Tag Archives: Cornhusker Kickback

Obamacare, the Constitution, and “Sabotage”

An inside look at an Oval Office meeting between President Trump and Democratic leaders…


Donald Trump:           Nancy, Chuck, so good to see you. I wanted to bring you some good news: We’re starting construction on the border wall tomorrow.

Nancy Pelosi and Chuck Schumer:             What? Congress hasn’t appropriated money for the wall. And Congress has the “power of the purse,” not you. How can you say you’ll build the wall when we haven’t signed off on the funding?

Trump:            Because Barack Obama did it for years. What about his actions on Obamacare?

Pelosi:              What do you mean, what about Obamacare? It’s the law of the land—and you should stop sabotaging it!

Trump:            By “sabotaging Obamacare,” you mean failing to spend money on the cost-sharing subsidies to lower deductibles and co-payments…

Pelosi and Schumer: Right!

Trump:            …even though the text of Obamacare itself nowhere includes an appropriation for those subsidies…?

Pelosi and Schumer: Ummm…

Trump:            Let me get this straight: You’re accusing ME of sabotage, because YOU “forgot” to include an appropriation in Obamacare for more than $10 billion per year in spending?

Pelosi:              But “everyone understood” the law provided an appropriation…

Trump:            Even though you couldn’t be bothered to write it down?

Pelosi and Schumer: Ummm…

Trump:            Did either one of you—or for that matter, any Democrat—actually read the bill before voting for it?

Schumer:         I meant to, I swear! But Max Baucus said he hired the best experts, so we didn’t think we needed to.

Trump:            Didn’t those experts read the bill?

Schumer:         They spent all their time cutting deals to get the bill passed. Those Cornhusker Kickbacks don’t write themselves, y’know!

Trump:            Well, your loss is my gain. I’ve read some of the documents in the lawsuit over the cost-sharing subsidies. Do you know that the Obama Administration argued that the structure of the bill implied an appropriation, even though one doesn’t exist…?

Pelosi and Schumer: Yes…

Trump:            And Nancy, you remember the amicus brief you filed in the case right before my election, which said that the courts are “certainly not” the venue for litigating cases when the executive invents an appropriation, as it did with the cost-sharing subsidies…?

Pelosi:              But…but…but…

Trump:            That means I can argue that there’s an appropriation behind any law Congress has passed—like the bill you voted for, Chuck, authorizing construction of the border fence…

Schumer:         What?

Trump:            …And you can’t go to court to stop me!

Pelosi and Schumer: But you requested funding from Congress—and we refused to grant it!

Trump:            You mean, like Congress refused to appropriate funds for the Obamacare cost-sharing reductions, after President Obama requested them…?

Pelosi and Schumer: Ummm…

Trump:            The Obama Administration testified before Congress that it had the authority to spend money on the cost-sharing reductions because Congress didn’t explicitly stop them from spending it, correct?

Schumer:         Yes…

Trump:            And Nancy, your brief said the same thing: That unless Congress explicitly prohibits a President from spending money, the President has free rein to do so…

Pelosi:              But I was trying to protect Obamacare from sabotage!

Trump:            Did you take an oath to support and defend the Constitution, or to support and defend Obamacare?

Pelosi and Schumer: There’s a difference?

Trump:            Yes—and here it is. Thanks to President Obama’s precedent, I can make up whatever appropriations I want—and by your own admission, you can’t go to court to stop me. You could in theory enact a bill prohibiting me from spending money on these phantom appropriations. But because I have a veto pen, you’ll need a 2/3rds majority in each chamber to override me. You don’t have a 2/3rds majority, do you?

Pelosi and Schumer: No, Mr. President.

Trump:            Didn’t think so. So I’ll get my funding for the border wall—and increased defense funding to boot. And maybe I’ll find some other appropriations too. I think the structure of Michelle Obama’s school lunch program implies an appropriation for a new chef at Mar-A-Lago…

Pelosi:              You know, Mr. President, maybe we need to re-think our position on these phantom appropriations. I signed that legal brief the week before the election, not knowing who the next President would be. I thought that power would be safe in her hands…

Trump:            WRONG!

Pelosi:              But executive power has its limits—and Congress should jealously guard its “power of the purse,” regardless of which party holds power at the other end of Pennsylvania Avenue. Otherwise, we could see all sorts of unintended consequences from legislation…

Trump:            You mean, we had to pass the bill so that you could find out what is in it…?

Pelosi:              Well played, Mr. President.

What You Need to Know about Budget Reconciliation in the Senate

After last week’s House passage of the American Health Care Act, the Senate has begun sorting through various policy options for health care legislation. But looming over the policy discussions are procedural concerns unique to the Senate. Herewith a primer on the process under which the upper chamber will consider an Obamacare “repeal-and-replace” bill.

How Will the Bill Come to the Senate Floor?

The bill that passed the House was drafted as a budget reconciliation bill. The phrase “budget reconciliation” refers to a process established by the Congressional Budget Act of 1974, in which congressional committees reconcile spending in programs within their jurisdiction to the budget blueprint passed by Congress. In this case, Congress passed a budget in January that required health-care committees to report legislation reducing the deficit by $1 billion—the intended vehicle for an Obamacare “repeal-and-replace” bill.

What’s So Important about Budget Reconciliation?

The Budget Act lays out specific time limits for debate in the Senate—20 hours of debate—and limits amendments to germane (i.e., relevant) topics. Normally, debate in the Senate is much more free-wheeling, with unlimited debate and amendments permitted on any issue. A senator could offer an amendment on Syria policy to a tax bill, for instance.

Under most circumstances, the Senate can only limit debate and amendments by invoking cloture, which requires the approval of three-fifths of all senators sworn (i.e., 60 votes). Because the reconciliation process prohibits filibusters and unlimited debate, it allows the Senate to pass reconciliation bills with a simple majority (i.e., 51-vote) threshold.

Why Does the ‘Byrd Rule’ Exist as part of Budget Reconciliation?

Named for former Senate Majority Leader Robert Byrd (D-WV), the rule intends to protect the integrity of the legislative filibuster. By allowing only matters integral to the budget reconciliation to pass the Senate with a simple majority (as opposed to the 60-vote threshold), the rule seeks to keep the body’s tradition of extended debate.

What Is the ‘Byrd Rule’?

Simply put, the rule prohibits “extraneous” material from intruding in budget reconciliation legislation. However, the term “Byrd rule” is technically a misnomer in two respects. First, the “Byrd rule” is more than just a longstanding practice of the Senate. After several years of operation as a Senate rule, it was codified into law beginning in 1985, and can be found at 2 U.S.C. 644. Second, the rule consists of not just one test to define whether material is “extraneous,” but six.

What Are the Six Different Types of Extraneous Material?

This chart from Senate Budget Committee staff highlights the six statutory definitions of “extraneous” material, provides some examples of each, and explains how the Senate rules on, and disposes of, material falling under each test.

So the Various Types of ‘Byrd Rule’ Violations Are Not Necessarily Equivalent?

Correct. While most reporters focus on the fourth test—when a legislative provision has a budgetary impact merely incidental to the provision’s policy change—that is not the only type of rule violation. Nor in many respects is it the most significant.

While violations of the fourth test are fatal to the provision—the extraneous material is stricken from the underlying legislation—violations of the third (material outside the jurisdiction of committees charged with reporting reconciliation legislation) and sixth (changes to Title II of the Social Security Act) tests are fatal to the entire bill.

Who Determines Whether a Provision Qualifies as ‘Extraneous’ Under the ‘Byrd Rule’?

As the chart notes, those determinations are made by the Senate Budget Committee chairman—currently Mike Enzi (R-WY)—or the chair, who normally acts upon guidance from the Senate parliamentarian.

How Does One Determine Whether a Provision Qualifies as ‘Extraneous’ under the ‘Byrd Rule’?

In some cases, determining compliance with the rule is relatively straight-forward. A provision dealing with veterans’ benefits (within the jurisdiction of the Veterans Affairs Committee) would clearly fail the third test in a tax reconciliation bill, as tax matters lie within the Finance Committee’s jurisdiction.

However, other cases require a more nuanced, textual analysis by the parliamentarian. Such an analysis might examine Congressional Budget Office (CBO) and other outside scores, to assess the provision’s fiscal impact (or lack thereof), the statute the reconciliation bill seeks to amend, other statutes cross-referenced in the legislation (to assess the impact of the programmatic changes the provision would make), and prior precedent on related matters.

When Does the Senate Assess Whether a Provision Qualifies as ‘Extraneous’?

In some respects, assessing compliance is an iterative process. Often, the Senate parliamentarian will provide informal advice to majority staff as they begin to write reconciliation legislation. While these informal conversations help to guide bill writers during the drafting process, the parliamentarian normally notes that these discussions do not constitute a formal advisory opinion; minority party staff and other interested persons are not privy to the ex parte conversations, and could in time bring her new information that could cause her to change her opinion.

Later in the process, as the reconciliation bill makes its way to the Senate floor, majority and minority leadership staff will gather for more formal discussions to assess which provisions qualify as “extraneous” under the “Byrd rule.” This process, informally known as the “Byrd bath,” allows for all sides to put their cases before the parliamentarian, who will normally provide more definitive guidance on how she would advise the chair to rule.

Do Debates about the ‘Byrd Rule’ Take Place on the Senate Floor?

They can, and they have, but relatively rarely. As James Wallner, an expert in Senate parliamentary procedure, notes, over the last three decades, the Senate has formally adjudicated only ten instances of the fourth test—whether a provision’s fiscal impacts are merely incidental to its proposed policy changes.

Because most determinations of “Byrd rule” compliance (or non-compliance) have been made through informal, closed-door “Byrd bath” discussions in the Senate parliamentarian’s office, there are few formal precedents—either rulings from the chair or votes by the Senate itself—regarding specific examples of “extraneous” material. As a result, the Senate—whether the parliamentarian, the presiding officer, or the body itself—has significant latitude to interpret the statutory tests about what qualifies as “extraneous.”

Can the Senate Overrule the Parliamentarian about What Qualifies as ‘Extraneous’ Under the ‘Byrd Rule’?

Yes, in two respects. The presiding officer—whether the vice president as president of the Senate, the president pro tempore (currently Sen. Orrin Hatch, R-UT), or another senator—can disregard the parliamentarian’s guidance and issue his or her own ruling. Alternatively, a senator could appeal the chair’s decision, and a simple majority of the body could overrule that decision. There is a long history of senators doing just that.

As a practical matter, however, such a scenario appears unlikely during the Obamacare debate, for two reasons. First, some senators may view such a move as akin to the “nuclear option,” undermining the legislative filibuster by a simple majority vote. The recent letter signed by 61 senators pledging to uphold the legislative filibuster indicates that at least some senators in both parties want to preserve the usual 60-vote margin for passing legislation, and therefore may not wish to set a precedent of allowing potentially “extraneous” material on to a budget reconciliation bill through a simple majority.

Second, if the Senate did overrule the parliamentarian on a procedural matter related to budget reconciliation, a conservative senator would likely introduce a simple, one-line Obamacare repeal bill and ask the Senate to overrule the parliamentarian to allow it to qualify as a reconciliation matter. Since many members of the Senate, like the House, do not actually wish to repeal Obamacare, they would likely decline to head down the road of overruling the parliamentarian, for fear it may head in this direction.

Can the Senate Waive the ‘Byrd Rule’?

Yes—provided three-fifths of senators sworn (i.e., 60 senators) agree. In the past, many budget reconciliation bills—like the Balanced Budget Act of 1997—passed with far more than 60 Senate votes, which made waiving the rule easier.

However, Republicans did not agree to waive the rule for extraneous material included in Senate Democrats’ Obamacare “fix” bill in March 2010. That material was stricken from the legislation and did not make it into law. For this and other reasons, it seems unlikely that eight or more Senate Democrats would vote to waive the rule for an Obamacare “repeal-and-replace” bill.

Didn’t Democrats Pass Obamacare through Budget Reconciliation?

Yes and no. They fixed portions of Obamacare—for instance, the notorious “Cornhusker Kickback”—through a budget reconciliation measure that passed through both houses of Congress in March 2010. But the larger, 2,400-page measure that passed the Senate on Christmas Eve 2009 was enacted into law first.

Once Scott Brown’s election to the Senate in January 2010 gave Republicans 41 votes, Democrats knew they could not go through the usual process of convening a House-Senate conference committee to consider the differences between each chamber’s legislation. A conference report is subject to a filibuster, and Republicans had the votes to sustain that filibuster.

Instead, House Democrats agreed to pass the Senate version of the legislation—the version that passed with 60 votes on Christmas Eve 2009—then have both chambers use a separate budget reconciliation bill—one that could pass the Senate with a 51-vote majority—to make changes to the bill they had just enacted.

This post was originally published at The Federalist.

Former Obama Administration Officials Now Making Money Off Obamacare

After examining the harmful impacts of Obamacare on so many segments of the population—seniorsdoctors, and future generations—we’ve finally found one constituency for whom the unpopular law has proved an unmitigated boon: high-priced lobbyists.

The Hill reports on how dozens of former staffers who wrote and implemented the law are now “cashing in,” trading their expertise for big bucks:

ObamaCare has become big business for an elite network of Washington lobbyists and consultants who helped shape the law from the inside. More than 30 former administration officials, lawmakers and congressional staffers who worked on the healthcare law have set up shop on K Street since 2010….

“When [Vice President] Biden leaned over [during healthcare signing] and said to [President] Obama, ‘This is a big f’n deal,’” said Ivan Adler, a headhunter at the McCormick Group, “he was right.”

As the article notes, these high-priced lobbying firms and their clients are searching for “expert help,” both to understand the law—we did have to pass the bill to find out what’s in it, remember—and to lobby bureaucrats into making regulatory changes. Hence “widespread complaints from businesses and their lobbyists” led to a delay in the employer mandate.

And it’s not just big businesses and their K Street lobbyists receiving special treatment under Obamacare. Unions received their waivers—although they’re now lobbying for yet another exemption from the law. Congress recently got in on the act, lobbying behind closed doors for its own illegal relief, to keep taxpayer-funded health insurance subsidies going to Members of Congress and their staffs.

This is the type of behavior—shady backroom deals like the “Louisiana Purchase” and the “Cornhusker Kickback”—that helped make Obamacare so unpopular when Congress rammed it through more than three years ago.

There’s one easy way to put a stop to this unfair, unworkable, and unpopular law: Congress should embrace the opportunity to defund Obamacare now.

This post was originally published at the Daily Signal.

Donald Berwick’s Rationed Transparency

Dr. Donald Berwick is back in the public eye. The former administrator of the Centers for Medicare and Medicaid Services (CMS) has announced he will run for governor in Massachusetts.

Berwick first entered the public spotlight in April 2010, when President Obama nominated him for the CMS post. But Berwick never went through the regular confirmation process. Instead, the president granted him a surprise recess appointment that July.

The president renominated him in January 2011, but it became apparent that he could not garner enough votes for Senate confirmation. That December, Berwick resigned. Now, he is pursuing office as an elected, rather than an appointed, official.

Berwick’s short tenure at CMS was defined by a series of controversial statements he made before his appointment. He defended both Britain’s National Health Service and government rationing of health care. Most famously, in a June 2009 interview, he stated that “the decision is not whether or not we will ration care — the decision is whether we will ration with our eyes open.”

After leaving CMS, Berwick said his comments were merely an attempt to argue for greater transparency in decision-making. “Someone, like your health-insurance company, is going to limit what you can get. That’s the way it’s set up,” he told the New York Times. “The government, unlike many private health-insurance plans, is working in the daylight,” he insisted. “That’s a strength.”

Unfortunately, Berwick himself, while head of CMS, went to great lengths to avoid transparency. He ducked reporters, in one instance even “exit[ing] behind a stage” to avoid press queries. Another time he went so far as to request a “security escort” to avoid questions.

Today, Berwick concedes his lack of transparency. According to a Politico report, he now “regrets listening to White House orders to avoid reaching out to congressional Republicans.”

The lack of transparency is endemic in the Obama administration. Case in point: the enactment of Obamacare. During his 2008 campaign, Barack Obama promised health-care negotiations televised on C-SPAN. Instead, we got a series of notorious backroom deals: the Cornhusker Kickback, the Louisiana Purchase, the Gator Aid.

“It’s an ugly process, and it looks like there are a bunch of backroom deals,” Obama feebly admitted in January 2010 — only to retreat again to the smoke-filled rooms two months later, where he cut the final deals to ram the legislation through Congress.

As usual, special interests had their day — both before and after Obamacare’s passage. While Berwick wouldn’t talk to reporters, he gladly met with insurance-industry executives, even if it meant ignoring journalists in the process. Likewise, the administrator who wouldn’t speak to Republican lawmakers happily addressed a closed-door meeting of “industry stakeholders” in December 2010. The Hill noted: “The meeting comes as a number of lobbyists say they’ve noticed more White House outreach toward K Street.”

So government transparency is possible — provided you’re a high-priced K Street lobbyist.

Obamacare is premised on the belief that government knows best. And those who share that belief all too often regard transparency and public accountability as inconveniences.

Consider the administration’s approach to regulating the proposed health-insurance “exchanges.” Obamacare requires state-based exchanges to “hold public meetings and input sessions,” but it fails to apply these same transparency standards to the federally run exchanges Washington will create in 33 states. The result: Many key questions remain unanswered.

Thus a law written in secret is being implemented in secret, with a maximum of opacity and a minimum of accountability from the administration.

Berwick claimed that open government would eliminate public worries about government rationing of health care. But Obamacare was born in darkness, and those implementing it are assuredly not “working in the daylight.” Americans have every reason to be concerned.

This post was originally published at National Review.

Big Hospitals’ Obamacare Deal Betrays Seniors and the Poor

backroom deal made during the writing of Obamacare will harm seniors and the poor, according to The Wall Street Journal (WSJ).

During their closed-room dealings with the Obama Administration, the hospital industry’s lobbyists agreed to support Obamacare—provided that the law placed restrictions on physician-owned “specialty” hospitals, noted WSJ. These innovative specialty hospitals frequently have quality outcomes better than most traditional facilities, but no matter—the big hospital lobbyists wanted to eliminate a source of competition. So Obamacare prohibits new physician-owned hospitals from receiving Medicare payments — and prohibits most existing facilities from expanding if they wish to keep treating Medicare patients.

WSJ highlighted the actions specialty hospitals have been forced to take in response to these Obamacare restrictions:

Forest Park Medical Center in Dallas has stopped accepting Medicare patients, allowing it to escape the law’s restrictions entirely…. Rejecting Medicare ‘was a big leap, but we felt like the law gave us no choice,’ said J. Robert Wyatt, a Forest Park founder….

Other doctor-owned facilities are asking the federal government to let them duck the law’s restrictions altogether. Doctors Hospital at Renaissance near McAllen, Texas, is trying to get a waiver allowing it to expand as more than 53% of its payments come through the Medicaid federal-state insurance program for the poor.

In other words, because hospital lobbyists cut a backroom deal to support Obamacare, seniors and low-income patients have fewer health care options. Think that these examples of Americans losing access to care would prompt the hospital-industrial complex to reconsider its backroom deal? Not a chance:

Any effort to undo the expansion limits faces an uphill battle with Democrats, because the restrictions were a deal-breaker for hospitals when the White House sought their support for the law in 2009, industry lobbyists say.

Obamacare’s backroom deals (the “Louisiana Purchase,” the “Gator Aid,” and the “Cornhusker Kickback”) represented the worst in politics—well-heeled lobbyists seeking to obtain government largesse through pork-barrel spending and regulatory loopholes. The Wall Street Journal story reminds us how those backroom deals have real-world consequences when it comes to medical access—another example of how Obamacare has harmed patient care.

This post was originally published at the Daily Signal.

Policy Brief: Two Years Later, Obamacare Fails Patients, Doctors, and Taxpayers

Two years ago, House Speaker Nancy Pelosi famously said Congress had to pass President Obama’s health care bill to find out what is in it. Now, we know what’s in this law and how it clearly breaks the President’s promises to the American people.

Broken Promise #1: “If you like your plan, you can keep it”

  • Candidate Obama promised “[y]ou will not have to change plans. For those who have insurance now, nothing will change under the Obama plan – except that you will pay less.”
  • By the Administration’s own estimates, new health care regulations will force most firms – and up to 80 percent of small businesses – to give up their current plans by 2013. Grandfathered plans would then be subject to the costly new mandates and increased premiums under the president’s health care plan.
  • Seniors will lose access to Medicare Advantage plans. One study found that Medicare Advantage enrollment will be cut in half by 2017, and plan choices will be reduced by two-thirds. Democrats realized seniors will lose plan access, so they created a temporary, multi-billion dollar waiver program for Medicare Advantage plans. Under this program, seniors will not lose their existing coverage until 2013 — after President Obama’s re-election campaign.

Broken Promise #2: “I will protect Medicare”

  • In his 2009 address to Congress, President Obama promised, “I will protect Medicare.”
  • The president’s health care law, however, takes more than $500 billion from Medicare and uses the money to pay for the new entitlements. The Medicare actuary has written that the Medicare cuts “cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions) and to extend the [Medicare] trust fund.”
  • The Congressional Budget Office wrote Medicare provisions in the president’s health care plan “would not enhance the ability of the government to pay for future Medicare benefits.” President Obama admitted in an interview, “You can’t say that you are saving on Medicare and then spend the money twice.” But that is exactly what the law does – it spends the same money twice, undermining Medicare rather than protecting it.

Broken Promise #3: Will “lower your premiums by $2500 per family per year”

  • Candidate Obama said his bill would cut premiums by an average of $2,500 per family. His campaign also promised those reductions would happen within President Obama’s first term.
  • The annual Kaiser Family Foundation survey of employer-provided insurance found that average family premiums totaled $12,860 in 2008, $13,375 in 2009, $13,770 in 2010, and $15,073 in 2011. Premiums already have risen by $2,213 since President Obama took office.
  • CBO projects the law’s new benefit mandates will raise premiums in the individual market by $2,100 per family. The increase is because people will be forced to buy richer coverage, which will encourage them to consume more health care.

Broken Promise #4:  Will not add “one dime to our deficits”

  • President Obama promised “I will not sign a [health care] plan that adds one dime to our deficits — either now or in the future.”
  • However, an honest accounting of the health care law finds that it will increase the deficit by hundreds of billions in its first 10 years alone (FY 2010-19).
  • For instance, the law double counts $398 billion in Medicare savings, used both to extend the life of the Medicare trust fund to pay for new entitlements. The CBO stated that if these Medicare savings were set aside for Medicare, the law would raise the deficit.
  • Former CBO Director Douglas Holtz-Eakin has written that under a realistic set of assumptions, the law will increase the deficit by at least $500 billion in its first 10 years and more than $1.5 trillion in its second decade (FY 2020-29).

Broken Promise #5: No need for a “mandate”

  • Candidate Obama opposed a mandate to buy insurance, and made it one of the hallmarks of his primary campaign against then-Senator Clinton. Obama said that fining people for not buying health insurance was like “solv[ing] homelessness by mandating everybody buy a house.”
  • President Obama’s health care law created an unprecedented federal requirement for all citizens to purchase a product merely because they exist.
  • The mandate has been struck down by one appeals court and will be considered by the Supreme Court of the United States later this month.

Broken Promise #6:  Will not raise “any of your taxes”

  • Candidate Obama pledged he would not raise “any of your taxes” and promised not to tax health benefits. His health care law broke those promises at least 10 times.
    • $52 billion in fines on employers who do not provide “government-approved” coverage;
    • $32 billion in taxes on health insurance plans;
    • $5 billion in taxes from limits on over-the-counter medication;
    • $15 billion in taxes from limiting the deduction on itemized medical expenses;
    • $13 billion in taxes from new limits on Flexible Spending Arrangements
    • $60 billion in taxes on health insurance plans;
    • $27 billion in taxes on pharmaceutical companies;
    • $20 billion in taxes on medical device companies;
    • $3 billion in taxes on tanning services;
    • $3 billion in taxes on self-insured health plans; and
    • $1 billion in new penalties on Health Savings Account distributions.
    • The health care law includes a “high-income” tax that, because it is not indexed for inflation, will eventually hit 80 percent of taxpayers, according to the Medicare actuary.
    • The law forces people to buy insurance, then the federal government taxes employer-provided plans at a 40 percent rate. This tax will hit middle-income families especially hard.

Broken Promise #7: “It’s going to have to control costs”

  • President Obama promised that health care legislation must control costs: “If any bill arrives from Congress that is not controlling costs, that’s not a bill I can support. It’s going to have to control costs.”
  • According to the Medicare actuary, national health spending will go up by at least $311 billion over 10 years under the president’s health care plan.
  • The Medicare actuary believes that payment reductions to hospitals and other providers as part of the law could cause as many as 40 percent of Medicare providers to become unprofitable. These cuts would lead to beneficiary access problems. If the experts’ predictions are accurate, the cuts would need to be reversed, and spending on health care would increase beyond the $311 billion currently projected by the actuary.

Broken Promise #8:  “Will cost between $50-65 billion a year when fully phased in

  • Candidate Obama pledged his health care plan would cost “$50-65 billion a year when fully phased in.”
  • CBO now projects the cost of coverage expansions will be $229 billion in 2020 and $245 billion in 2021, four times what candidate Obama promised. CBO conceded that “putting the federal budget on a sustainable path would almost certainly require a significant reduction in the growth of federal health spending relative to current law (including [the health care law]).”
  • CBO Director Elmendorf said higher-than-expected unemployment levels will raise federal spending on subsidies in the president’s health care plan. This means projections could significantly underestimate the level of spending on the new entitlements.

Broken Promise #9: “Four million small businesses may be eligible for tax credits”

  • President Obama claimed that “4 million small businesses may be eligible for tax credits” included in the law. The IRS spent nearly $1 million in taxpayer money to pay for four million postcards promoting the tax credit.
  • The Treasury Department’s Inspector General recently testified that “the volume of credit claims has been lower than expected.” Only 309,000 firms have received the credit – seven percent of the four million firms the Administration claimed.
  • Republicans pointed out more than a year ago that this credit was too complex to be of much assistance to small businesses. The Treasury Inspector General noted that “there are multiple steps to calculate the Credit, and seven worksheets must be completed in association with claiming the Credit.”

Broken Promise #10:  “These negotiations will be on C-SPAN”

  • Candidate Obama promised to televise all health care negotiations on C-SPAN. The process that created the president’s health care plan was plagued with backroom deals like the “Cornhusker Kickback,” “Gator-Aid,” and the “Louisiana Purchase.”
  • The president conceded the process “legitimately raised concerns not just among my opponents, but also amongst supporters that we just don’t know what’s going on. And it’s an ugly process and it looks like there are a bunch of backroom deals.”
  • Democrats drafted the final legislation entirely in secret and passed it on party-line votes in both houses of Congress. President Obama noted that “sometimes it’s messy, the process is frustrating,” but he did not admit failure on transparency.

Time after time, President Obama made promises his health care law did not keep. It is time to replace President Obama’s failed experiment and provide real reform that guarantees people the care they need, from the doctor they want, at a price they can afford.

Senate Democrat Talks about Medicaid “Stigma”

Earlier this week, Sen. Ben Nelson – he of the infamous Cornhusker Kickback – made the startling admission that the Medicaid program, which the health care law expands dramatically, carries a “stigma for some.”  The statement came in response to Nebraska Governor Dave Heineman’s outreach to education groups encouraging them to support repealing the health law, as its Medicaid unfunded mandates would squeeze out state funds for education.

On Monday, Sen. Nelson’s office put out a release calling the Governor’s accusations overblown.  Specifically, Sen. Nelson alleged that Milliman’s independent analysis of the health care law’s impact on the Medicaid budget was “seriously flawed,” for two reasons:

“The Milliman study anticipates 100 percent participation in the Medicaid program under health reform.  Medicaid is voluntary and voluntary programs never see 100 percent participation.  Also, the governor’s new study assumes that about 60,000 people who have private insurance now will switch to Medicaid.  Will that happen when private insurance generally is better than Medicaid, which also comes with a stigma for some?”

This remarkable statement leads to some interesting questions for Sen. Nelson, and Democrats generally:

  1. What exactly is voluntary about forcing individuals to purchase “government-approved” health insurance, and then taxing them if they do not do so?  How is the message that Medicaid is a voluntary program consistent with the mantra of “personal responsibility” used for the past year to justify the unpopular individual mandate?
  2. Given that their supposed goal in health “reform” is universal coverage, shouldn’t Democrats WANT 100 percent participation in the Medicaid program?  Or do Democrats merely want to CLAIM they have created universal coverage, while hoping that individuals do not sign up at rates that will overwhelm the fiscal capacity of states and the federal government to finance this new entitlement?
  3. According to the Medicare and Medicaid chief actuary, most individuals obtaining new health insurance coverage as a result of the law will do so via Medicaid.  Why should these projected 18 million individuals be “stigmatized” by what Sen. Nelson himself called an inferior form of health insurance?
  4. The health law’s expansion of Medicaid PROHIBITS individuals eligible for the Medicaid expansion (i.e., those with incomes under 138 percent of poverty) from receiving federal subsidies to cover the cost of private insurance.  In other words, poor people weren’t granted a choice of health care plans, and were instead dumped on to the Medicaid rolls.  If Sen. Nelson believes that the inferior Medicaid program carries a “stigma,” why did Democrats not only not fix this troubled program, but instead perpetuate and deepen the “stigma” attached to it by giving poor people no other choice of coverage?
  5. Is Sen. Nelson’s belief that private insurance “generally is better than Medicaid” the reason why he, along with the rest of his Senate Democrat colleagues, opposed an amendment offered by Sen. LeMieux to enroll Members of Congress in Medicaid?  Do Democrats want to “stigmatize thee, but do not stigmatize me” by enrolling others – but not themselves – in what Sen. Nelson called an inferior Medicaid program?

The comments above illustrate how Democrats are attempting to “have it both ways” when it comes to the health care law – trumpeting supposedly universal coverage, while simultaneously arguing that the law will not bankrupt states and the federal government because many individuals eligible for free entitlements will not enroll in them.  Similarly, the majority consigned 18 million Americans into a health “insurance” program that they themselves refused to accept – not least because, as Sen. Nelson admitted, the program is inferior to private insurance.  This latest example of Democrats’ double-talk, and double standards, once again illustrates why the health care law does not constitute health reform.

Policy Brief: Obamacare — Bad for States

Would Make States’ Tough Fiscal Situations Worse.  The health care takeover[i] requires all states to pay a portion of the proposed Medicaid expansion beginning in 2017—tens of billions in new state spending imposed by federal requirements.  However, states cannot afford their existing Medicaid programs, which is why Congress included a $90 billion Medicaid bailout in the 2009 “stimulus” package.  To make things worse, the cost of the Medicaid expansion borne by states will rise appreciably in years 2019 and beyond—further pinching state budgets.

Forces Higher State Medicaid Spending.  The health care takeover gives states a higher federal match to expand the Medicaid program to all individuals earning up to 133 percent of the federal poverty level ($29,327 for a family of four).  However, such an expansion—when coupled with an individual mandate to purchase insurance—is likely to increase Medicaid enrollment among individuals who are already eligible for the program—and for whom a full federal match will not be available.

Encourages States to Drop Medicaid Entirely.  The health care takeover prohibits states from reducing their Medicaid eligibility standards or procedures at any point in the future.  Governors in both parties have already voiced significant concerns about what Tennessee Democratic Gov. Phil Bredesen termed “the mother of all unfunded mandates” being imposed upon states.[ii]   As a result of the added restrictions in Democrats’ proposals, the head of Washington state’s Medicaid program believes that states facing severe financial distress may say, “I have to get out of the Medicaid program altogether.”[iii]

Undermines State Flexibility.  Provisions in the legislation significantly erode states’ independence in managing their Medicaid programs.  For instance, the health care takeover requires states to include family planning services for individuals with incomes up to the highest Medicaid income threshold in each state—undermining flexibility established by Republicans in the Deficit Reduction Act of 2005.

Supersedes State Authority.  The health care takeover provides that states that do not establish health insurance exchanges will see the federal government create them on states’ behalf.  Furthermore, the legislation also provides that states that prohibit abortion coverage in their insurance exchanges will see their citizens’ federal tax dollars used to subsidize insurance plans that cover elective abortions in other states.

Backroom Deals Create State Inequities.  The public focus on the “Cornhusker Kickback” regarding Nebraska’s Medicaid funding omits the other backroom deals included in the legislation—most of which remain, creating additional inequities among states.  The health care takeover includes provisions known as the “Louisiana Purchase,” providing an extra $300 million in Medicaid funding to Louisiana.[iv]  And the legislation also provides an additional $100 million in Medicaid hospital funding solely to Tennessee.  Many may wonder why citizens in other states should see their taxpayer dollars fund special deals for places like Tennessee and Louisiana.

[i] Senate-passed bill (H.R. 3590) text available at http://www.opencongress.org/bill/111-h3590/text; reconciliation bill (H.R. 4872) text available at http://www.opencongress.org/bill/111-h4872/text.

[ii] Kevin Sack and Robert Pear, “Governors Fear Medicaid Costs in Health Plan,” New York Times July 19, 2009, http://www.nytimes.com/2009/07/20/health/policy/20health.html.

[iii] Clifford Krauss, “Governors Fear Added Costs in Health Care Overhaul,” New York Times August 6, 2009, http://www.nytimes.com/2009/08/07/business/07medicaid.html.

[iv] “Dems Protect Backroom Deals,” Politico February 4, 2010, http://www.politico.com/news/stories/0210/32499.html.

McCain Amendment 3570 to H.R. 4872 — Strike Sweetheart Deals

Senator McCain has offered an amendment (#3570) to strike the “sweetheart deals” included in the health care law and the reconciliation bill.


  • The amendment repeals the following “sweetheart deals” included in the health care law and the reconciliation bill:
  1. Increase in Medicaid disproportionate share hospital (DSH) payments just for Tennessee (Section 1203, page 71 of H.R. 4872);
  2. Increase in Medicaid DSH payments just for Hawaii (Section 10201, page 2132 of H.R. 3590);
  3. The “Louisiana Purchase” to increase Medicaid funding just for Louisiana (Section 2006, page 428 of H.R. 3590);
  4. Increased Medicare reimbursement just for frontier states (Section 10324, page 2237 of H.R. 3590);
  5. Medicare coverage just for Libby, Montana residents exposed to environmental hazards (Section 10323, page 2222 of H.R. 3590);
  6. A $100 million hospital funding provision intended to benefit Connecticut (Section 10502, page 2354 of H.R. 3590); and
  7. Extension of Section 508 hospital reimbursement provisions just to Michigan and Connecticut (Section 10905, pages 2205-06 of H.R. 3590)

Arguments in Favor:

  • Citizens in other states should not be asked to see their taxpayer dollars funding special “backroom deals” for certain locales.
  • The public outrage over the “Cornhusker Kickback” included in H.R. 3590 may lead many to believe it is long past time for Congress to strip out ALL of the “backroom deals” included in the Senate bill – rather than using the reconciliation measure to add more of them.
  • Given President Obama’s campaign promises of transparency – including his famous pledge to televise negotiations on C-SPAN – the American people deserve action consistent with Democrats’ rhetoric.
  • If Democrats support this government takeover of health care, they should be willing to support the legislation on its own merits – without the need to add on extraneous “backroom deals” in order to win votes.

Legislative Bulletin: H.R. 4872, Health Care and Education Reconciliation Act


  • H.R. 4872 is intended to make changes to the Senate-passed health care bill (H.R. 3590), while also making reforms to student lending and education programs.
  • The Congressional Budget Office has estimated that, when coupled with H.R. 3590, the bill would spend a total of $940 billion on health insurance coverage expansions over 10 years (fiscal years 2010-2019).  However, these provisions exclude other non-coverage related mandatory and discretionary health and education spending included in both measures, bringing the total cost in the bill’s first 10 years to $1.2 trillion.  The Republican staff of the Senate Budget Committee estimates that the total spending in the Senate bill’s first 10 years of full implementation (fiscal years 2014-2023) would be $2.4 trillion.
  • The reconciliation bill reduces Medicare spending by an additional $60.5 billion pay for new health care entitlements, and when combined with the Senate bill cuts Medicare Advantage plans by $202.3 billion.
  • The reconciliation bill raises taxes by an additional $48.9 billion when compared to the Senate bill, for an overall tax increase of $573.2 billion.  The bill specifically taxes investment income for individuals with incomes over $200,000 and families with incomes over $250,000.  The bill also delays the implementation of the “Cadillac tax” on high-cost plans from 2013 in the Senate bill until 2018, but lowers the inflation adjustment, so more plans will be hit by this tax over time.
  • The bill increases from $750 to $2,000 per worker the “free rider” penalty, and imposes the penalty on firms’ part-time employees as well as their full-time workers.
  • The bill would end the Federal Family Education Loan (FFEL) program, converting all student lending to the government-run Direct Lending (DL) program.  Some of the savings from this change would be used to fund new federal spending on Pell Grants and other mandatory spending for higher education, while other spending would be diverted to the bill’s health care provisions.

Title I—Coverage, Medicare, Medicaid, and Revenues

Subsidies:  Increases subsidies for health coverage, offered as refundable, advance-able tax credits payable directly to insurance companies. Specifically, the bill raises premium subsidy levels for those with incomes between 133 and 150 percent of the federal poverty level (FPL), and those between 250 and 400 percent.   Individuals with incomes between 300 and 400 percent of  FPL would be forced to pay 9.5 percent percent of their adjusted gross income on health insurance, instead of 9.8 percent in the Senate bill.  The federal portion of cost-sharing would also be increased for individuals with income of between 133 and 250 percent of FPL.

Revises the income definitions in the Senate bill, using “modified adjusted gross income” (MAGI) instead of “modified gross income” to determine subsidy eligibility, and permitting states an income disregard five percent of applicants’ income with respect to determining Medicaid eligibility, effectively raising the eligibility threshold to 138 percent of FPL (up from 133 percent in the Senate-passed bill).  The bill also includes an additional adjustment and trigger mechanism after 2018 to slow the growth of the premium subsidy levels.  The Congressional Budget Office (CBO) has stated that “over time, the spending on exchange subsidies would therefore fall back toward the level under H.R. 3590 by itself.”[i]

Increase in individual mandate:  Modifies the penalty for not having health insurance that qualifies as “minimum essential coverage” from $750 or 2 percent of income to $695 or 2.5 percent of income, indexed for inflation after 2016.  The effect of this is to shift the burden of the mandate slightly from lower income Americans to upper income Americans.  Raises $2 billion more in revenue than Senate bill.

Increase in employer mandate:  Increases the “free-rider” penalty for businesses with more than 50 employees that don’t offer health insurance and have at least one employee receiving a government subsidy for health insurance in the exchange.  The penalty rises from $750 per full time employee to $2,000 per full time employee.  The first 30 workers are disregarded in calculating the penalty.  Strikes the construction industry’s exclusion from the small business exemption.  Raises $25 billion more than the Senate bill.

Implementation Funding:  Provides $1 billion in new mandatory spending in a “Health Insurance Reform Implementation Fund” created within the Department of Health and Human Services.

Medicare Part D “Doughnut Hole”:  Provides a $250 rebate in 2010 for any Medicare beneficiary who enters the prescription drug coverage gap.  This flat $250 payment is not tied to a beneficiary’s actual spending within the coverage gap; thus a beneficiary would receive the full $250 payment if he or she only entered the “doughnut hole” by $10.  The bill also postpones the start of the prescription drug “discount” program created in the Senate bill by six months, until January 1, 2011.

Starts a process of closing the “doughnut hole” beginning in 2011; however, that gap will not be filled until 2020—outside the 10-year budget window.  Some may view the delay as a budgetary gimmick designed to mask the true cost of this new entitlement.  The bill also reduces the growth of the true out-of-pocket threshold for Part D plans, beginning in 2014.

Medicare Advantage Cuts:  The bill imposes more cuts to Medicare Advantage (MA), phasing in a new system of blended benchmarks.  Benchmarks will be phased in beginning in 2012, and are based on overall levels of Medicare spending, with low-cost areas receiving up to 115 percent of traditional Medicare spending and high-cost areas receiving 95 percent of traditional Medicare spending.  Benchmarks are phased in over longer periods in areas currently receiving higher MA rebates.  These cuts, over and above those included in the Senate bill, will further reduce access to both MA plans and the additional benefits they provide.

Establishes a new mechanism to increase payments to “high-quality” MA plans, even though traditional Medicare does not base its payments on quality measures.  Plans receiving at least four stars on a new scorecard will be subject to bonus payments of 5 percent in 2014 and succeeding years, with those amounts doubled in urban markets with high MA penetration and below-average Medicare spending.  Requires additional adjustments to MA plan payments reflecting differences in coding intensity compared to traditional Medicare—adjustments that were increased in the House manager’s amendment—and repeals a comparative cost adjustment program created as part of the Medicare Modernization Act (P.L. 108-173).  Requires MA plans to spend at least 85 percent of their premium costs on medical claims, and directs rebates from plans not meeting that threshold into a management account at the Centers for Medicare and Medicaid Services.

Other Medicare Provisions:  Begins reductions in Medicare disproportionate share hospital (DSH) payments in 2014, rather than 2015 in the Senate bill, but lessens the overall impact of DSH reductions by $3 billion through 2019.  The bill makes further market basket adjustments to inpatient hospitals, long-term care hospitals, inpatient rehabilitation facilities, psychiatric hospitals, and outpatient hospitals beyond those in the underlying Senate bill.  The bill also accelerates and expands changes in the Senate bill regarding the presumed increase in utilization rates for imaging services, resulting in an additional $1.2 billion in savings, and adjusts the physician practice expense geographic adjustment for 2010.  Finally, the bill provides a total of $400 million for payments in fiscal years (FY) 2011 and 2012 to “qualified hospitals” ranking within the lowest quartile of counties in Medicare spending.

Physician Self-Referral:  Extends from August 1, 2010 to December 31, 2010 implementation of a ban on new physician-owned hospitals included in the Senate bill.  It also adds a limited exception to growth caps on existing physician-owned facilities for those hospitals that treat the largest number of Medicaid patients in their county.

Medicaid Funding:  The bill amends the Senate legislation to “fix” the Cornhusker Kickback, such that all states would have 100 percent of their Medicaid expansion costs paid in 2014 through 2016, 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and future years.  These provisions still leave states responsible for tens of billions of dollars in unfunded liabilities through 2019—and more in the years outside of the budget window.

Provides for a five-year transition period in 2014-2018 for “expansion states” that have already broadened their Medicaid programs to include the populations (namely, childless adults) covered under the Senate bill.

Provides an increase in Medicaid reimbursement levels to the prevailing Medicare rates in each Medicare fee schedule area, fully funded by the federal government—but only for years 2013 and 2014.  Many may consider this “cliff” in the years following 2014 a budgetary gimmick to mask the bill’s true cost, similar to the sustainable growth rate mechanism now used to calculate Medicare physician reimbursements.  Some may also question whether this reimbursement bias in favor of primary care will give providers and states a greater incentive to classify their treatments as primary care, in order to receive higher reimbursements fully paid for by federal dollars.

Further reduces Medicaid disproportionate share hospital (DSH) payments beyond those included in the Senate bill, and establishes a payment methodology whereby the largest DSH reductions would be imposed on the states with the largest reduction in the number of uninsured individuals.  The bill includes special language increasing DSH allotments for Tennessee.

Other Medicaid Provisions:  The bill increases Medicaid funding for American territories, delays establishment of the “community first choice option” for long-term care services from October 2010 to October 2011, and narrows the definition of a covered drug under the Medicaid drug rebate program.

Fraud and Abuse Provisions:  The bill re-defines “community mental health centers” within Medicare, and repeals a section of the Medicare statute related to prepayment medical review.  Includes a total of $250 million in new funding for the Health Care Fraud and Abuse Control Fund, and links future increases in funding for the Medicaid Integrity Program to consumer price inflation.  It also provides for a 90-day period of enhanced oversight of the initial claims of durable medical equipment (DME) providers in cases deemed a significant risk of fraud.

Tax Increases

Decrease in high-cost plans excise tax:  Delays the effective date of the high-cost plans tax from 2013 to 2018.  It also raises the thresholds for what qualifies as a high-cost plan to $10,200 for singles and $27,500 for families.  That number is increased by 100 percent plus another percentage point for each percentage point the cost of the Federal Employees Health Benefits Standard Blue Cross/Blue Shield plan grows over 55 percent between 2010 and 2018.  Strikes the transition rule for high-cost states, and indexes the thresholds after 2020 to Consumer Price Index (CPI) inflation instead of inflation plus one percent.  Includes a carve-out for multiemployer plans that generally cover unionized firms that allows single employees to qualify for higher the family threshold.  Raises $116.9 billion less than the Senate bill.

New tax on investment income:  Imposes a 3.8 percent tax on investment income (interest, dividends, annuities, royalties, or rents, business income derived from a passive activity, and net capital gain unless derived from disposition of property held in the ordinary course of business) for singles whose MAGI exceeds $200,000 and families whose MAGI exceeds $250,000.  It exempts active income from certain business ownership stakes and expenses and distributions from retirement plans.  These thresholds are not indexed for inflation, so an increasing number of Americans will be subject to these investment and wage taxes over time.  Raises $123.4 billion more than the Senate bill.

Delay limitation of flexible spending accounts by two years:  Delays the effective date of the $2,500 cap on flexible spending accounts from 2011 to 2013.  Raises $1 billion less than the Senate bill.

Increase in tax on pharmaceutical industry: Delays the effective date of the pharmaceutical tax one year to 2011, increases the annual fee within the budget window to $4.1 billion in 2018, and increases the per-year fee in perpetuity to $2.8 billion. Raises $4.8 billion more than the Senate bill within the budget window.

Increase in tax on medical device manufacturers:  Changes the annual fee with a set dollar amount to an excise tax on medical device sales of 2.3 percent of the price of the device.  It then delays implementation until 2013.  Exempts eyeglasses, contact lenses, hearing aids, and “generally purchased” goods, and eliminates the exemption for Class I devices, which are commonly used medical devices such as tongue depressors and bed pans.  Raises $800 million more than the Senate bill.

Increased fees on health insurers:  Delays the effective date for the tax on insurance companies from 2010 to 2014.  It also provides an exclusion for voluntary employees’ beneficiary associations and non-profit insurers that receive more than 80 percent of gross revenue from certain government programs.  Increases the annual fee to $14.3 billion in 2018, increasing annually thereafter based on premium growth. Raises $500 million more than the Senate bill within the budget window and more outside it.

Delay of elimination of deductible Part D subsidy:  Ends the deduction for the Medicare Part D subsidy two years later, in 2013.  Raises $900 million less than the Senate-passed bill.

Elimination of cellulosic biofuel credit for “black liquor”:  Uses the revenue raiser from the Senate-passed Baucus extenders bill (H.R. 4213) that prevents a byproduct from paper production known as “black liquor” from qualifying for the cellulosic biofuels tax credit.  Raises $23.6 billion over ten years.

Codification of the Economic Substance Doctrine:  Uses the revenue raiser from the Senate-passed Baucus extenders bill that codifies a judicial code used to determine the economic substance of a transaction for tax purposes.  Raises $4.5 billion over ten years.


Senate bill

Reconciliation Bill plus Senate bill

Implied Effects of Reconciliation bill

Cadillac plan tax




Employer W-2 reporting of health benefits



Conform definition of medical expenses




Increase penalty for nonqualified HSA deductions




Limit FSAs to $2,500




Corporate information reporting




Requirements for non-profit hospitals



Pharma fee




Device manufacturer fee




Health insurer fee




Eliminate subsidy related to Part D




Raise 7.5 percent AGI floor to 10 percent




$500k deduction cap on pay for heath insurers




Medicare (HI) tax on wage and investment income




Section 833 treatment of certain insurers (the Blues)




Tanning tax




Fee on health plans for Comparative Effectiveness Trust Fund




Deny eligibility of “black liquor” for cellulosic biofuels credit




Codify economic substance doctrine




Individual mandate penalties




Employer mandate penalty




Effects of coverage provisions on revenues




Other changes in revenue









Title II – Education and Health

Federal Pell Grants:  Provides mandatory funding to increase the maximum Pell Grant to $5,500 in 2010 with increases up to $5,975 by 2017.  Beginning in 2013, Pell Grant increases would be indexed to inflation using the CPI.  CBO estimates this will cost $22.6 billion over 10 years.

Student Financial Assistance:  Provides $13.5 billion in mandatory  funds to partially cover the discretionary Pell Grant shortfall.  Funds will remain available until September 30, 2012.

College Access Challenge Grant Program:  Provides  mandatory funding of $750 million over five years to promote partnerships between federal, state, and local governments and philanthropic organizations through matching formula grants to increase the number of low-income students who are prepared to enter and succeed in postsecondary education.

Historically Black Colleges and Universities:  Provides mandatory funding in the amount of $2.55 billion for Historically Black Colleges and Universities through FY 2019.

Termination of Federal Family Education Loan Appropriations:  Ensures that no funds can be expended after June 30, 2010, to support new lending activity in the Federal Family Education Loan (FFEL) program.  Shifts all new loans to the federally run Direct Loan (DL) program.  CBO estimates this will save $61 billion over $10 years.

Federal Consolidated Loans:  Gives temporary authority for certain borrowers who are still in school to consolidate their loans into a Direct consolidation loan.  These loans would have the same terms as Direct consolidation loans except the interest rate on the underlying loans would be the applicable in-school rates and not rounded  up to the nearest one-tenth.  The goal of this provision is to ensure students have one servicer of their loans that could be split between the FFEL and DL program after the transition. CBO predicts this will cost $40 billion.

Direct Loans at Institutions Outside the United States:  Allows foreign institutions to participate in the DL program by making arrangements with domestic banks designated by the Secretary of Education for loans to American students attending those institutions.  Under current law, American students attending foreign institutions can only receive a federal loan through the FFEL program.

Contracts, Mandatory Funds:  Provides mandatory funds and requires the Secretary of Education to award contracts to non-profit loan servicing agencies.  Each eligible agency would be given a maximum of 100,000 student loans to service initially.  Provides $50 million in mandatory funds for the Department of Education to provide technical assistance to institutions of higher education so they can switch from FFEL to DL.  Provides $50 million in mandatory funds for fiscal year 2010 and 2011 ($25 million each year) for payments to loan servicers for retaining jobs.

Income Based Repayment:  Beginning July 1, 2014 would expand the existing income-based repayment program that limits the percentage of an individual’s income that goes to student loan repayment, as well as the length of time they have to pay off the loan.  The provision would decrease the limit on loan payments from 15 percent to 10 percent of individual income and forgive loans after 20 years rather than 25 years.  CBO estimates this will cost $1.5 billion over 10 years.

Insurance Reforms:  The bill applies to all “grandfathered” health plans the provisions in the Senate bill regarding excessive waiting periods before becoming eligible for employer-based insurance, lifetime limits on benefits, rescissions, and coverage of dependents, and clarifies that only non-married dependents may remain on their parents’ insurance policies until turning 26.

340B Program:  The bill repeals the Senate bill’s expansion of the program to inpatient drugs, and exempts orphan drugs from the program with respect to new participants in same.

Community Health Centers:  The bill increases mandatory funding for community health centers by $2.5 billion.  Neither the reconciliation bill nor the Senate-passed measure include any prohibition on community health centers using these federal funds to offer elective abortion.


According to the CBO, the reconciliation bill, when combined with the Senate bill, would spend a total of $938 billion on coverage expansions.  These provisions exclude other non-coverage spending: $93.9 billion in related mandatory health spending in the Senate bill; $50.3 billion in mandatory health spending in the reconciliation bill; $41.6 billion in mandatory education spending in the reconciliation bill; and at least $70 billion in discretionary spending included in the Senate bill.  These bring the total cost in the bill’s first 10 years to $1.2 trillion.  Moreover, the Republican staff of the Senate Budget Committee estimates that the total spending in the Senate bill’s first 10 years of full implementation (FY 2014-2023) would be $2.4 trillion.

To pay for the additional spending on health insurance subsidies and education, the bill would raise taxes by an additional $50 billion, and reduce Medicare spending by $60.5 billion.  The reconciliation bill and the Senate bill impose Medicare Advantage cuts totaling $202.3 billion.  Tax increases include $25 billion in additional revenue from the employer mandate; $23.6 billion from removing “black liquor” from the cellulosic biofuels tax credit; $123.4 billion from the new Medicare taxes on investment income—all offset by a $119 billion reduction in revenue from the “Cadillac tax” delay.  The bill also includes $67 billion in savings from the abolition of the FFEL program, which is channeled into $41 billion in new education spending and $19 billion in new health care spending.

CBO found that H.R. 4872 and H.R. 3590 would provide health insurance coverage to an additional 32 million individuals 2019—half of them through Medicaid.  Individuals enrolled in employer-based coverage would decline by about three million overall—six to seven million would gain access to employer coverage, but eight to 11 million would lose their offer of coverage and/or purchase a policy elsewhere.  Overall, 23 million individuals would remain uninsured, about one-third of them undocumented immigrants.

The CBO score notes that the federal budgetary commitment to health care would rise by an additional $180 billion in the next ten years under the reconciliation bill.  The reconciliation bill and H.R. 3590 combined would increase the federal budgetary commitment to health care by a total of $390 billion in the 2010-2019 period.  Like H.R. 3590, H.R. 4872 contains unfunded mandates that would exceed the threshold levels in the Unfunded Mandates Reform Act.

There are several important caveats in the CBO analysis.  First, the long-term deficit projections “reflect an assumption that the key provisions of the reconciliation proposal [i.e. H.R. 4872] and H.R. 3590 are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation.  For example, the sustainable growth rate mechanism governing Medicare’s payments to physicians has frequently been modified to avoid reductions in those payments, and legislation to do so again is currently under consideration by the Congress.”[ii]

Second, the “reconciliation proposal and H.R. 3590 would maintain and put into effect a number of policies that might be difficult to sustain over a long period of time. Under current law, payment rates for physicians’ services in Medicare would be reduced by about 21 percent in 2010 and then decline further in subsequent years; the proposal makes no changes to those provisions. At the same time, the legislation includes a number of provisions that would constrain payment rates for other providers of Medicare services. In particular, increases in payment rates for many providers would be held below the rate of inflation (in expectation of ongoing productivity improvements in the delivery of health care).”[iii]

[i] Congressional Budget Office score of H.R. 4872 incorporating the manager’s amendment, March 20, 2010, http://cbo.gov/ftpdocs/113xx/doc11379/Manager%27sAmendmenttoReconciliationProposal.pdf, p. 12.

[ii] Ibid., pp. 13-14.

[iii] Ibid., p. 14.