ReidCare: The Remix

What’s inside the “blended” Senate health reform bill.

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Senate Majority Leader Harry Reid. Click image to expand.
Senate Majority Leader Harry Reid

The health care reform bill that Senate Majority Leader Harry Reid will bring to the floor (text, CBO score) is mostly better than the Senate finance bill on which it is largely based. But it is mostly worse than the counterpart reform bill (text, CBO score) already passed by the House.

It’s worse mainly because it’s stingier. The Senate bill would save $130 billion over 10 years (a mysterious $1 billion more than the figure leaked last night by the Democratic leadership). That’s $21 billion more than the House bill, which would save $109 billion. For about $2 billion a year, then, we could have a significantly better bill. That’s less than what the Pentagon spends in two days. Still, we probably aren’t going to get it. The numbers most people pay attention to are the bill’s cost before taking into account offsetting savings (mainly through Medicare cuts) and taxes. The House bill would “cost” a little more than $1 trillion, whereas the Senate bill would “cost” a mere $848 billion. That puts Reid below a limit of $900 billion set by President Obama in a Sept. 9 speech to Congress. The limit, Ezra Klein of the Washington Post has shown, was completely arbitrary—indeed, Obama’s precise words were “around $900 billion”—but it became holy writ.

The Senate bill does not differ significantly from the House bill in the number of people to whom it would extend health insurance. The House bill would cover 36 million of the roughly 45 million uninsured. The Senate bill would cover 31 million. But the Senate would spend about $150 billion less in subsidies to help uninsured lower-income people purchase health insurance through the newly established health exchanges. To ease the added burden this would impose on the uninsured, who under both the House and Senate bills would be required to purchase health insurance, the Senate bill includes a substantially reduced penalty for failing to comply (up to $750, versus up to 2.5 percent of total income under the House bill). Unfortunately, as Jonathan Cohn of the New Republic explains, the subsidies have also been shifted somewhat relative to the House bill, falling in the Senate bill more heavily on poorer folks in order to ease the burden on the politically more powerful middle class.

Like the House bill, the Senate bill contains a public option. But the Senate bill allows individual states to enact laws opting out of it. Neither the House bill nor the Senate bill allows the public option to tie its doctor and hospital fees to Medicare rates. As with the House bill, CBO concluded that this prohibition would cause public-option premiums to be a little higher than premiums for private insurance plans available through the newly created exchanges. That’s a serious problem. Len Nichols, the economist who dreamed up this “level playing field” variation on the public option, says CBO’s wrong—the public option won’t charge higher premiums because it will match its private competitors in various cost-control methods, including those meant to limit the proportion of sick people who buy in (a practice that will be greatly reduced, but not wholly eliminated, under the bill). I don’t find that thought entirely cheering.

In some ways, the Senate bill is better than its House counterpart. It’s at least theoretically tougher in forcing Congress to cut Medicare spending, and its 40 percent tax on so-called “Cadillac” family health insurance plans valued in excess of $23,000 would exert downward pressure on private insurance costs. Also, although it contains a counterpart to the House’s ban on federal spending for abortions, the ban is far less restrictive and therefore (unlike the House bill) would permit—indeed, require—that at least one policy offered through the exchanges cover abortion.

Whether Reid can sell this to the U.S. Conference of Bishops, which exercised considerable muscle in the House (Speaker Nancy Pelosi even placed a call to Rome!), is another story.

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