Health Care Reform will Add to Medicaid's Importance; Help Maryland

Medicaid, the little health program that could, has already grown to be the single largest provider of health coverage in the nation. Over 60 million Americans, mostly children, receive their health coverage through Medicaid. Though it covers more people, Medicaid is often overshadowed by the more well known and more popular Medicare. Part of that lack of recognition stems from the fact that Medicaid is a state/federal partnership. The federal government establishes program regulations and provides at least half of the funding, but states are required to administer the program and have a certain degree of freedom to tailor it to their needs. In that regard Medicaid is actually 50 different programs.


If health reform is enacted (including Senate passage of the reconciliation bill), Medicaid will likely eclipse Medicare in name recognition. The legislation pending in Congress seeks to insure an additional 32 million Americans - and half of them would receive coverage via Medicaid. As currently structured, federal regulations limit the program's availability to childless adults - no matter how poor. But health reform would expand Medicaid to every American with income at or below 133% of the federal poverty line. This change will bring millions of new people into the program. Many states were concerned that the influx of new recipients would overwhelm already strapped budgets – remember, states share in the funding.

The legislation that would reconcile House and Senate differences addresses that concern. According to the proposed bill federal Medicaid matching payments for the costs of services to newly eligible individuals will be provided at the following rates: 100% in 2014, 2015, and 2016; 95% in 2017; 94% in 2018; 93% in 2019; and 90% thereafter. So states only absorb 10% of the cost. Some states have chosen to cover these adults, largely at state expense, and the bill will help them as well by reducing the state share of the costs by 50% in 2014, 60% in 2015, 70% in 2016, 80% in 2017, 90% in 2018. In 2019 and thereafter, these states would bear the same state share of the costs of all other states.

This could help reduce current Medicaid costs for states like Maryland and Massachusetts. In 2007, Maryland expanded coverage to childless adults with incomes up to 116% of poverty. An analysis conducted by the state's Department of Legislative Services (DLS) in January estimated the Medicaid expansion and enhanced funding in the Senate version of health reform would save Maryland roughly $135 million per year between 2014 and 2016 (due to the extra federal money). State costs would then begin to rise to around $200 million per year between 2017 and 2019 - owing to increased enrollment. Based on DLS estimates the expansion would impact 133,000 Marylanders - $200 million in costs would mean the state would be covering these folks for the bargain price of $1,500 each. The state would incur additional savings as well, the state maintains an uncompensated care fund for hospitals to offset the cost of covering the uninsured. Those costs topped $1 billion in fiscal 2009. The increased coverage would reduce those costs.  The state also manages a high-risk pools called the Maryland Health Insurance Plan (MHIP) - MHIP cost $111 million. MHIP would no longer be needed and those funds would be freed.

It is no secret that Medicaid saves money by paying providers less money than they would receive from Medicare or private insurance. In many states providers may earn as little as 35-45% of the usual rate for Medicaid patients. In the past year, 38 states (Maryland included) cut provider payments to try and squeeze savings out of Medicaid. This caused many to worry that the expansion of Medicaid would accomplish little as the newly insured would not be able to find participating doctors.

The reconciliation language requires that Medicaid payment rates to primary care physicians be no less than 100% of Medicare payment rates in 2013 and 2014 (an presumably thereafter). Given that many states could not afford such an increase, the federal government would provide 100% federal funding for the costs to States of meeting the requirement.

In short, the proposed health reform holds the potential of transforming Medicaid into a true national health insurance model. The expansion of the program to new, higher income individuals, and the provision of dramatically improved federal funding, holds the promise that Medicaid may soon become a federal responsibility – freeing states form the tremendous cost burden and freeing Americans from a situation where their access to health care depends on their state of residence.

Full text of the bill is here - Part C. Sections 1201 and 1202 directly address Medicaid.

The House has Posted the Health Reform Reconciliation Bill

The 153-page bill would make several changes to the Senate bill, including:

• Increase the tax credits for middle-income families who buy insurance.
• Reduce the penalty for not buying insurance from $750 to $695. But the bill also requires some people to pay a share of their income as a penalty and that number was raised from 2 percent to 2.5 percent.
• Close the gap in Medicare prescription drug coverage by 2011 and give seniors who fall into the gap this year a $250 rebate.
• Eliminate the Cornhusker Kickback (the special Medicaid deal for Nebraska) and covers 100 percent of the increased Medicaid costs of all states until 2016 and decreases each year thereafter.
• Though it appears to stop at a 10% state share, this is a significant development that should help already burdened states.
• It will also provide an enhanced federal match for states that have already expanded coverage to childless adults. This could mean millions of dollars for states like Massachusetts and potentially extra money for Maryland.
• Require that doctors that care for Medicaid patients be reimbursed at the full rate.
• This is also significant and should bring new doctors into Medicaid. The Feds will cover 100% of cost to bring physician pay in line with Medicare.
• Delay the tax on high-end insurance plans in keeping with the deal Democrats struck with the labor unions. However, it does lower the index at which plans will be taxed, making it likely that more plans will be affected over time.
• This change directly impacts Social Security revenue and may well be rejected by the Senate parlimentarian during the reconciliation process - if so, unions will scream.
• Impose a Medicare tax on unearned income for families making more than $250,000.

 More detail via Politico (the source for this posting).

Why Process Matters

Update: Realizing that it was undermining the credibility of the vote, Democratic leaders in the House have announced that they will not use the "deeming" procedure to pass health reform. This means that no one can question the process by which the Senate bill becomes law (if it is passed). Though the changes being made via reconciliation still represent a violation of process, the decision to abandon deeming goes a long way toward respecting the process of lawmaking.

With all of the talk about "deeming," "self-executing rules," and reconciliation proponents of health care reform have dismissed everyone who engages in a discussion of "process" as being opposed to reform and trying to avoid a real discussion of "the issues." As a proud advocate of health reform I reject such accusations and further contend that my obsession with "process" is a direct result of my support for health reform. In short, health reform is too important to passed in any manner other than one which embraces a clean, open, and honest debate. That means no parlimentary tricks, no rule making sleight of hand - no action which could ultimately undermine reform.

As a professor of public policy my students are introduced early to what is called the Policy Process Model - a six stage description of the process through which policy is created: problems are defined, policies considered, implemented, evaluated, and changed (if need be).  The third step in the process is one that is all too often overlooked - Policy Legitimation. According to public policy scholars Michael Kraft and Scott Furlong:

"Legitimation as a step in the policy process is at once both simple and complex. It is simple when it merely means that a recognized authority considered and approved a policy proposal. A bill becomes a law at the national level if both houses of Congress approve it and the president signs it, but does that process necessarily imply that the measure was legitimated?"

That's the simple, School House Rock, process of legitimation - but the authors continue:

"The complex view is that legitimation requires more than a majority vote... Policy legitimacy... flows from several conditions..." such as "demonstrable public support... and a full and open airing of the issues and controversies."

Kraft and Furlong conclude that without a sense of legitimacy:

"Policies... face serious hurdles. They may well fail to command public support, affected interest groups may... challenge them in court, and their implementation could be adversely affected."

I dwell quite a bit on the issue of legitimation in my classes and cite the examples of the Nuclear Waste Policy Act of 1982 and the Medicare Catastrophic Coverage Act of 1988 to illustrate why the simple process of legitimation is insufficient. If the public doubts the legitimacy of a legislative act, if there is any reason to question the decision-making process, a legally enacted bill (even two very good pieces of legislation) can ultimately fail.

Health care reform is one of the most important issues of our time. Health care spending is bankrupting our nation, our citizens, and 45 million Americans lack even basic coverage. The legislation pending before the House of Representatives marks the most substantial social reform since the creation of Medicare and Medicaid in 1965 and is equally as import. But if Democrats opt to use parlimentary trickery to pass health reform they risk everything they hope to accomplish. Relying on reconciliation to bypass the Senate's filibuster rules and now talk of "deeming" the Senate bill to have passed in the House without a true up or down vote only serve to further undermine already abysmal public support for the legislation. Members of the public may rightly ask 'If this legislation is so good, why are all of the normal rules of process being cast aside?'.

Aside from the public's reaction the "deeming" process would put the entire legislation in question as it would certainly face a court challenge. As reported by Politico, Alan Morrison, a professor at the George Washington University Law School who has litigated similar issues before the Supreme Court warned “If I were advising somebody," on whether deem and pass would run into constitutional trouble, "I would say to them, ‘Don’t do it.’” Michael McConnell, a former federal judge on the U.S. Court of Appeals, argues that the use of deeming to pass the Senate bill and simultaneously pass the reconciliation bii likely violates Article 1, Section 7 of the Constitution. Said McConnell:

"Most of the time a self-executing rule is used to incorporate amendments into a pending bill without actual votes on the amendments, where the bill is then subject to a final vote by the House and Senate. That usage may be a dodge around House rules, but it does not violate the Constitution. I am not aware of any instance where a self-executing rule has been used to send one bill to the president for signature and another to the Senate for consideration by means of a single vote. Self-executing rules have also been used to increase the debt ceiling by virtue of adopting a budget resolution. That procedure is questionable, but because budget resolutions are not laws, this usage does not have the feature of using one vote to send a bill to the president and at the same time to send a different bill to the Senate."

So contrary to the claims that deeming and self-executing rules are common, or that they have been sanctioned by the courts, the simple fact is that they have not. So the use in this instance, a bill so substantial, represents poor judgement and certainly will raise questions of legitimacy.

House Majority Leader Steny Hoyer defended the use of the "deeming" approach by dismissing any need to worry about the rules of process. Said Hoyer, "We talk a lot about process in this town... 'So what?’ says the American public. What they’re interested in [is] ‘What result? What did you do for me and my family..." Congressman Hoyer is right and wrong - in most cases Americans do not care about process. In the past, the House of Representatives has used the deeming procedure on matters pertaining to House rules, it has been used to consider amendments to bills, there is a standing rule in the House to use deeming to raise the debt ceiling - but deeming has rarely been used to effect final passage of legislation. It has never been used to pass something as significant, and controversial, as comprehensive health reform. Americans do care about process - when they believe that it is being abused.

And the deeming approach is simply one more example of such abuse - it began with the decision to use reconciliation. The Constitution makes clear that the House and Senate must each approve a bill before it goes to the President. When they pass different versions of a bill they must reconcile those differences and if changes are made the new bill must be passed again by both chambers. The House and Senate passed different health reform bills last year, House and Senate negotiators were working on compromise legislation when Democrats lost their 60 seat filibuster-proof majority in the Senate following the special election to fill the late Ted Kennedy's seat in Massachusetts. Faced with the threat of a GOP filibuster in the Senate and a House that was unwilling to accept the legislation passed in the Senate, Democratic leaders decided that rather than abide by the rules of process they would instead have the House approve the Senate bill, but then use the budget reconciliation process to resolve key differences between the House and Senate bills. They essentialy decided to use reconciliation - a Senate budget process with limited debate that cannot be filibustered - to do an end run around the House/Senate conference process.

When party leaders discovered that many in the House were still unwilling to accept the Senate version they decided to explore the deeming process whereby House members would be asked only to vote on the House/Senate reconciliation fixes and if those fixes passed, the original Senate bill would be "deemed" to have passed.

If health reform passes as a result of the one-two punch of deeming in the House and reconciliation in the Senate there is little hope that it will ever be accepted as legitimate. It will face years of legal challenges and likely deeply entrenched public opposition. Worse, the manner in which the bill is being pushed may allow for errors or inconsistencies in the law that could weaken or undermine it in unanticipated ways. The normal process may cause delays and be fraught with obstacles, but it exists to protect the public and to promote sound legislation. In the end, Democrats will have turned the most important domestic policy issue of our time into a bill more toxic than the Nuclear Waste Act - and they will have only themselves to blame.

Reconciliation is Not an Acceptable Approach for Passing Comprehensive Health Reform

According to multiple news reports President Obama and Congresional Democrats will seek to pass health reform via the reconciliation process - bypassing the possibility of a filibuster and thereby needing only 51 votes in the Senate. Many reform advocates have been urging the use of the reconciliation process and several experts on Congress have come forward to argue that reconciliation is an appropriate process for the creation of comprehensive new programs. According to the Center for Budget and Policy Priorities “Congress has employed reconciliation many times to make major policy shifts.”

These shifts in policy included the passage of the Personal Responsibility and Work Opportunity Act of 1996 (welfare reform), the Economic Growth and Tax Relief Act of 2001 (tax cuts), the Jobs and Growth Tax Relief Reconciliation Act of 2003 (more tax cuts), and the creation of several health programs such as the health portability changes contained in the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), and the creation of the State Children’s Health Insurance Program passed as part of the Balanced Budget Act of 1997. Indeed, each of those measures were enacted via the budget reconciliation process, but contrary to what the Center for Budget and Policy Priorities as well as Thomas Mann and Molly Reynolds of the Brookings Institution and Norman Ornstein of the American Enterprise Institute have explained, using reconciliation to enact health reform would NOT be consistent with past congressional practice.

I have argued many times in favor of enacting comprehensive health reform, including the need for a single payer system - but I cannot endorse the use of the reconciliation process and will explore prior uses of the procedure to argue that they do not, in fact, support the use of the process to enact comprehensive reform.

• The Consolidated Omnibus Budget Reconciliation Act of 1985 amended existing tax law to deny employers the ability to deduct health insurance costs unless it allowed employees and their immediate family members to maintain their coverage if for up to 18 months if they were to lose coverage. COBRA initially passed in the Senate in November on 1985 by a 93-6 margin. A subsequent vote on the conference report reconciling differences between the House and Senate passed with 78 votes, additional changes were then made to appease the House and the final bills was passed in the Senate with no recorded vote – meaning there was no serious opposition. So COBRA passed the Senate with a filibuster proof majority, reconcilation was a procedural not a strategic choice.
• The Personal Responsibility and Work Opportunity Act of 1996 amended the Social Security Act to end the entitlement to Aid to Families with Dependent Children and replace it with the non-entitlement program Temporary Assistance for Needy Families. PRWORA passed the Senate 74-24 and a subsequent conference report passed 78-21. So like COBRA, PRWORA passed via reconciliation, but not in an effort to bypass negotiation and compromise.
• The Balanced Budget Act of 1997 and the creation of the State Children’s Health Insurance Program (SCHIP) represented the culmination of true bipartisan negotiations in the Senate. SCHIP, a program to provide grants to states to provide health care to children with family incomes too high to qualify for Medicaid was the work product of Democratic Senator Ted Kennedy and Republican Senator Orrin Hatch. After several early roadblocks over funding mechanisms and worries about the creation of a new social program broad agreement was eventually reach on SCHIP and it was attached to the Balanced Budget Act of 1997. Although the Balance Budget Act was passed via reconciliation it initially passed the Senate with Unanimous Consent and a subsequent Conference Report passed by an 85-15 margin. So SCHIP was technically created via reconciliation, but only after negotiations garnered broad support for the program, and it was merely attached to a budget bill as “last train leaving the station” means by which to enact an already bipartisan piece of legislation. Reconciliation was not used to bypass negotiations.
• The Economic Growth and Tax Relief Act of 2001 (EGTRA) amended existing tax law to utilize projected surpluses to provide broad tax reductions. Consistent with the reconciliation process the law included an expiration date of 10 years post enactment and it passed the Senate by a vote of 62-38. The subsequent Conference Report was passed by a vote of 58-33. Two Republicans, that supported the measure, were not present to cast votes – Mike Enzi (R-WY) and Pete Domenici (R-NM). So the bill enjoyed a filibuster proof majority.
• The Jobs and Growth Tax Relief Reconciliation Act of 2003 amended existing tax law – namely the Economic Growth and Tax Relief Act of 2001 – to accelerate tax reductions. This is the one example that could be pointed to as an effort by the Republican majority to circumvent the process – because they did. The GOP violated the letter and spirit of reconciliation to accelerate the bipartisan tax cuts approved in 2001 – they did not, however, create any new programs.

Although 19 bills have passed via reconciliation since the creation of the process, the five that I just cited are the ones most frequently mentioned as evidence that the reconciliation process has been used to create new programs – including new health programs - and would therefor be appropriate for enacting health care reform. The fact of the mater is that these bills show quite the opposite. The most extensive health reform, SCHIP, represented the culmination of intense bipartisan negotiations and though it was attached to the budget bill passed via the reconciliation process reconciliation was not “used” to create a new program. The President and Congressional Democrats are seeking to use reconciliation so as to avoid compromise and negotiation - this is not what has been done in the past.

The use of reconciliation to enact comprehensive health care reform would be a violation of the process. The only reason that reconciliation is being considered is because health reform, as currently written, cannot overcome a filibuster threat. In other words, reconciliation is being proposed solely for the purpose of bypassing normal rules of procedure in the Senate. This represents a clear abuse of process and one that should be rejected by all responsible. James Madison warned that men are not governed by angels nor are they angels themselves – as such we rely on auxiliary precautions to prevent the abuse of power. The division of the legislature into a House and Senate, each with a distinct connection to the electorate, and each with divergent interests and motivations, was done to prevent majoritarian tyranny – in other words, it was never expected that in America 51 votes would be enough for a majority to do whatever they wished.