WEEK OF JANUARY 4-8, 2010
The wish list. The White House – House – Senate bartering game began to take shape this past week as House Speaker Nancy Pelosi (D-CA) circulated her wish list to negotiators. Using the more moderate Senate bill as a benchmark, Pelosi’s document outlined a number of provisions that she would like amended in order to score a couple of victories for the liberal wing of her caucus. As arbiters of negotiations, President Obama and his chief of staff Rahm Emanuel are faced with the difficult task of threading a needle between the liberal and moderate factions of their Party. They must find a way to appease House Democrats on a couple of issues while maintaining the fragile 60 vote Democratic coalition in the Senate. Below is an overview of the issues included in Speaker Pelosi’s list:
Subsidies
The House negotiators would like to increase the subsidy amounts for those in lower income brackets.
Both the House and Senate bills establish subsidies for individuals and families with incomes between 133-400 percent of the federal poverty level. However, the House bill distributes more generous subsidies to individuals/families at the lower end of the subsidy spectrum.
Last week, President Obama stated that he supports expanding subsides.
The subsidy expansion would add significant costs to the bill, which are likely to be offset with additional tax increases.
Implementation Date
The House negotiators would like all health care reform provisions to be fully implemented by 2013.
The Senate bill staggers the implementation of health care reform provisions over the next five years with most of the core provisions taking effect in 2014.
The White House has not taken a formal position.
The one year acceleration is very costly – somewhere in the neighborhood of $100 billion.
Employer Mandate
The House negotiators would like to impose an employer mandate, similar to the version included in the House-passed bill.
The House bill would require employers to pay 72.5% of the premium for individual policies and 65% for family policies or pay a fee equal to 8% of payroll. Small businesses with payrolls less than $500,000 per year would be exempt. In the Senate bill, employers with more than 50 full-time employees who do not offer health insurance and have at least one employee who qualifies for a tax credit would have to pay a fee of $750 for each full-time employee.
The White House has not taken a formal position.
National Exchange vs. State Exchanges
The House negotiators would like to implement a one-size-fits-all national exchange, as included in the House-passed bill, rather than create state-based exchanges.
The Senate bill instructs each state to create and design an exchange.
The White House has not taken a formal position.
Cadillac Tax
The House negotiators would like to exempt middle-income individuals and families from the Cadillac tax. The exemption would likely come in the form of increased thresholds for the tax.
The Senate bill would impose a 40% excise tax on insurance companies who sell an employer-sponsored health insurance plan that has an aggregate value of $8,500/individuals and $23,000/families. The excise tax is imposed on the amount above the stated threshold. The House bill includes no such tax.
The White House has stated that they want the Cadillac tax included in the final bill. It is unclear whether or not they are willing to budge on the threshold amounts.
If the threshold amounts are increased, it is likely that policymakers will look to increase the Medicare payroll tax on wealthy Americans to offset the loss in tax revenue.
What to watch for this week:
1. President Obama is scheduled to address the House Democrats at their annual retreat this week as is former President Bill Clinton. What will President Obama’s message be on health care reform?
2. The White House has yet to announce the date of the State of the Union address. They are delaying the announcement in hopes of scheduling it in coordination with the passage of health care reform. Watch for an announcement of the date – it will indicate that a deal is imminent.
Mike Wojcik 