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Centrists Win Numerous Concessions in Health Care Bill Amendment

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.

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