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In the Nation's Interest

Back to Square One on Health Reform?

You surely have seen numerous press stories about how the special election for the Massachusetts Senate seat has changed the legislative options for health reform. Different news pieces and editorials have anointed different alternative paths as being the answer for the President and his (now crucially diminished) majority in Congress.

The bottom line, however, is that there are no options available to complete the work that the President's team has begun. For months, their approach was predicated upon their ability to call upon a 60-vote supermajority in the Senate. With that supermajority gone, the entire approach has fallen apart.

The 41-vote minority in the Senate now has the tempting option to remain united whatever the plan on the table, and thereby to achieve a political victory - arguably at the expense of at least an opportunity to improve health care and security for all Americans. If that path is motivated purely by politics, it will be a tragedy.

On the other hand, the approach hitherto followed by the majority has assumed no bipartisan cooperation - by whose fault is infinitely arguable - and therefore rested on unsavory deals cut within the majority party to maintain unity. It also involved limited consideration of substantive options that could have yielded better policy and better outcomes.

Some commentators have argued that the Congress should have completed its process much more quickly, and that if it had, the current impasse would have been avoided. That conclusion is terribly misguided. The health-care debate is one of the most consequential in recent history, and is not adequately measured even by the very large number of dollars involved. The resulting government spending, taxes and regulation (the last of these often ignored) would have had significant leverage over one-sixth of the U.S. economy, not to mention people's lives. It would have been irresponsible to rush the process to achieve the political outcome preferred by any one interest, however well meaning.

In short, there is plenty of blame to go around for what could prove to be the waste of virtually a full year of the Congress's time - when the nation could instead have improved both its fiscal standing and the health care of many millions of Americans.

First, we can consider why there are no good options for the President's team. Then, we can think about where the process should go in the coming weeks and months.

The simplest approach discussed in the press, and by many advocates of the brand of reform on the table, would be for the House and Senate negotiators to rush to agreement, and for the Senate and the House to pass that compromise before the new Massachusetts Senator is signed, sealed and delivered. This option one was summarily rejected by the President and by several (more than enough) majority Senators. However many voters have accused the Congressional majority of arrogance already, their numbers surely would swell by orders of magnitude if the Senate used the vote of a departing appointed Senator to slip a momentous and controversial piece of legislation under the wire. If future election results alone were the criterion for judgment, this option likely would be among the least attractive to the Senate majority.

Option two, put forward by those who favor specifically the already passed Senate bill, would be for the House simply to pass that bill and send it on to the President. This option, also, has been summarily rejected. There are several highly contentious issues between the House and the Senate. Abortion is only the most enflamed. The House taxes high-income individuals; the Senate taxes high-value employer-finance health-insurance plans. The House establishes a national health-insurance exchange; the Senate uses state exchanges. The list could go on. The House would not simply roll over and accept the Senate bill; any attempt to do so would shed votes quickly from both the majority's political left and its political right.

From which evolved option three: Have the House pass the Senate bill and a "reconciliation" bill to change the Senate bill into an acceptable compromise between the House and the Senate positions. (Option four, coming in a moment, will be to discard the bills thus far and instead to enact a "reconciliation" bill that embodies the entire reform.) A reconciliation bill can be passed by a simple majority - not a 60-vote supermajority - in the Senate. Sounds like magic. So what is a "reconciliation" bill?

Condensing the fully detailed book-length explanation into a few paragraphs: A reconciliation bill is a privileged budget bill that can be permitted through enactment of a budget resolution. A budget resolution, of course, is the non-binding budget blueprint that the Congress passes at the beginning of its budget process in most years. (The Congress has failed to produce a budget resolution in only a few contentious years.) Last year, for the current fiscal year of 2010, the Congress passed its budget resolution, and in that resolution did permit a reconciliation bill to achieve deficit-neutral health-care reform.

A budget reconciliation bill is not subject to Senate filibuster; by law, Senate debate is limited to 20 hours on an original reconciliation bill, and 10 hours on a subsequent conference report. Therefore, there is no need to muster a 60-vote supermajority to terminate debate. Hence the clear attraction of reconciliation to health-reform advocates who want to get a bill through a Senate without a 60-member majority.

The process of budget reconciliation was created in the enactment of the Congressional budget process in 1974. Reconciliation was recognized at the time as a short-cut of the normal Senatorial legislative process, believed to be necessary because of the difficulty of making potentially necessary but painful budget choices with a supermajority requirement. Senator Robert Byrd (D-WV) was involved in the creation of the budget process, and was well known then, as now, as a fierce protector of the prerogatives of the Senate. (That is the United States Senate - although Senator Byrd is an equally avid scholar of the Roman Senate, and can hold forth at length on its procedures and prerogatives.) Thus, Senator Byrd was predisposed against parliamentary short-cuts for budgetary convenience.

However, to his eternal credit, Senator Byrd recognized that the time could come when only a simple majority would be willing to agree to necessary tax increases and spending cuts. Accordingly, he crafted a compromise under which reconciliation could be invoked, but its uses would be limited strictly. However, the terms of that compromise are far less favorable to a reconciliation bill than is typically appreciated. Two restrictions (there are more) are particularly important now. First, although the time for Senate debate of a reconciliation bill is limited, the number of amendments is not. So opponents of a reconciliation bill can file a large number of amendments and attempt to wear down the proponents that way. Second, all provisions of a reconciliation bill must be budgetary in nature. Thus, purely regulatory provisions are subject to a point of order and can be stricken from the bill.

These restrictions on and complexities of a reconciliation bill make it an extremely awkward vehicle in the context of health reform.

Some advocates would ask the House to pass the Senate bill now, and fix it with a reconciliation bill later - perhaps much later. This option would be particularly attractive to those who believe that health reform has become a political liability, but that failing to pass health reform after all this time is an even bigger political liability. From that perspective, the most important provisions of the bill - including the requirement for individuals to purchase insurance, and the payment of subsidies so that they can afford it - do not take effect for years. Thus, enactment of the Senate bill gets the issue off of the table, and allows the Congress to shift its focus to more popular issues, like economic recovery. Reconciliation can come much later, when public sensitivities have died down somewhat.

There are at least three problems with that strategy. One, asking the House to accept the Senate bill without specified compromises would be very nearly as painful as asking the House to accept the bill with no compromises at all. Any such agreement would have to be spelled out in detail and in advance. And for that matter, the interests that the House would seek to satisfy would not be appeased by an unpassed reconciliation bill; they would want to see the compromises that they want written in law, because anything can happen between drafting and enactment. So the Congress almost surely would need to pass both the Senate health bill and an additional reconciliation bill before moving on to any more politically attractive legislative agenda.

And how long would it take to complete a reconciliation bill to implement compromises to the Senate health bill? On the surface, 20 hours of Senate debate seems a short time. In reality, the process would be far from quick. First, the compromises must be struck. That process was ostensibly complete for changes to the health reform bill. But because of the restrictions imposed on a reconciliation bill, some changes will be needed. In some instances, accepted compromises may not be allowed within a reconciliation bill (because they are not "budgetary"). Accordingly, new deals may need to be struck. This may not be a lengthy process, but it will not be instantaneous.

Then, the reconciliation bill must be drafted, which will take some time, particularly considering the parliamentary requirements of reconciliation. Next, it must be scored by the Congressional Budget Office, which will take one to two weeks. Then, it must be passed by the House. That process can be relatively quick. But then it must be passed by the Senate. Realistically, the minority in the Senate will challenge every line of the bill for alleged noncompliance with the parliamentary rules of reconciliation. Those points of order need not, and realistically will not, be limited to those with demonstrable parliamentary merit. Resolving those points of order and appeals to the chair of the Senate parliamentarian's rulings, requiring roll-call votes, will take time outside of the 20 hours of formal debate. In addition, the Senate minority will file hundreds of amendments. Roll call votes on those amendments, and even brief debate on many of them, will take hours of time outside of the 20 hours of debate. (Add in, of course, the time required for the entire bill to be read aloud, if the minority - predictably - refuses to give consent to forgo that ritual.) If the Senate amends the reconciliation bill at all - and the minority will make a strategy of proposing amendments that the majority will not want to oppose, if only for political reasons - then the bill will have to go back to the House to be passed one more time.

In short, those who believe that an additional reconciliation bill will be a quick and simple way of enacting exactly the health policy that the Congressional majority wants, circumventing the requirement for a 60-vote majority in the Senate, likely will find the process less attractive than they expect. It will not be an easy way for the majority to enact their preferred health reform and then pivot quickly to other issues that will steal the public's attention.

So how about procedural option four - skip House passage of the Senate health bill, and simply pass the entire health-reform program through reconciliation? That would remove one step from the process, and it would save the House the indignity of accepting the Senate bill without change, if only for short time before the deal is cut through reconciliation. However, remember that a reconciliation bill can include only budgetary issues. Regulatory provisions, such as prohibiting insurers from excluding applicants with pre-existing conditions, cannot be included in a reconciliation bill. Thus, reconciliation would be a poor vehicle to carry an entire health-reform program.

So that pretty much excludes Congressional majority procedural options one through four. Press accounts also have raised an option five: pass the pieces of health reform that have bipartisan agreement in a series of smaller individual bills. After all of the attacks on complex, thousand-page bills containing hidden political payoffs, this option certainly seems attractive. But it has its own fatal flaws. To illustrate, one short, simple bill that has been advanced by advocates of this option has been prohibiting insurance companies from discriminating against people with pre-existing conditions. But that change cannot be made in isolation. If insurers must accept all applicants regardless of health conditions, then people will have strong incentives to go without insurance until they get sick. Insurers will be required to cover every sick person, while healthy people save their premium dollars until the moment they need insurance. Clearly, that business model for health insurance will not work. To be viable, a pre-existing conditions prohibition must be coupled with a mandate that individuals must purchase insurance. An individual mandate is not viable without subsidies so that all individuals can afford insurance. Those subsidies require raising virtually all of the revenue that was required for the current health-reform bills. So what was to be a short and narrowly focused health-insurance reform bill has quickly grown into the monster that American voters have come to know and not love.

So is there an option six? Some policymakers, even in the majority, have been quoted as advocating a not-yet-specified less-ambitious bill - perhaps not achieving near-universal coverage right away - that would have bipartisan support. For those who have followed CED's proposal for health reform, there should be an obvious candidate. As we recommended in chapter five of Quality, Affordable Health Care for All: Moving Beyond the Employer-Based Health-Insurance System, the Congress could take the first steps toward a far superior health-insurance system by (1) establishing a health-insurance exchange - a virtual marketplace for individuals to choose among competing private health-care plans, like the Federal Employees Health Benefits Plan; (2) creating very strong incentives for all small firms (perhaps 100 employees and below) that choose to offer insurance to buy through the exchange; and (3) over time, as the exchange proves itself, gradually increasing the number-of-employee threshold so that true competition drives insurers and health-care providers to improve quality and control cost in an ever-larger segment of the overall market. Eventually, all firms can be directed to purchase their private health insurance through the exchange, health care will be more value-driven, and the country can choose to raise the necessary revenue to deliver insurance to all.

This path requires an organizing role in the health-insurance market for the federal government. CED does not advocate actual provision of insurance by the federal government, either as a "public option" or as a "single-payer" system. But public organization of the private market is necessary because of the dangers of adverse selection in insurance - unless risks are divided equitably, healthy people will seek to escape risk pools that include sick people, and the costs of insurance for those who are sick will explode. Those who are skeptical of government must come to accept this inescapable reality, which is reflected in successful government organization and regulation of other markets. But we believe that it is private insurers who should compete on this level playing field, and that competition in health care and insurance can be as effective as private competition in other markets at improving quality and driving costs down.

Just as there is plenty of blame to go around in the current impasse in health reform, so there can be more than enough credit for all in a new and more pragmatic approach - even if it continues for the balance of the year. Americans often say that they want the health care that their Members of Congress get. The CED proposal would give the people exactly what they ask for - and it would put incentives to work for higher quality and lower cost, while extending insurance coverage to all. It is not too late to take the best approach.

Commentaries are the views of the authors and do not necessarily represent policies of the Committee for Economic Development.