By Alex Wayne and Edward Epstein, CQ Staff

January 20, 2010 -- Democratic leaders say they will continue to press forward with legislation to overhaul the health system, but after a demoralizing Senate loss in Massachusetts, they haven't yet settled on how to finish the effort.

There's no easy answer, and no guarantee of success. Pressed on whether he was confident that Congress would send Obama a health care overhaul this year, Senate Majority Leader Harry Reid, D-Nev., ducked. "I'm confident that health care is an issue in the country, and we're going to do everything we can to alleviate the pain and suffering of people who can't afford health care and who want to maintain what they have," he said.

Republican Scott Brown's win means that Democrats no longer hold 60 votes in the Senate and cannot break unified Republican filibusters against health legislation. No Senate Republican voted for the Democrats' health bill (HR 3590) in December, and none is likely to do so after an election that Brown and other Republicans repeatedly cast as a referendum on the overhaul.

Republicans say that both the Senate bill and the House version (HR 3962), which passed narrowly in early November, should be abandoned.

"This was in many ways a national referendum, principally on the major issue we're wrestling with here in the Congress, which is whether or not the government should take over one-sixth of our economy, slash Medicare by half a trillion dollars, raise taxes by half a trillion dollars and drive insurance rates up for most of the rest of our country," said Senate Minority Leader Mitch McConnell, R-Ky. "And I think we heard a large and resounding message yesterday in one of the most—if not arguably the most—liberal states in America."

Democrats fear that failing to enact the health care bill could cost them politically even more than passing the measure. The bill is Obama's top domestic priority and is strongly backed by important Democratic-aligned interest groups, notably labor unions. Should Democrats abandon the measure, despite their still-formidable majorities in Congress, their supporters would be demoralized heading into the 2010 elections.

Reid said, "We're not going to rush into anything. As you've heard, we're going to wait until the new senator arrives before we do anything more on health care."

Reid noted that "the bill we passed in the Senate is good for a year. There are many different things that we can do to move forward on health care, but we're not making any of those decisions now."

Reid said he had spoken to House Speaker Nancy Pelosi, D-Calif., Obama and White House Chief of Staff Rahm Emanuel about potential paths forward but would not elaborate.

Sen. Christopher J. Dodd, D-Conn., one of the architects of the Senate bill, said, "There is no decision about how to go forward, except there's a general agreement that we ought to take a few days just to relax, calm down and begin to think about this in a cooler environment than today."

He added, "To abandon the effort because of a loss in Massachusetts last night would be the worst possible option."

Senate Bill, Plus?
The best option for Democrats would appear to be for the House take up the Senate-passed health bill (HR 3590) and clear it, despite their distaste for many of its provisions. Some House Democrats endorsed that approach Tuesday evening, and others have not ruled out voting for the Senate bill even though they dislike it.

But House Democratic leaders have not undertaken a count to determine if they could muster the 218 votes needed to clear the bill, according to a spokeswoman for House Majority Whip James E. Clyburn, D-S.C.

House Majority Leader Steny H. Hoyer, D-Md., said at an appearance Wednesday morning that Democrats were still discussing how to proceed with the health legislation. "We do believe there are some very good things in the bill that we can get passed," he said at a forum hosted by the centrist group Third Way.

But four centrist Democrats at the forum expressed concerns about clearing the Senate bill.

"My sense is the Senate bill is a tough sell," said Rep. Joe Courtney , D-Conn. "There is a high burden of proof the leadership would have to argue" to get it through the House, he added.

In any deal to clear the Senate bill, Democratic leaders—including Obama and Reid—would likely have to promise House Democrats that they would simultaneously move a "corrections" bill through Congress, probably using expedited budget reconciliation procedures. That measure would amend the health bill with provisions negotiated to meet concerns of the House. Any bill advanced under reconciliation procedures would move on a fast track and require 51 votes to pass the Senate, instead of a filibuster-proof 60 votes.

At a minimum, the second measure would include a deal Obama agreed to with labor unions to reduce the impact of an excise tax on high-cost insurance plans that is the main source of revenue for the Senate bill.

Labor unions and many liberals dislike the proposed excise tax, which they believe many middle-income workers would have to pay.

"We're trying to find a way to move very quickly . . . that satisfies both the concerns of the Senate and the House," said Senate Finance Chairman Max Baucus, D-Mont. "We've got to figure out how we put those two pieces together."

Senate Budget Committee Chairman Kent Conrad, D-N.D., said Wednesday that he's not opposed to using reconciliation for the fixer bill. "It's very dependent on what the details are," he said, adding it had to be paid for, reducing the deficit.

Alternatively, Democrats could use the same expedited reconciliation process to try to pass an entirely new health bill. That would be fraught with problems, however, because policy provisions unrelated to revenues and entitlement spending could be stricken on a point of order.

"Whatever went to the floor would end up coming out looking like Swiss cheese, I suspect," said Sen. Judd Gregg of New Hampshire, the senior Republican on the Budget Committee.

Drew Armstrong and Kathleen Hunter contributed to this story.

By Jane Norman, CQ HealthBeat Associate Editor

January 22, 2010 -- Like the last guest left when the party's over, the Medicare physician payment formula remains an awkward presence for Congress as Democrats attempt to regroup on efforts to overhaul the health care system.

Those who follow the long-running doctor saga say the poisoned atmosphere surrounding health care spending makes it difficult to see how Congress will agree to the hundreds of billions of dollars needed to make a permanent change in the payment formula. The Senate has rejected attempts to pay for the 10-year cost without offsets.

But there's also mounting pressure from the influential doctor and senior lobbies to do something—and fast—out of fear that beneficiaries will lose access to care. Those who advocate a permanent fix point to the recent news that physicians at a Mayo Clinic family practice clinic in Glendale, Ariz., have decided to try opting out of Medicare.

Doctors who treat Medicare beneficiaries face a 21.2 percent cut in their payments beginning March 1. The deadline had been Jan. 1, but a two-month extension was included in a defense spending bill (HR 3326) to give lawmakers time to come up with a solution. "Clearly, for physicians, something needs to be done by Mar. 1 or there's a big problem," said Julius W. Hobson, Jr., a lobbyist at the Bryan Cave law firm and former director of congressional affairs for the American Medical Association.

The reductions are mandated by what's called the sustainable growth rate formula, or SGR, which sets overall targets in order to hold down spending on Part B physician services. Payment rates are adjusted every year to reflect differences between actual spending and the target. Since 2002, spending has exceeded the target but Congress beginning in 2003 has raced to the rescue to avert the cuts.

Lobbying Begins Anew
Doctors now are growing restless in the face of the March 1 deadline, and have begun pushing hard to make this the year for an SGR repeal, or "doc fix."

The AMA—which gave Democrats a big boost with endorsements of both the House and Senate health care overhaul bills—joined up with AARP and the Military Officers Association of America at a press event Jan. 21 to urge the Senate to set up a new foundation for physician payments. Retired Navy Capt. Kathy Beasley, deputy director of government relations for the military group, said the formula for Medicare payments puts 9 million military beneficiaries at risk because their payments under the Tricare program are tied to Medicare's.

Cecil Wilson, president-elect of the AMA, spoke from Portland, Maine, the home state for two Republican senators, Susan Collins and Olympia Snowe, who are viewed as friendly to the idea of a fix. "Every year, seniors, military families and their physicians are unwilling players in a game of legislative chicken as Congress takes us to the brink before stopping Medicare cuts at the last minute," said Wilson.

The AMA and AARP also have launched a television ad campaign to run through Jan. 29 in Georgia, Florida, Maine, Mississippi, Missouri, North Dakota, Virginia and Wisconsin, states with large elderly populations as well as key senators.

The House-passed bill that would make a permanent fix (HR 3961) at a cost of $210 billion over 10 years has been placed on the Senate calendar. The Finance Committee Chairman, Max Baucus, "is committed to finding a permanent fix for the physician payment formula and is examining a range of policy options to meet that goal," an aide to the Montana Democrat said. "He intends to ensure payment cuts for critical medical services do not go into effect."

The doc fix also has a toehold in the debate over the debt limit. The administration and Democratic leaders are trying to finalize a deal on a special commission to find a way to control the debt. As part of that, the Senate would have to enact pay-as-you-go budget legislation that would require offsets for any new spending. Tentatively, a plan to prevent cuts in Medicare payments to physicians would be exempt from the pay-as-you-go rule, for five years.

It's unclear whether that will fly in the Senate, where moderate Democrats in the past have demanded that the cost of the doc fix be offset. The Senate voted Oct. 21 against taking up legislation (S 1776) that would eliminate the Medicare formula entirely. That would cost $247 billion over 10 years. Now the Senate has a new Republican, Scott P. Brown of Massachusetts, and a 41st vote to help the minority wage filibusters.

Those interested in controlling overall costs say that it wouldn't be a bad thing to see the House bill fail because it does too little to curb spending.

Gail Wilensky, the former administrator of the Health Care Financing Administration, now the Centers for Medicare and Medicaid Services, called the House bill "an abomination" in that sense. She said Medicare should instead move toward bundled payments in which doctors and other providers are paid a single fee for an episode of care, rather than every visit or treatment.

By Drew Armstrong, CQ Staff

January 22, 2010 -- A top Senate Democrat said Friday that the majority party should take a break of up to six weeks in the health care debate to allow the caucus to regroup and refocus on how to move a bill forward.

Christopher J. Dodd, D-Conn., said it will be up to President Obama to get Democrats' health care legislation back on track, perhaps by taking "a breather for a month, six weeks, and quietly go back and say the door's open again."

Democrats in both chambers have been reeling from the loss of their Senate seat in Massachusetts to GOP state Sen. Scott P. Brown. They have yet to come up with a strategy for how to move a health care overhaul forward, and have spent the past few days huddling privately to try to come up with a path for their bill.

"We're sort of discussing it, taking a little breather here because we've got to start moving the jobs bill," said Senate Health, Education Labor and Pensions Committee Chairman Tom Harkin, D-Iowa. "But we can't just get paralyzed by this health care problem."

Dodd said it will take substantial presidential leadership to guide the rest of the legislative process and calm Democrats. He said he expects Obama to do just that during his State of the Union address on Jan. 27.

"Maybe we do need to take this time . . . and say, 'Look I want all of us to take a month," Dodd said. "It isn't as if you'll have nothing to do around here . . . there's a lot of other issues that could fill up the time of the Congress while we sat down and see if there wasn't some way to resolve these differences and come up with a health care bill."

Harkin and Dodd made their comments after a meeting with other Senate health players in the offices of Majority Leader Harry Reid, D-Nev.

The options they are considering could include a substantially scaled back piece of legislation that is far from the sweeping overhaul they imagined originally.

"As I said, 'starter home.' Maybe it's a smaller starter home," said Harkin, who has pushed the idea that any legislation Democrats are able to pass will always have room for expansion and improvement.

Another option that has been floated is to clear the Senate health bill (HR 3590) in the House, while concurrently passing a bill—likely through the filibuster-proof reconciliation process—that incorporates changes on revenue and tax items that the House wants to see.

That option will take far more political courage and cajoling, however. House Democrats have signaled they are wary of that option and might have difficulty rounding up the votes to clear the Senate bill.

By Alex Wayne and Edward Epstein, CQ Staff

January 21, 2010 -- House Speaker Nancy Pelosi said Thursday that there aren't enough votes in the House to send President Obama the Senate-passed health care bill, as rank-and-file Democrats shied away from efforts to clear a comprehensive package.

Pelosi told reporters that she will move slowly in deciding how to proceed now that Democrats have lost their filibuster-proof 60-vote Senate majority.

"I don't see the votes for it at this time," the Speaker said regarding the Senate bill (HR 3590). "Our members have been very clear."

Tuesday's election in Massachusetts, in which Republican state Sen. Scott P. Brown upset Democratic state Attorney General Martha Coakley to fill the seat of the late Democrat Edward M. Kennedy has left Democrats demoralized and appears to have doomed their year-long effort to send Obama a sweeping overhaul of the U.S. health care system.

Pelosi stressed that she still wants the House to move a health care bill that would assure affordable coverage for the middle class, accountability for private insurance companies and steps toward reducing the federal deficit.

"We have to get a bill passed. That is the predicate we all subscribe to,' she added.

Pelosi has been huddling with members of the House's various Democratic factions to gauge their sentiment about how to proceed with health care legislation.

Some Democrats wanted the House to send Obama the bill (HR 3590) that the Senate passed on a party-line 60–39 vote on Christmas Eve, and perhaps accompany it with separate legislation making changes to the legislation that House-Senate leaders have negotiated since then.

The corrections bill, for example, could be used to scale back a tax on high-cost insurance plans included in the Senate bill and change provisions of the bill that would give some states more generous reimbursement than others for a Medicaid expansion.

But numerous House Democrats have objected to that plan, Pelosi said.

"Without changes I don't think it is possible to pass the Senate bill in the House," she added.

"I just don't see it as a viable option," said Rep. Joe Courtney, D-Conn.

Several members said Democrats do not trust that the Senate would actually pass the accompanying corrections bill.

"To trust we can fix it incrementally, reversing the process, I think gives people pause," Rep. Earl Blumenauer, D-Ore., said.

Pelosi said that she will continue to weigh options for advancing some type of health care legislation this year.

"We're not in a big rush. We will pause to consider the possibilities," she said.

Shattered Confidence
It was clear, whatever Pelosi said, that House Democrats are running scared after the Massachusetts election, and many have little appetite to continue pressing an expensive, comprehensive health care bill.

At a morning meeting of their caucus, not a single Democrat spoke in favor of passing the Senate bill, said Rep. José Serrano, D-N.Y., who attended. Instead, Serrano and others said, there was much conversation among Democratic rank-and-file about passing only the most politically popular pieces of the health overhaul as discrete legislation.

Such a strategy would almost certainly guarantee that near-universal insurance coverage, Obama's and other Democrats' ultimate health policy goal, will not be accomplished in this Congress.

"The sense is we shouldn't drop the subject," Serrano said. "But maybe we need to work on some pieces of it."

Blumenauer, said that there is "great interest" in passing elements of the health care bill "in bite-size pieces." Specifically, he mentioned a provision from the House's bill (HR 3962) that would mostly repeal health insurers' exemption from federal antitrust law. Many Democrats believe that would lead to greater competition in insurance markets, but insurers say it would have relatively little effect on their business. It is unlikely that the proposal, by itself, would significantly expand insurance coverage or reduce its cost.

The retreat from a broader health overhaul began Wednesday with Obama, who said in an interview with ABC News that Democrats should focus on only the "core elements" of the proposal. The White House's communications director, Dan Pfeiffer, later seemed to try to walk back Obama's remarks on the administration's official blog.

"Right now there are a lot of discussions going on about the best path forward," he said. "But let's be clear that the President's preference is to pass a bill that meets the principles he laid out months ago: more stability and security for those who have insurance, affordable coverage options for those who don't, and lower costs for families, businesses, and governments."

Across the Capitol, Senate Budget Chairman Kent Conrad, D-N.D., said Pelosi's comments left the health care effort "in limbo," but added that he thought it was still possible to path some sort of legislation this year;.

When asked how, Conrad responded, "Well, that would require a lot of thought."

One option, Conrad said, would be "a more incremental approach."

"I think almost everyone would acknowledge that there are things that have to be addressed—exploding cost, the insurance abuses that are occurring in the system—so I personally believe a package could be put together, even one that would have bipartisan support."

By Jane Norman, CQ HealthBeat Associate Editor

January 22, 2010 -- President Obama said at a town hall meeting in Ohio Friday that his push to revamp the nation's health care system has "run into a bit of a buzz saw along the way" but he won't walk away.

Obama, appearing at Lorain County Community College, said that he always knew that it was going to be tough to pass a health care overhaul through Congress but he wanted to curb rising costs as well as insurance industry abuses.

"The long process of getting things done runs headlong into the special interests, their armies of lobbyists, and partisan politics aimed at exploiting fears instead of getting things done," he said. "And the longer it's taken, the uglier the process has looked."

Advocates of the health care measures spearheaded by Democrats in the Senate (HR 3590) and House (HR 3962) suffered a setback following the Jan. 19 special election of Republican Scott P. Brown to the Senate seat in Massachusetts left vacant by the death of Democrat Edward M. Kennedy. Brown adds a 41st vote to the GOP minority, giving them the ability to mount successful filibusters.

"I know folks in Washington are in a little bit of a frenzy this week, trying to figure out what the election in Massachusetts the other day means for health insurance reform, for Republicans and Democrats, and for me. This is what they love to do," said Obama.

"But this isn't about me. It's about you. I didn't take up this issue to boost my poll numbers or score political points—believe me, if I were, I would have picked something a lot easier than this," he said.

He added: "And I am not going to walk away just because it's hard. We're going to keep on working to get this done with Democrats, Republicans—anyone who is willing to step up. Because I am not going to watch more people get crushed by costs, or denied the care they need by insurance company bureaucrats, or partisan politics, or special interest power in Washington."

Meanwhile, a new poll found that dissatisfaction with the country's direction, opposition to the health care bills and a dislike of federal government activism all fueled Brown's come-from-behind victory. The poll by the Washington Post, the Henry J. Kaiser Family Foundation and Harvard University's School of Public Health found 63 percent of voters in the special election think the nation is seriously off track.

By John Reichard, CQ HealthBeat Editor

January 20, 2010 -- When it comes to a massive overhaul of the health care system, staying the course in the face of adversity may make a nice slogan, but it's lousy politics and policy, many Democrats said on a Wednesday full of woe after Massachusetts Senate election results that brought an end to their ability to move an overhaul with a filibuster-proof 60 votes in the Senate.

Paramount in their minds appeared to be hewing to what they read as the mood of the national electorate, based on the election results in the Bay State that gave Republican state Sen. Scott Brown the seat held for decades by the late Democratic Sen. Edward M. Kennedy.

"I would advise that we try to move quickly to coalesce around those elements of the package that people agree on," President Obama said in an interview with ABC News that addressed the election results.

"I think that's a reasonable alternative," responded House Majority Leader Steny H. Hoyer, D-Md., whose House Democrats still possess the sheer numbers they need to accomplish a massive overhaul that would cover 31 million uninsured people—simply by taking up and passing the health care overhaul measure (HR 3962) adopted by the Senate.

The Brown victory would not block that path to an overhaul—an historic change that has eluded presidents going back more than 100 years. But Democrats focused heavily on reading the tea leaves from Massachusetts, voicing concern about the public angst they observed in the results, which of course have a bearing on their own election prospects.

"Given the public's concern, I think we ought to focus on that we think the public can support and will be possible in terms of making health care more affordable" and attainable, Hoyer said. "You could do it in a number of ways," he added. "You could do it in an individual new bill."

Obama shed some light on what he thinks lawmakers should coalesce around.

"We know that we need insurance reform, that the health insurance companies are taking advantage of people," he said in the interview. "We know that we have to have some form of cost containment because if we don't, then our budgets are going to blow up and we know that small businesses are going to need help so that they can provide health insurance to their families. Those are the core, some of the core elements of, to this bill."

But how can premiums be made affordable without an individual mandate that people buy insurance—the element that makes an overhaul sweeping in scope? Many policy analysts say that to bring down premiums for those who can't find affordable coverage, a mandate is needed to bring young and healthy uninsured Americans into insurance pools where they can offset the costs of treating older and sicker Americans.

House Democratic leaders who met Wednesday afternoon appeared to be focusing on that very question. "That's where we're talking," said Rep. Xavier Becerra, D-Calif.

Not all Democrats were thinking major change in their approach to an overhaul, however, including some senators once viewed as on the fence about the Senate bill before they voted yes. Sen. Joseph I. Lieberman, I-Conn., said he thought a bipartisan approach is needed to a heath care overhaul, but noted pointedly that he was a yes vote for the Senate bill.

Two red-state Democratic senators, Ben Nelson of Nebraska and Mary L. Landrieu of Louisiana, also renewed their expressions of support Wednesday for the Senate-passed measure as the right approach to an overhaul.

But other Democrats described a dramatically altered political landscape. California Democratic Sen. Dianne Feinstein said "the situation has changed dramatically and I think it's a sweep across the country. I think that. . .the administration has to see it and we have to see it. And therefore everything is jobs and the economy and education. People are worried about education.

"I think we. . .go slow on health care," she added. "It is so big it is beyond (people's) comprehension" and makes the issue vulnerable to distorted criticisms by opponents.

Asked if Democrats were overreacting in that they still have 59 votes in the Senate and the election results Tuesday were only from one state's special election, Democratic Sen. Kent Conrad of North Dakota expressed incredulity.

"Ha, ha, ha," Conrad responded. "Anybody that doesn't get the message of what's happening across the country politically is really tone deaf. I don't know what could be more clear than people are angry, they're upset, they're anxious and if you don't deal with that you do so at your peril."

So you pull the plug on the whole overhaul effort? a reporter pressed. "No, that's not what I've said," Conrad replied. "That's not what I've said." But Conrad said a pared-down bill "is a possibility."

Democrats emphasized that they are weighing options on health care, however, and that a period of time is needed to let the dust settle.

Obama urged a more reflective approach. "It is very important to look at the substance of this package and for the American people to understand that a lot of the fear mongering around this bill isn't true," he said.

But the idea of jamming a House-Senate compromise before Brown is seated appears to be dead, and the notion of having the House vote on the Senate bill is drawing a negative early reaction.

Obama said the Senate should not act on an overhaul until Brown is seated. "I think it is very important for the House to make its determinations," he added. "I think, right now, they're feeling obviously unsettled and there were a bunch of provisions in the Senate bill that they didn't like, and so I can't force them to do that."

Asked if he would vote for the Senate bill, House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., said "I don't think we're going there."