Policy Update 2010: What's Next for Health Care Reform After the White House Summit?

26 February 2010 Publication
Author(s): Theodore H. Bornstein

Legal News Alert: Public Policy

Policy Update 2010: What’s Next for Health Care Reform After the White House Summit?
The extraordinary televised summit between President Barack H. Obama and congressional leaders at Blair House on February 25, 2010 was not the touted meeting of the minds to hammer out an agreement, but rather what one observer called a “kabuki dance” designed to further stake out positions on the issue. The result of the summit is that Mr. Obama and congressional Democratic leaders will seek to push ahead and pass a health care bill using the controversial strategy of reconciliation — intended to allow consideration of a contentious budget bill without the threat of filibuster — and congressional Republicans will rebuke them for pursuing this path despite voter opposition and several recent electoral losses attributed to the bill and its impact.

While Republicans said Democrats should scrap this bill and start over, the president and Democrats said it was important to act now on the issue and that waiting to craft new legislation would waste valuable time. At the end of the summit, Mr. Obama made it clear that unless Republicans made significant and unexpected compromises, Democrats would press ahead to pass a bill that would follow the blueprint of the $950-billion, 10-year health care plan he outlined on February 22, 2010 and would do so using reconciliation. Under the budget reconciliation strategy, the U.S. House of Representatives would pass the U.S. Senate bill as-is, sending it directly to the president for signature. The House would then pass a separate corrections bill that includes some of the compromises already informally agreed to by party leaders. The Senate would then bring up the corrections bill under reconciliation rules, which require only 51 votes as opposed to the 60 votes needed to break a filibuster. The budget reconciliation approach has its own obstacles — the procedure is intended to be used strictly for passing tough laws that reduce the deficit, and the Senate parliamentarian needs to determine whether the bill meets this definition. This sprint to the finish line will likely develop over the next month.

Members of the Foley's Government & Public Policy Practice provide insight below on the policy and political impacts of the summit and what to expect in the coming days and weeks.

Policy Impact
At the end of the day-long health summit discussions, Mr. Obama gave congressional Republicans a six-week deadline to resolve their differences with Democrats, or the Democrats would move on without them. Expecting no change in the Republicans’ position, Democrats are preparing for a go-it-alone strategy using a complicated budget procedure known as reconciliation. The final product would likely be based on the Senate-passed bill with some changes included to appease liberal Democrats in the House. The president’s proposal, released on February 22, 2010, reflects such a compromise and will be the most likely final legislative product.

The president’s proposal would cost roughly $950 billion over 10 years and extend coverage to 31 million uninsured Americans. Based largely on the Senate-passed bill, the proposal would include popular provisions such as banning insurance companies from denying coverage based on pre-existing conditions, rescinding coverage when patients get sick, and setting premium rates based on gender. It also would include some less popular provisions such as requiring individuals to carry insurance, but it reduces the fines proposed in the Senate bill from $750 to $695 annually. Employers would not be required to provide coverage, but would be required to pay a $2,000 fine for each employee that qualified for a federal subsidy, increased from the Senate’s $750 fine.

The plan would eliminate a gap in Medicare prescription drug coverage by 2020, paid for in part by a $90-billion contribution from the pharmaceutical industry — $10 billion more than previously agreed to by the Pharmaceutical Research and Manufacturers of America (PhRMA). The plan eliminates a special deal for Nebraska that would have fully covered the expansion of Medicaid — also known as the “Cornhusker Kickback” — and instead extends the same deal to all 50 states for fiscal years 2014 – 2017.

The proposal would create state-by-state health insurance exchanges, to the dismay of House Democrats who prefer a national exchange. It also includes a policy to allow the U.S. Department of Health & Human Services to require insurers to make up, through lower premiums or rebates, what the department might consider an unreasonable and unjustified rate increase.

The proposal raises the threshold for a tax on high-cost health plans to $10,200 for individuals from $8,500 and $27,500 for families from $23,000. The president’s plan does not include a government-sponsored health insurance plan, or “public option,” championed by House liberals.

In addition to the $90-billion tax on pharmaceutical companies, the plan includes a $20-billion excise tax on medical device companies. The plan also would require drug, device, and medical supply companies to disclose any gifts given to doctors, and would require doctors with financial interests in medical imaging services to inform patients that they can obtain a referral from another physician.

The president has already prepared a more modest version of the bill as a back-up plan in case Democrats are unable to move a larger comprehensive bill. The president’s fallback plan would cost about $240 billion over 10 years and cover about 15 million more people. The fallback proposal would offer a modest expansion of Medicaid and the Children’s Health Insurance Program, and would allow young adults to remain on their parents’ insurance plans up to age 26.

Michelle A. Leeds, Public Affairs Assistant
Former staffer for Rep. Grace Napolitano (D-Calif.)

Democratic View
The Senate leadership, Budget Committee, and many rank-and-file members are intent on passing health reform under reconciliation sometime in March 2010. Democratic leadership and a growing number of rank-and-file Democratic senators believe the political risks in disappointing the base and looking impotent to the middle associated with failure to pass health reform are greater than the risks inflaming the Republicans and the growing numbers in the middle who are skeptical about the so called "government takeover of health care."

The strategy involves a very complicated and risky scenario of the House passing the Senate-passed health bill, immediately followed by the House passing a reconciliation bill that repeals the objectionable features of the Senate-passed bill and adds provisions desired by House members and president. The Senate Budget Committee would then "bless" the House-passed bill as a reconciliation bill. The Senate Finance Committee and the Senate Committee on Health, Education, Labor & Pensions would be by-passed, and the reconciliation bill would go directly to the Senate floor, where only 51 votes would be required to pass.

Ironically, the biggest stumbling block to a successful reconciliation strategy is the House. The original House bill passed with only 220 of 435 votes. Since then, two Democratic House members who voted for the bill have left: Rep. Robert Wexler (D-Fla.) resigned and Rep. Jack Murtha (D-Penn.) died. Moreover, Rep. Neil Abercrombie (D-Hawaii) is planning to resign his seat to jumpstart his gubernatorial race. The House Democratic leadership will have a very tough time persuading its members to cast another set of difficult votes for an unpopular health reform package.

By almost all accounts, health reform legislation will need to pass before Congress recesses at the end of March 2010. The Democratic leadership is still using the March 2009 Congressional Budget Office baseline budget assumptions in making cost projections for reconciliation. It will have to use March 2010 baseline assumptions once the FY 2011 budget resolution is passed in late March or April, 2010, which will skew the numbers for health reform and higher education that also will be included in the reconciliation bill.

Theodore H. Bornstein, Partner
Former chief of staff for Sen. Herb Kohl (D-Wisc.) and Rep. Les Aspin (D-Wisc.)

Republican View
The Republicans made use of what many were describing as a set-up as their first public opportunity to send a consistent message on their ideas for health care and were able to use the president's own bully pulpit to do so. This bit of public relations maneuvering has helped them immensely, as they appeared cooperative and respectful of the office while disagreeing with the president on a series of bills that a majority of Americans have already rejected. Right from the beginning, the Republicans demanded that the president rule out using the extremely complex and complicated reconciliation process.

The Democrats and the president faced a higher hurdle in their efforts than the Republicans, as they have to convince a larger group of unfavorable voters to switch positions and support the concept of a sweeping bill that fundamentally changes how health care is delivered in the country. It is apparent the Democrats are moving the current legislation, which axes the public option, and extends the Nebraska fix to all the states because if they do not, their base will walk away from them in upcoming elections. The Republicans reinforced their opposition to the bill and further defined for the public why opposition is the correct choice. They also let voters know that they, too have ideas about how to address a limited number of very specific problems with the health care system without trying to remake the entire system and overreach, as their colleagues across the aisle have done. The public forum with the president gave the Republicans an unprecedented opportunity to get their message across to the public. The much-ballyhooed "Party of No" appellation used by the Democrats and the mainstream media proved not to be accurate as Republicans were able to show on that they are the "Party of Reform —But Not Like This."

At this point, it is unclear if the Democrats have the votes to succeed without any Republican support. The reconciliation process is complicated and requires numerous parliamentary maneuvers and votes to pass the House and Senate. The Democrats have lost two members who voted for the bill last year, and another is ready to leave the House. The only Republican who voted for the bill will not support the weak anti-abortion language in the Senate bill. Thus, four votes have to be changed, not to mention Rep. Bart Stupak (D-Mich.) has said he has 15 to 20 Democratic "no" votes unless his strong pro-life amendment is made a part of the Senate bill.

It has been widely reported that if the current modified Senate bill fails, the White House has prepared a more modest plan according to insiders. This plan would require insurance companies to allow people up to 26 years of age to stay on their parents' plan and would expand two federal/state plans — Medicaid and the State Children’s Health Insurance Plan. This may have a chance of obtaining some Republican support and could avoid the Stupak problem.

Philip G. Kiko, Of Counsel
Former general counsel/chief of staff for the House Judiciary Committee and counsel to Rep. F. James Sensenbrenner (R-Wisc.)

Political Impact
The health care summit — as any event in Washington — was as much about politics as policy and in this aspect, Republicans were able to use the moment to lay out their disagreements with the Democrat-authored bill in a way that echoed public opinion. By a margin of 49 percent to 43 percent, those surveyed in the USA TODAY/Gallup Poll (http://www.gallup.com/poll/126191/Americans-Tilt-Against-Democrats-Plans-Summit-Fails.aspx) released on the day of the summit, opposed passage of a health care bill like the three versions that either Mr. Obama or congressional Democrats have drafted — and those opposing the bill hold their views more strongly than the supporters do. Moreover, use of the reconciliation strategy was opposed by a majority of the poll respondents (52 percent to 39 percent) and should serve as a warning to the Democratic Party — especially those seeking re-election in November — that forcing through an unpopular bill in an even more unpopular way could put more Democratic House and Senate seats into play in an already bad year for incumbents. However, creation of new jobs and improvements in the nation’s economy — still the biggest issue for voters — would significantly boost Democratic prospects in the fall. Republicans would be foolish to assume that nothing will change in the next eight months.

Anyone hoping for a made-for-TV moment where the groups forged an agreement failed to see the fact that this was simply a PR event to try to lay out the positions for the debate on a bill. However, the viewpoint of Americans prior to the summit was vindicated by the lack of results and may speak more to the fact that a majority opposes making a deal based on any of the Democratic proposals. Three of four Americans in the February 25, 2010 poll predicted Mr. Obama and congressional leaders would not reach an agreement, and the poll found that the public is not clamoring for such a deal.

In the wake of the sudden retirement announcement of Sen. Evan Bayh (D-Ind.) on February 15, 2010, political experts are entertaining a heretofore unbelievable prospect: a Republican takeover of the Senate after the 2010 midterm elections. While the Democrats hold a 59-41 majority, requiring the Republicans to seize 10 seats to wrest control away, the political environment is looking bleaker for the Democrats. Already, in swing states such as Arkansas, Colorado, Pennsylvania, and Nevada, the Democratic incumbents are behind in the polls. Other Democratic retirements in Indiana, North Dakota, Illinois, and Delaware show further weaknesses. The souring environment also is causing the GOP to take another look at other seats in more Democratic-leaning states such as California, New York, Washington, and Wisconsin. As of February 24, 2010, the influential Rothenberg Political Report (http://rothenbergpoliticalreport.blogspot.com/) listed eight Democrat-held seats as either “Toss-ups” (four ) or “Leans Republican” (four) and only four Republican-held seats as “Toss-ups,” with none listed as “Leans Democratic.” The report further notes that the GOP “seems most likely to net 5-7 Senate seats” and sees an eight-seat gain as “certainly possible.” However, even with this best-case scenario for Republicans, such a gain would leave the Democrats still holding a slim 51-49 majority.

In the House, where all 435 seats are up, the prospects for a Republican takeover are very strong across the board. A recent analysis on CQ Politics noted that “of the 49 most competitive House seats in this election, 42 are held by Democrats and only seven by Republicans." And in a February 18, 2010 interview on National Journal, noted election analyst Charlie Cook was quoted saying “it's very hard to come up with a scenario where Democrats don't lose the House. It's very hard. Are the seats there right this second? No. But we're on a trajectory on the House turning over.” Added to the high-water House seats gained by Democrats in Republican-leaning districts in 2008, there are a large number of seats that will be prone to takeover this fall. There is still time for this trajectory to be changed, and this effort starts with one word: jobs.

Democratic leaders must hope to deal effectively with the health care bill now, and then complete Mr. Obama’s plan to pivot the national debate back to job creation and economic recovery as promised in the State of the Union. The election will be primarily about jobs and the economy no matter what happens with health care. If the economy can demonstrate a visible positive change with jobs being added and better economic prospects going forward, Democrats will be able to turn the debate over the effect of the stimulus and increased spending on its head and have a powerful weapon against Republican candidates, who have opposed these efforts.

Mr. Obama is already assuming a campaign footing, as reports indicate he is setting up re-election campaign operations in Chicago to be headed by a top White House deputy. This suggests that the president is fully ready to use his policies to drive the political campaign aimed at assisting Democrats with the mid-term elections and to get ready for 2012. As we have seen, Mr. Obama’s campaigning skills are formidable, and the Republicans must respect him and the Democratic Party, who are now well aware of the dangers that loom and will not be taken by surprise as in Massachusetts.

Robert C. Geist, Jr., Public Affairs Director
Former press secretary for Reps. Frank LoBiondo (R-N.J.) and Porter Goss (R-Fla.)

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues. If you have any questions about this alert or would like to discuss this topic further, please contact your Foley attorney or any of the following individuals:

Theodore H. Bornstein
Washington, D.C.

Robert C. Geist, Jr.
Washington, D.C.

Philip G. Kiko
Washington, D.C.

Ladonna Y. Lee
Washington, D.C.

Michelle A. Leeds
Washington, D.C.

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