Chairman's Mark of Finance Committee Bill, and Proposed Amendments

Today, the Senate Finance Committee is continuing to mark-up the Committee’s health care reform bill. In total, the Committee is considering 564 amendments (see New Health Dialogue’s live twitter feed here) to the “Chairman’s Mark” put forward by Senator Max Baucus. As CRFB has shown, the original version of that Mark would reduce the ten-year deficit by around $50 billion and the tenth year deficit by around $16 billion. Beyond the ten year window, the Congressional Budget Office expected the bill to go even further in reducing deficits, doing so to the tune of half a percent of GDP in the second decade.

Yet even before debate began, Senator Baucus accepted a number of amendments into his Mark – many of which would increase the legislation’s net costs. Among the larger changes include:

• An increase in premium subsidies so they limit premiums to between 2 and 12 percent of income, as opposed to 3 and 13 percent (cost unknown)
• An increase in out-of-pocket-cost subsidies for those making between 200 percent and 300 percent of the poverty line (cost unknown)
• A reduction in the maximum penalty for not carrying an insurance from $3,800 per family to $1,900 per family (cost unknown)
• Funding for a re-insurance program for employer-sponsored retiree health coverage (cost of $5 billion)
• A number of changes to the excise tax on high cost insurance plans, including an increase in the rate from 35 percent to 40 percent, new rules which index the threshold above which the tax is paid at one percentage point above inflation (as opposed to at inflation) each year, and a higher threshold on taxation for plans which cover individuals over 55 or in high-risk professions (cost of $10 billion)
• The elimination of annual fees on clinical laboratories (cost of $6 billion)
• The imposition of higher annual fees on insurance companies (gain of $5 billion)
• New rules restricting the tax deductibility of medical expenses so that they only qualify after surpassing 10 percent of income, rather that 7.5 percent under current law (gain of $22 billion)

Although the Congressional Budget Office has not estimated the effects of these changes, they are likely, on net, to eat up the entire on-budget surplus ($28 billion) produced by the original bill. And two of the provisions in particular – the one which increases the size of insurance subsidies and the one which calls for more rapid indexing of the excise tax threshold – are likely to demonstrably worsen the long-term impact of the bill.

As the amendments process continues, there will surely be temptation to expand the new benefits within the bill and minimize any new taxes or spending cuts. To help put us on a sustainable fiscal and economic path, though, health reform legislation must do the opposite.

Rather than spending away the bill’s projected surpluses, the Finance Committee should be increasing it. And more importantly, it should be adding measures which have the potential to bend the health care cost curve over the long-run.

Chairman Baucus took an important first step in proposing a fiscally sustainable health reform bill. Now is not the time to move backwards.