To achieve his ambitious agenda, President Biden will look to budget reconciliation as a tool to advance legislation in Congress. Reconciliation is a legislative process that allows Congress to enact policy more quickly than under regular order. The process circumvents traditional rules in the Senate and gives the legislation “privileged” consideration on the floor by limiting debate to 20 hours and requiring a simple majority rather than the typical 60-vote threshold.

With a 50–50 Senate and continuing partisan rancor, it is likely Biden and the Democrats in Congress will use reconciliation to advance key priorities such as the next anticipated COVID-19 relief and recovery bill. This week, the House and Senate passed a budget resolution that includes this approach.

In this blog post, we describe the nuanced and arcane parliamentary rules guiding the Senate and address the inherent limitations that could impede the Biden administration as it seeks to tackle the COVID pandemic and expand health coverage.

History of Reconciliation

When reconciliation was first authorized in the Congressional Budget Act of 1974, it was used to achieve deficit reduction. Over time, reconciliation also has been used to pass major tax cuts that increased the federal deficit.

Despite its origins as a budget tool, in the 1980s, lawmakers started using reconciliation to pass legislative priorities not budgetary in nature. This concerned Senate institutionalists, most notably the late Senator Robert Byrd (D–W.V.), who sought to limit the inclusion of “extraneous” matters on reconciliation bills, preserving truncated debate for issues directly related to the tough job of deficit reduction. The so-called Byrd rule was adopted in 1985 and eventually codified in 1990.

Since 1980, reconciliation has been used by both parties to pass 25 bills, 21 of which became law. But the Byrd rule continues to define what can and cannot be included in reconciliation.

Reconciliation in Practice

Reconciliation is triggered by the adoption of a budget resolution in the House and Senate that directs one or more committees to report recommendations to achieve a specific spending, revenue, or deficit target within the budget window. For example, in the case of the 2021 budget resolution, 12 committees in the House and 11 in the Senate were tasked with reporting recommendations to increase the deficit by specific amounts. The Budget Committee compiles reconciliation recommendations from the committees and reports them to the floor for consideration.

In the Senate, the biggest hurdle to reconciliation is the Byrd rule. Specifically, a provision is in violation if it:

  1. doesn’t have a budget impact (with limited exceptions)
  2. leads a committee to fail to comply with its instruction
  3. exceeds the jurisdiction of the reconciled committee
  4. produces a budget impact that is “merely incidental” to the nonbudgetary effect of the policy
  5. increases spending or decreases revenues outside the budget window
  6. impacts Social Security.

The Senate Parliamentarian acts as arbiter on the application of the Byrd rule, consulting closely with the Budget Committee, carefully considering precedent, and advising the Presiding Officer. On many issues, applying judgment to the rules is an art, not a science.

Application of the Byrd Rule to Biden’s Health Legislation

What aspects of Biden’s health agenda are likely permissible under reconciliation and what policies may run into roadblocks?

Permissible. Provisions that may be allowed under the Byrd rule include expanding coverage or enhancing benefits under public health programs, because they directly impact federal spending and revenues. Some straightforward examples include:

  • enhancing Affordable Care Act (ACA) premium tax credits and extending credits to people with incomes above 400 percent of the federal poverty level ($51,040 for an individual, $104,800 for a family of four).
  • allowing eligible adults in states that didn’t expand Medicaid to access ACA tax credits during the COVID-19 public health emergency
  • lowering the eligibility age for Medicare enrollment
  • investments in community health centers and workforce development.

Prohibited. Certain provisions are clear violations of the Byrd rule. Examples include:

  • a transfer of general revenue to the Medicare Hospital Insurance Trust Fund to address Medicare solvency
  • congressionally mandated studies and commissions
  • price transparency and data dashboards.

Questionable. Policies that set up a complicated new program or regulatory structure, impose mandates on private sector entities, or require a long phase-in period could have a more difficult path under the Byrd rule. For example:

  • President Biden has proposed establishing a public option resembling Medicare that would be available to uninsured people living in states that haven’t expanded Medicaid. Building on Medicare rather than setting up a new program could potentially withstand a Byrd rule challenge. In addition, targeting access to people who lack other coverage may strengthen the case.
  • President Biden and Democrats support allowing the Secretary of Health and Human Services to negotiate Medicare drug prices. The noninterference clause in Medicare Part D prevents the Secretary from “interfering” with negotiations between drug manufacturers and plan sponsors, requiring a formulary, or imposing a price structure. Striking this clause would have a negligible budgetary impact, and thus be in violation of the Byrd rule. But if it were combined with new tools the Secretary was required to use, lawmakers could argue that the strike is inextricably related to – or a “term and condition” of – the underlying legislative change.

The Upshot

Though initially conceived as a deficit reduction tool, reconciliation has been used by both parties to achieve policy goals. In a narrowly divided Senate, President Biden will likely turn to reconciliation to deliver on his health agenda. Success will depend on adherence to a complex set of rules governing the process and content of the legislation.