "improper steering" of high risks. Employers with up to 100 workers should be required to use exchanges, as should uninsured people ineligible for Medicare, Medicaid or other federal programs, they said.

Sens. Ron Wyden, D-Ore., and Olympia Snowe and Susan Collins, both Maine Republicans, are pushing to increase the size of exchanges as overhaul negotiations continue. Wyden professes optimism. "This cake isn't baked yet," he said.

The stakes are large, Kramer said: "If we don't have robust and sustainable exchanges, we will be missing an essential element of comprehensive reform."

In addition to size, Riemer sees two other features critical to a successful exchange that are missing in current legislation.

One is ensuring participation by those who are eligible, and the other is creating strong incentives to pick efficient, high quality plans.

The second is making sure that individuals using exchanges use their own money to pay for the added cost of picking a higher priced, less efficient plan. That will help put pressure on insurers to offer better organized health care delivery systems that hold down the costs of care, he says.

While exchanges in overhaul legislation aren't mandatory, subsidies to buy coverage to comply with a mandate that people have health insurance could only be used for plans offered in exchanges. That feature is expected to help draw in good risks.

By John Reichard, CQ HealthBeat Editor

December 16, 2009 -- House passage Wednesday of a defense spending measure averting—if only briefly—a 21 percent cut in Medicare physician payments drew praise from lobbies representing seniors and doctors, but they urged lawmakers to do much more on the payment issue.

Nancy LeaMond, a member of the board of the seniors' lobby AARP, said "the 60-day patch approved today is yet another band-aid for a flawed payment formula. AARP continues our call for a bill that would permanently fix how Medicare pays doctors."

The American Medical Association said in a statement that the two-month patch "will allow physicians to continue to care for Medicare patients while waiting for the Senate to vote on a permanent solution."

AARP's LeaMond also praised the extension of provisions subsidizing the payment of health insurance payments for "COBRA" coverage, which allows laid-off workers to stay on their former employer's health plan if they pay group rates.

"Unemployed workers over age 55 are out of work for at least nine months on average," she said. "These older workers would rather get back on the job, but in the meantime this measure provides some comfort for those struggling to pay for basic necessities and maintain access to more affordable health coverage."

The provisions were part of a $636 billion fiscal 2010 Defense appropriations bill.