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Senate Bill Will Contain a Public Option     Permalink

Reversing his position of only three weeks ago and despite some foot dragging on the part of the White House, majority leader Harry Reid announced yesterday that the merged bill he will bring to the Senate floor will contain a "public option," that is, a government-run health insurance system analogous to medicare. The bill will allow states that don't want to participate to opt out. The "opt out" part is an idea due to Sen. Tom Carper (D-DE) and pushed hard by Sen. Chuck Schumer (D-NY). It provides cover for red-state Democrats who feel their voters may punish them for such a plan.

In reality, the opt-out means little to nothing, as Schumer well knows. To opt out, a state will have to pass a law opting out. In states with a Democratic governor or at least one chamber of the state legislature under Democratic control, opting out is not going to happen. So, depending on the results of the 2010 elections, only a dozen or so states, where the Republicans control the entire state government, might opt out. But what will gubernatorial or legislative candidates say in these states? Maybe: "If elected, I promise to make sure you won't be able to choose cheap insurance from the blankety-blank federal government?" Probably not a winning slogan, even in the reddest states (which on the whole, are also the poorest states).

The procedure from here on out is as follows. First the Congressional Budget Office will examine Reid's proposal and say how much it is going to cost. If it comes in at under the magic (and totally arbitrary) $900 gigabuck mark set by President Obama, Reid will finish drafting the text and send the bill to the Senate, possibly as early as next week. Then senators can offer amendments. An amendment will surely be offered to strip out the public option, but such an amendment will require 51 votes to be accepted. All 40 Republicans will vote for it and if 11 Democrats vote for it, it could be stripped but it is doubtful that 11 Democrats will vote for it. This whole procedure is show to allow maybe half a dozen Democrats to vote for the amendment to prove to the folks back home that they are against the public option. Some amendments might actually pass. One to watch is one from Sen. Ron Wyden (D-OR) which would force employers who offer health insurance to provide plans from at least two companies, to give employees a real choice. This amendment would shake up the insurance industry more than the public option, and it might even have a chance.

When all amendments have been offered and voted on, some Democrat will introduce a cloture motion to cut off debate. If Reid has counted correctly, all 58 Democrats and two allied independents will vote for cloture and it will be invoked. After that, a limited amount of additional debate will be allowed (typically 20 hours). Then there will be a straight up-or-down vote on the bill. If it passes and the House has passed a comparable bill, the two bills will go to a conference committee where everyone will pull out all stops to get their favorite provisions in the bill. A key question here is who gets to be on the conference committee, especially which Democrats, since they are likely to simply ignore the Republicans altogether and work out the compromises among themselves.

Public option or no public option, there is still a lot of uncertainty about the final bill. Here are just a few of the elements still up for grabs.

  • Who is eligible? Most of the bills have very strict eligibility requirements for the public option. For example, only people whose employer does not offer a health-insurance plan and the self employed will be eligible. There will be immense pressure from liberals to expand this pool and equally immense pressure from conservatives to contract it.

  • When does it kick in? In the current vision, nothing even happens until 2013. That's one presidential election and two congressional elections away. Count on Republicans saying next year: "Vote for me so I can kill the health bill before it kills all of us." If the Democrats want to counter this, they better have actual results to show to the voters before next November. It won't be possible to set up an insurance system before then, but other provisions, like forbidding insurance companies from discriminating against people with preexisting conditions merely require a change in the law. That provision could take effect the day the bill is signed into law. But the insurance companies will scream that if they have to insure sick people, they will have to raise rates astronomically. But if they actually actually carry out such a threat, next year the Democrats will say that even more people need to be protected so the eligibility requirements have to be broadened. Think: three-dimensional chess.

  • Subsidies. All the bills provide for government subsidies to allow poor people to buy insurance. How poor? Twice the federal poverty line? Three times? Four times? Expect a big battle here.

  • Paying for it. Obama has repeatedly said that the health-care program will not increase the deficit. So where will the money come from to pay for the subsidies? The Senate Finance Committee Bill imposes an excise tax on gold-plated health care plans. Every health economist in the country thinks this is a good idea since such plans encourage frivolous use of scarce resources. If your plan allows you to go to a hand surgeon to remove a hangnail, why not have a pro do the job to avoid the threat of infection? However, unions that have given up wage increases to get good health plans are adamantly against this tax and one of their strongest supporters, Sen. Jay Rockefeller (D-WV), comes from a state full of coal miners who have gold-plated health plans. The House bill is likely to have a different payment plan: tax the rich. The chairman of the Ways and Means Committee, Rep. Charlie Rangel (D-NY), just wants to raise income taxes for the wealthiest Americans. This idea will have tough sailing in the Senate. A lot of money is involved, so the conference won't be able to find the money using smoke and mirrors. Some taxes will have to go up but the conference might choose some other option not currently on the table. It is not limited to choices in either of the bills in front of it. It could decide, for example, to tax soft drinks or junk food or something else.

  • Employer mandate. Will employers of a certain size (e.g., more than 50 employees or a payroll of $500,000 or some other metric) be required to offer insurance to their employees? Employers don't want this and oddly enough, advocates of a single-payer system don't want it either. The latter would like to get employers out of the loop altogether and have the government be the only insurer. So this provision will have odd bedfellows lobbying on it. Also, if some employers do not provide insurance, what is the sanction? One option is to make them pay a fine. Another is to keep track of which of their employees choose the public option and make them compensate the public plan for these employees. There are many possibilities here.

  • Individual mandate. All versions of the bill will prevent insurers from discriminating against sick people. But some people will try to game the system by not being insured until they get sick, then applying for insurance. This will bankrupt the insurance companies so no country allows this. Every country that requires insurance companies to take all applicants also requires everyone to buy insurance. The sticking point here is what happens if someone simply refuses and doesn't buy insurance? No one is in favor of putting these sneaky people in jail. It would cost too much to build all the new jails required. Should there be a fine? How big? If the fine is about the same size as what an insurance policy would cost, probably nobody will intentionally choose the fine, but if it is much lower, some people will do a personal opt-out and won't be insured. What if you don't buy insurance because you can't afford it? Expect battles here.

  • Antitrust. In a last-ditch effort to block the public option, the insurance companies released a study last week showing that government meddling in the health-care business will result in skyrocketing premiums. This PR stunt backfired and so antagonized Democrats in the Senate that they are now seriously considering revoking the industry's exemption from the antitrust laws (the only other industry with such an exemption is Major League Baseball). The consequences of revocation could mean that a company with 90% of the business in some state could be found in violation of the antitrust laws. At the very least, revocation would shake things up in the industry big time.

The next few weeks may not be Armageddon, but there is going to be all out war between Congressional Democrats and the insurance industry. The White House is now firmly committed to getting a bill passed and will do everything it can to get a bill to the President's desk this year, even without Olympia Snowe's vote (which seems unlikely now). Obama may even unleash his chief of staff, Rahm Emanuel, and tell him to get the votes and don't report back how he did it. Emanuel can be nasty, Karl Rove but without the social graces. Obama jokes about Emanuel all the time. Example: "In Egypt, we had the opportunity to tour the pyramids. I'm sure you've all seen the pictures of Rahm on that camel. I admit, I was a little nervous about the whole situation. I said at the time, 'This is a wild animal known to bite, kick and spit. And who knows what the camel could do.' "

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