Up in the Air

Six health care provisions that still need to be hammered out.

Senate Majority Leader Harry Reid

Despite President Obama’s promises to broadcast important legislative negotiations on C-Span, this final phase of health care reform has been pretty opaque. In lieu of streaming video, the public is left to imagine the compromises and trade-offs being hashed out.

Luckily, they’re not that hard to imagine. The bill is not going through a formal conference committee, as most bills do, with input from representatives of each party and each chamber. It’s instead going through a “ping-pong” process in which members of the House and Senate send the legislation back and forth, tweaking as they go (or something).

It’s fair to assume that on most issues, the Senate version of the bill will prevail. For all the grandstanding on the left—Sen. Bernie Sanders of Vermont and some liberals in the House have said that they won’t vote for a bill that doesn’t include a public option—at this point, after all the painful compromises that have already been made, no one is going to torpedo a historic health care bill.

When it comes to health care negotiations, provisions fall into two categories: Those that Sen. Ben Nelson, D-Neb., demanded in exchange for his 60th vote, and those that he didn’t. If Nelson asked for it, it’s going to stay. If he didn’t, then there’s some flexibility. Same goes for the provisions added to secure the votes of Sens. Mary Landrieu, D-La., Joe Lieberman, D-Conn., and Blanche Lincoln, D-Ark. The Nelson abortion compromise is therefore likely to stay—especially since the Senate version is, in some ways, more palatable to Democrats than the Stupak amendment in the House. (For example, it allows state exchanges to offer plans that cover abortion.) The public option and its surrogates, like Medicare expansion or a national nonprofit plan, are gone.

But that still leaves a lot of wiggle room. Here are a few big issues that still need to be resolved in the final version of the bill. (For more details, check out this great comparison sheet posted by Politico or this one from the Kaiser Family Foundation.)

The exchanges. The House bill would create a national exchange, whereas the Senate bill would create a series of state-based exchanges. There’s no real midway between these two options. Either it’s national or it’s state-based. Chances are, the Senate version wins out, since “national exchange” is the kind of phrase that makes moderate senators like Nelson skittish. Yet the Senate could loosen up the regulations that would allow states to create multiple exchanges or bond together to form regional exchanges.

The mandates. Unless the Earth shifts on its axis and the individual mandate suddenly becomes unconstitutional, as some believe, health care reform will include an individual mandate. The question is: What’s the penalty for not buying health insurance? The House bill would charge a 2.5 percent tax on all income above the filing threshold (about $9,000 for individuals or $19,000 for couples), capped at the amount of the average premium. The Senate version would simply impose a flat penalty, which would reach up to $750 per person by 2016. (It could also impose a 2 percent tax, if the flat rate is too low.) The House version is thus a little more progressive, since Americans with lower incomes would pay lower fees.

Both bills also include an employer mandate. But the House bill goes further. Employers that don’t offer coverage to their employees would pay an 8 percent tax on total wages. The Senate bill instead levies a $750 fine per employee, but that amounts to only about a 1.5 percent tax on payroll for a firm with an average annual salary of $50,000. The Senate version also carves out an exemption for firms that employ fewer than 50 people. The final version will probably fall on the weak side, but the House should be able to leverage the fact that its version would reap $135 billion, compared with the Senate version’s expected revenue of $28 billion. (This would also be an opportune time for the Senate to scrap its “free rider” provision, which incentivizes companies not to hire low-income workers.)

Medicaid expansion and subsidies. The House bill would make Medicaid available to those earning up to 150 percent of the federal poverty level (FPL); the Senate would expand it to 133 percent. (The FPL is about $18,000 for a family of three in 2009.) The final numbers depend largely on what Congress thinks it can pay for. For people above that threshold but below 400 percent of FPL, both bills would provide subsidies to help people buy insurance. The differences are in the subsidies. The House bill would provide a lot more support for families at or below 300 percent FPL. The Senate would focus more on middle-income families between 300 and 400 percent FPL. The House would cover more people than the Senate: 36 million versus 31 million. But it would also cost more: about $600 billion, compared with $430 billion for the Senate bill. Since there are no senatorial ultimatums on this issue, the final version could fall somewhere in between.

CHIP. Does Congress really want to end the Children’s Health Insurance Program and push kids into the exchanges and Medicaid, as the House bill would do? Or does it want to extend CHIP until 2015, as the Senate bill would do? Depends whether it wants a regular headache or a migraine: Scrapping CHIP would simplify the system by putting everyone under the same program. But it would mean overhauling a popular program in an already turbulent time for health care. Leaving things as is would mean less hassle in the short term.

Narrowing the “donut hole.” The House bill goes a lot further than the Senate bill in closing the gap in Medicare coverage known as the “donut hole” (so named because Medicare covers prescription drugs costs up to about $2,700 per year, then stops until costs reach about $6,200, when coverage is restored). The House bill phases out the donut hole altogether by 2019, by “filling” it with money from the pharmaceutical industry. The Senate bill would close the gap halfway, and only temporarily. In December, Harry Reid was receptive to the idea of adopting the House approach. The prospect of killing this longtime Democratic bugaboo is probably too tempting to pass up.

Paying for it. To tax rich people or to tax expensive health care plans? That might not sound like much of a difference, but each method of generating revenue would have big consequences. The House would levy a 5.4 percent surtax on individual income above $500,000—in other words, a tax hike for the wealthy. The Senate, meanwhile, would tax plans that cost more than a certain amount—$8,500 for individual coverage, $23,000 for a family—dubbed “Cadillac” plans for their supposed luxuriousness. Neither idea is especially beloved. But the Cadillac tax, for all its drawbacks, at least keeps Democrats from raising income taxes in an election year. The Senate would also tax indoor tanning services.

Again, it’s not always easy to split the difference on these issues. There will not be a semi-national exchange—although, come to think of it, that wouldn’t be bad—or a semi-public option. Those provisions that fall on a continuum, rather than being binary, have the most room for compromise. Where the final bill lands depends on how bad each chamber—or, more likely, Joe Lieberman—wants it.

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