Health Care Reform: House Vs Senate

The US House of Representatives and the US Senate versions of the health care reform bill have grown further apart. Although a bill containing a public option has passed in the House, Senate Democrats announced that they have agreed on a package of provisions to replace the public option.

According to a CNN report on December 10, two unnamed Democratic sources purport that the new proposal will be replacing the public option with a not-for-profit private insurance option that will be overseen by the federal Office of Personnel Management. This new option will largely match the health plan currently offered to federal employees.

Another provision in the Senate bill is to open up Medicare coverage to persons 55 years or older, who would be able to buy into the program. Although specific costs of the program have not been released as of this writing, opponents of this provison are concerned that persons in this age group would have to pay the entire premium for coverage, which may be more costly than a private insurance premium. How much of the bill will actually be changed is unclear, because Senate leaders have not made all details of the revised plan public.

Other important differences between the House and the Senate bills include details on abortion, Medicaid expansion, individual and employer mandates, illegal immigration, cost, and financing.
 Abortion. Whether abortion will be covered under any government-sponsored plan is hotly debated. However, it is expected that any mandates that require public funding of abortion would be strictly limited (to cases of rape, incest, or danger to the mother’s life).

Medicaid. Both the House and Senate bills significantly expand the Medicaid program. In the House bill, individuals with an annual income of up to 150% of the poverty line, or about $33,000 for a family of 4, would be eligible for Medicaid, which is very similar to the Senate plan’s income levels of 133% of the poverty line for individuals, or $29,000 for a family of 4. 

 Individual and employer mandates. For persons or businesses required to purchase health care coverage under the new plan, there are greater penalties for noncompliance under the House bill. For individuals who fail to buy coverage, the maximum fine under the House bill would be 2.5% of the person’s annual income. The penalty under the Senate bill would be $95 in the first year, increasing to $750 by 2016. Both versions require that parents must secure coverage for children up to 18 years of age, and both versions have a hardship exemption for low-income Americans.

Employers with a payroll of more than $500,000 would be required to provide health insurance for all employees under the House bill. The penalty for noncompliance would be up to 8% of their payroll. The Senate bill imposes a penalty fee of $750 per employee for all companies with more than 50 workers that rely on government subsidies to purchase health care coverage. For small businesses, the self-employed, and the unemployed, both House and Senate versions of the bill have adopted health care exchanges, which would allow these groups to pool resources and purchase less costly coverage. The major difference between these versions is who will provide the exchanges; the House proposes a national health insurance exchange, and the Senate supports state-run exchanges.

Illegal immigrants. Persons in this country illegally are not eligible for any government funds or subsidies under either plan. However, the House bill requires fewer identity verifications than the Senate bill, making it easier for undocumented workers to purchase health insurance.
 Cost. According to the Congressional Budget Office, the House bill will guarantee coverage for 96% of Americans and cost more then $1 trillion over the next 10 years. The projected costs of the new Senate plan have not yet been released, but the original Senate plan covered approximately 94% of Americans and cost $848 billion.

 Financing. The financing of the final plan, whatever that may be, promises to be the most debated issue. A 5.4% tax surcharge on individuals earning more than $500,000 per year and families earning more than $1 million, coupled with spending limits on Medicare and Medicaid, will finance the House bill. The Senate bill will also limit the costs of Medicare and Medicaid but will also include a range of tax increases and new fees.

For example, under the Senate bill, Medicare payroll tax would increase from 1.45% to 1.95% for individuals earning $200,000 a year and for couples earning $250,000. Also, insurers who provide “Cadillac plans,” or costly health coverage, would be taxed 40% on all plans with annual premiums of more than $8500 for individuals and $23,000 for families. The Senate plan would also impose a 5% tax on all elective cosmetic surgeries and mandate new fees for insurers and pharmaceutical manufacturers. This new revenue stream is projected to exceed $200 billion.