The Power of A

The Senate Finance Committee yesterday continued to debate the list of amendments to its comprehensive health care reform legislation, but conspicuously absent from the discussion were any amendments tied to the major issues being discussed by members of Congress and the media, according to Politico.  At the beginning of yesterday’s hearing, the first amendment discussed was Senator John Kerry’s (D-MA) changes to the tax on “Cadillac” insurance plans.  However, the discussion was quickly ended when Kerry stated his intention to withdraw his amendment, stopping the debate over a major proposal to pay for health care reform.  Instead, it looks like he will reintroduce the amendment on the Senate floor.  Public option alternative amendments by Senators Carper and Snowe, which have been discussed by Senate leadership in recent days as major proposals, are also not scheduled to be debated by the committee.

The result is that the Finance Committee markup will be completed by the end of the week, allowing for the merging of the Finance and HELP Committee legislation.  Senate Majority Leader Reid yesterday told reporters he was cancelling the Columbus Day recess, setting aside that time for a floor debate on health care.  It seems likely that it is during that debate that we will see (depending on the content of the merged bill) debates on a version of the public option (or a trigger for the public option) as well as ways to pay for the Senate legislation.

Debate yesterday instead focused mostly on social issues, including abortion and immigration.  A list of all amendments and the votes can be found at the America’s Health Insurance Plans website, but some amendments of note include:

-          The Ensign/Carper amendment that would allow employers to adjust health care premiums based on the workers’ healthy or unhealthy behavior (Passed 19-3).

-          A Grassley amendment to remove the $6 billion fee on insurance companies (Failed 10-13).

-          A Nelson amendment to allow seniors to claim a tax deduction if their catastrophic insurance costs exceeds 7.5% of their income (Passed 14-9).

Quick Hits

The U.S. Chamber of Commerce urges its members to oppose Wyden amendment C-1 that requires large employers to offer at least two health care plans to employees…  CBO failed to include an exemption for hospitals in the Finance bill’s Medicare cost-cutting commission, skewing the score (subscription)… The White House tax reform panel holds its first public hearing yesterday and hears from some associations… Senators Kerry and Boxer introduce the Senate climate change legislation… The Washington Post tries to define a “Cadillac” plan.

Members of Congress and staffers have the day off in recognition of Yom Kippur, but even with the break they are preparing for a contentious week of health care debating.

Most of the attention this week will be on the Senate Finance Committee, which resumes its markup of the Chairman’s Mark health care language tomorrow.  Last week, the committee took an immense amount of time debating a few amendments, and moved many of the major debates (including financing) to this week.  Among the major amendments debated last week was the Nelson amendment that would require drug makers to provide rebates on drugs they sell to Medicare and Medicaid participants.  The amendment had aimed to close the Medicare “donut hole” but was opposed by the White House and Chairman Baucus as potentially undermining the deal the White House had with the Pharmaceutical Research and Manufacturers of America (PhRMA) to help pay for health care reform.  The amendment was defeated 10-13.

The following are the major issues that the committee will likely discuss over the next week, and may help pass or sink the legislation:

- The Rockefeller-Schumer Public Option Amendment: This is likely to be one of the most controversial amendments debated in the committee. The two Senators have pushed for an amendment that would replace the privately-owned cooperatives concept with a public option contained in the Senate HELP and House bills. It is likely the amendment will be defeated in committee but could be reoffered on the Senate floor.

- The “trigger” amendment: While an immediate implementation of a public option in a health care bill may be a non-starter, the idea of a public option “trigger” or delayed implementation may gather enough votes to pass. The trigger has the tentative support of Senator Olympia Snowe (R-ME) and would create a public insurance option if specified insurance reforms were not in place within a certain timeframe.

- Subsidies for middle class Americans: A major concern with some Senate Democrats is the perilous balance between an individual mandate and the cost of insurance. At issue is the concern that by mandating a certain level of insurance, some middle class families would face an increased insurance bill and instead opt to pay a financial penalty. Insurers are concerned this would weaken the pool of insured, especially since many of the opt-outs would be younger, generally healthier Americans. Others call it a tax on middle class Americans, something the bill seeks to avoid.

- Charitable deductions: Chairman Baucus has said any amendment that would add cost to his bill must be offset, and this is the most popular offset offered in members’ amendments. The provision would cap the value of itemized deductions at 33% or 35% for taxpayers whose brackets would be set to rise to 36% or 39.6% in 2011. ASAE and a host of other nonprofits oppose this provision as detrimental to charitable giving in a poor economy.

- Grassley amendments #489 and 490: While not tracked by most media, these two amendments by Senator Grassley would be onerous to many nonprofits. The amendments would they would (1) give the IRS statutory authority to require tax-exempt organizations to report governance and management information and (2) give the IRS expanded authority to challenge executive compensation. Both are being offered as “pay-fors” for health care reform, but it is unknown if the amendments will be debated this week or simply dropped.

Quick Hits:

The U.S. Chamber of Commerce emails the Finance Committee its objections to three major amendments to be considered… The White House shows how a health insurance exchange would work with a working example… Insurers advocate for an individual mandate without an easy opt-out… How the National Association of Insurance Commissioners would play a large role in reformed health care… USA Today offers pros and cons of taxing high-cost insurance plans.

As the Senate Finance Committee today continues to wade through hundreds of amendments to the health care reform bill drafted by committee Chairman Max Baucus (D-MT), ASAE has taken issue with two specific proposals that have generated concern in the nonprofit community.

The two amendments in question, filed by Senate Finance Ranking Member Charles Grassley (R-IA) in advance of the committee’s markup this week, would give the IRS statutory authority to require governance reporting from tax-exempt organizations, and expand the Service’s authority to challenge nonprofit executive compensation practices.

In a letter delivered to Senate Finance Committee offices yesterday, ASAE asks that both amendments not be accepted as part of the health care reform package currently in committee markup.

The IRS recently revised the Form 990 return filed by most tax-exempt organizations and added a new section on governance. The Grassley amendment, however, would protect the IRS from “wasteful legal challenges” by specifically mandating that the Service require governance information be reported in nonprofit filings. ASAE has voiced concern about the IRS creating uniform, narrow standards for good governance in light of the extraordinary diversity of the nonprofit sector. ASAE also believes the proposal could be interpreted to remove any legal recourse for exempt organizations whose governance practices are questioned by the IRS.

The second amendment would grant the IRS authority to subjectively determine whether an organization relied on appropriate comparable data in setting compensation for top executives. This extension of IRS authority seems “excessive and dangerous, and unfairly shifts the burden of proof to filing organizations to prove that the compensation is reasonable instead of the government,” ASAE stated.

What are your thoughts on these amendments?

Sen. Chuck Grassley (R-IA), ranking member of the Senate Finance Committee, has filed two amendments to the health care reform bill introduced by Senate Finance Chairman Max Baucus (D-MT) that directly impact tax-exempt organizations.

These amendments were filed along with more than 500 others before the end of last week, and are being considered in the markup of the Baucus bill that got underway Sept. 22.

One of Grassley’s amendments would give the IRS statutory authority to require that tax-exempt organizations report governance and management information as part of their annual Form 990 reporting requirements. The IRS revised the Form 990 for the 2008 tax year to include a new section on governance, among other changes. The section asks filing organizations questions about board composition, governing body review of the 990, and whether certain policies are in place for conflicts of interest, whistleblower and document retention, as well as a process for determining executive compensation. In drafting the new section, the IRS acknowledged it lacked explicit statutory authority to scrutinize nonprofit governance practices, but included the section because it believes good governance leads to improved compliance.

Grassley’s amendment would protect the IRS from “wasteful” legal challenges by adding language to specifically mandate that the agency require governance reporting by tax-exempt organizations.

The second amendment proposed by Grassley is a revenue raiser that would remove the safe harbor providing tax-exempt organizations a “rebuttable presumption of reasonableness” in setting the compensation of its officers and directors. In explaining the amendment, Grassley cited studies by the IRS of executive compensation practices at charities and nonprofit hospitals. These studies showed very high salaries and little recourse for the government to challenge the reasonableness of compensation paid by the organizations in question. Many organizations were able to use rebuttable presumption procedures to demonstrate compensation was set comparable to executives in other organizations, even in some instances for-profit organizations.

Grassley’s amendment would adopt a 2005 recommendation by the Joint Committee on Taxation to remove the rebuttable presumption defense and require organizations to disclose in their annual 990 filings a summary of the comparable information used to determine an executive’s compensation. In a report this week, BNA quoted a Grassley spokesperson as saying the changes to existing compensation rules would apply only to Section 501(c)(3) and (c)(4) organizations.

ASAE is attempting to determine the intent of this amendment, and analyzing its implications for tax-exempt organizations. Giving the IRS express authority to determine what is reasonable compensation and what are appropriate comparables would be viewed by many as a potentially dangerous extension of authority. ASAE will study this amendment closely, and report its findings.

Quick Hits

Senate Finance begins its markup … Baucus modifies his chairman’s mark.

As expected, Senate Finance Committee Chairman Max Baucus (D-MT) introduced his health care reform bill today after months of negotiating with three Democrats and three Republicans on his committee, dubbed the Gang of Six.

“This is a unique moment in history where we can finally reach an objective so many of us have sought for so long,” Baucus said in a statement today.

The Finance Committee mark up is scheduled to begin Sept. 22. Considered a more moderate alternative to the health care bills produced in the House and the Senate HELP Committee, the Baucus bill eschews the public insurance option in favor of creating membership-run nonprofit cooperatives to compete with the private insurance companies. The bill contains many of the other reforms endorsed by President Obama in his speech to Congress last week, including creating a state-based exchange through which individuals and small businesses could obtain insurance; providing tax credits for lower-income individuals and small businesses to help offset the cost of premiums; and requiring that most U.S. citizens and legal residents purchase health insurance or have health coverage through their employer.

According to Baucus, the Congressional Budget Office has estimated the cost of the bill at $856 billion over 10 years. Baucus said the bill will be fully paid for without adding to the federal deficit. To offset the cost, the bill calls for imposing a 35 percent tax on high-value insurance plans and new fees on insurers and other industry players.

The unveiling of the Senate Finance Committee’s bill has prompted renewed grousing from both sides of the aisle. Sen. Chuck Grassley (R-IA), the committee’s ranking member, has spent months at the bargaining table as one of the Gang of Six, but signaled this week he will not vote for the end product.

“Unfortunately, we’re operating under an artificial deadline set by the Democratic leadership and the White House,” Grassley said in a Sept. 15 statement. “I’m disappointed because it looks like we’re being pushed aside by the Democratic leadership so the Senate can move forward on a bill that, up to this point, does not meet the shared goals for affordable, accessible health coverage that we set forth when this process began.”

Grassley said he still has concerns that federal funds could be used for abortions, that illegal aliens could receive subsidies to help obtain insurance, and that medical liability reform measures aren’t tough enough.

The other two Republican members of the Gang of Six, Sens. Mike Enzi (R-WY) and Olympia Snowe (R-ME), haven’t yet said whether they will support the Finance bill, though many observers have said Snowe is probably the only hope for a bipartisan bill.

Meanwhile, liberal Senate Democrats are also balking at the Baucus bill. Sen. John Rockefeller (D-WV) told reporters Sept. 15 he won’t support the bill in its present form. Rockefeller has been pushing hard for a government-run public option and also opposes the excise tax on high-value health insurance plans included in the Finance bill. What do you think of the long-awaited bill unveiled by Sen. Baucus? How should the Senate proceed in the absence of Republican support for the bill?

Quick Hits

The full text of the chairman’s mark  … Reaction to the bill from Senate Minority Leader Mitch McConnell  … Ways and Means Chairman Charlie Rangel (D-NY) is skeptical about Senate plan (subscription required).

As expected, the Senate broke for August recess last week without the Finance Committee releasing a health care bill.  The news today however is comments made by a Democratic leader that signals a possible concession to the Finance Committee and Senate Republicans on a controversial section of the leadership’s bill.

Majority Whip Richard Durbin (D-IL) on CNN’s State of the Union said he was willing to support health care legislation without a public plan.  According to The Hill, Durbin said “I support the public option but yes, I am open” to voting for legislation without it.  Currently, the Senate Finance Committee’s health care proposal does not contain a public plan and substitutes language creating privately-owned “cooperatives”.

While the Finance Committee’s bill is still under wraps, The Washington Post last week revealed additional details contained in the legislation.  The revised bill lowered its cost by $100 billion while expanding Medicaid coverage and covering about 94% of Americans.  It also includes, as a financing option, a tax on “Cadillac” insurance plans.  The tax would be up to 35% on insurance companies that offer health insurance plans valued above $21,000 for families or $8,000 for individuals.

Despite reported progress, the six Senate Finance negotiators have yet to finalize the bill, leading even the negotiators to begin considering alternatives to their comprehensive plan.  Finance Committee Ranking Member Charles Grassley (R-IA) Tweeted yesterday that lawmakers should reconsider the so-called Wyden-Bennett health care bill.  The “Healthy Americans Act” would require all Americans to be insured in a Health Americans Private Insurance (”HAPI”) plan, either through the state or an employer, and provide federal subsidies for lower-income Americans.  The legislation has 14 bipartisan cosponsors, but was considered to this point a non-factor in the health care debate.

Quick Hits

Will the taxing of “Cadillac” plans lead to the same problems as the alternative minimum tax?… The White House creates a webpage to answer criticisms of health care proposals… USA Today finds that seniors are most resistant to changing the current health care system.

Facing the August recess and constituents who have a wide range of opinions on health care, the House and Senate attempts to pass comprehensive health care reform hit major road blocks yesterday.

The much-rumored dissension on the Blue Dogs deal on HR 3200 was made public yesterday.  Some of the House liberal caucuses released a letter yesterday to the Democratic leadership pledging to vote against any bill that incorporated the changes requested by the Blue Dog.  They specifically cited reimbursement rates in the public plan not being coupled to Medicare repayments and the reduction in low-income subsidies.  The letter was signed by 57 members, more than enough to defeat any bill brought to a vote on the House floor.  However, news broke Friday morning that a deal had been struck to allow the Energy & Commerce Committee to pass the bill, although complete details have yet to be released.

On the Senate side, Finance Committee negotiators and Senate Democratic leaders admitted that a bill would not be released from the committee before the August recess.  Finance Committee Chair Max Baucus (D-MT) spent most of the day deliberating with his Democratic members on controversial aspects of the bill.  It may have been erroneous news reports, however, that helped torpedo the negotiations.  After some newspapers reported Wednesday that a bill was close to being released, Finance Committee Republicans stated that negotiations were still a ways off, with Senator Mike Enzi (R-WY) calling negotiations “a train wreck.”

The one place where progress was made on health care legislation was in the Energy & Commerce Committee, which held its fourth day of mark-ups on HR 3200.  Among the amendments adopted by the committee:

-          The Markey amendment: directs HHS to conduct a pilot program on physician home-care (agreed by voice vote)

-          The Rogers amendment: states the government will not use specific research to ration or deny health care (agreed by voice vote)

-          The Capps amendment: prohibits spending of government money by private insurers to cover abortions, and requiring all state exchanges to have at least one plan covering abortion and one not covering (agreed 30-28)

-          The Stupak amendment: codifies a conscience clause on abortion (agreed by voice vote)

Notable amendments that were not approved include:

-          The Burgess amendment(1): prohibits the creation of a public plan (failed 24-35)

-          The Burgess amendment(2): decouples the public plan payments from Medicare (failed 29-29)

-          The Deal amendment: prohibits illegal immigrants from receiving medical benefits (failed 28-29)

-          The Blunt amendment: requires the president, vice president, and members of Congress to enroll in the Exchange (ruled non-germane by a 36-22-1 vote)

Quick Hits

The House Democrats memo on how to discuss health care reform over the August recess was leaked… Senator Grassley promises not to sell out party… Are health care reform proponents blaming too much on the insurance companies?

Update - A link to the just released House bill can be found here, and a summary of the legislation here.  The committee also has guidance documents for employers, on the public plan, and other aspects at the Education & Labor committee website.  Check back for ASAE’s summary of the legislation for associations.

Original Post - A ticking clock may be the best image to describe yesterday’s developments in health care in both chambers.

House Democratic leaders are expected to unveil their comprehensive health care legislation today.  The legislation was supposed to be unveiled last week but protests from the Blue Dog caucus and over how to pay for the legislation derailed the timeline temporarily.  ASAE will post an analysis of the legislation on the Power of A, specifically looking at if it addresses Blue Dog concerns over small business costs and how the bill raises revenue.  According to Congress Daily (subscription), the Blue Dogs and House Democratic leader have already failed to compromise on an employer mandate for small business, with leadership setting an exemption for companies with payroll under $250,000, which Blue Dog leadership feels excludes too many small businesses.

On the Senate side, Senate Finance Chair Max Baucus has told his committee that their health care bill’s unveiling will be Thursday (subscription), according to ranking member Charles Grassley (R-IA).  While Baucus publicly has denied this timeline, he has come under increased pressure from the White House and Democratic leadership to release his committee’s bill.  Yesterday, White House officials held a conference with Baucus, Ways & Means Chair Charlie Rangel (D-NY), Senate Majority Leader Harry Reid (D-NV), and Speaker Nancy Pelosi (D-CA) to coordinate their efforts on health care reform.  According to the Associated Press, the president told Baucus directly that he wanted a bill publicly announced by the committee before the end of the week.  When it is released, ASAE will post a summary on this site.

Quick Hits

Congressional Republicans hone talking points on potential health care legislation… HELP Committee approves amendment for 12-year exclusivity window before generic versions of biologic drugs can be marketed… Senator Grassley is profiled by Wall Street Journal and targeted by Health Care for America… Insurance associations hold health care “fly-in”.

In the debate to pay for comprehensive health care legislation, one idea that would only partially pay for reform is the idea to tax beverages. Specifically, some members of Congress have proposed leveraging an excise tax on sugar-sweetened beverages and changing the excise tax on alcoholic beverages to an equal tax on beer and wine based on alcoholic content.

The new sugar-sweetened tax proposal, which is specifically aimed at sodas, was recently estimated by the Congressional Budget Office to raise $50 billion over ten years, a small percentage of the $1 trillion the comprehensive bill is expected to cost. But proponents of the excise tax argue that in addition to providing some savings for health care legislation, it would promote public health and save on long-term care costs. In a letter to Senate Finance Committee Chairman Max Baucus, the American Public Health Association and a coalition of groups argued: “While many factors contribute to weight gain, soft drinks are the only food or beverage shown to have a direct link to obesity, which in turn can lead to hypertension, strokes, heart attacks, diabetes, cancer, arthritis, and other health and psychological problems.”

Other associations have argued that the excise tax would unfairly impact lower-income Americans and would not deter consumption in the long term. American Beverage Association (ABA) President & CEO Susan Neely, CAE told the Wall Street Journal, “Taxes are not going to teach our children how to have a healthy lifestyle.” ABA is working with the Alliance for a Healthier Generation (of which the American Heart Association is a founder) to promote its “School Beverage Guidelines” to promote healthy drink choices in schools.

By contrast, a federal excise tax is already imposed on alcoholic beverages, but at different rates for beer, wine, and spirits. Under the funding proposal, the excise tax would be increased and the tax made uniform based on the alcoholic content of the beverage. Mothers Against Drunk Driving (MADD) supports the proposal as “a means of covering the cost to society caused by misuse of alcohol.”

The proposal has drawn criticism from trade associations representing the industry. The Distilled Spirits Council of the United States opposes the tax because it would hurt industry employment. “Forcing hundreds of thousands of waiters, waitresses, bartenders, and busboys into the unemployment line is not the way to reform our nation’s health care system,” it said in a statement.

What do you think? Are beverage taxes a viable way to pay for comprehensive health care reform?

Quick Hits

Senate Finance Ranking Member Sen. Grassley (R-IA) expresses support for the co-op alternative to a public plan… White House Chief Political Advisor says president may sign bill without public plan and with the removal of the tax-exemption for health care… AARP issues statement urging Senate to consider biologics issue with health care reform… Senator Baucus pressures medical groups to provide health care savings for his legislation.

After holding a private session with all members of the Senate Finance Committee yesterday, Chairman Max Baucus (D-MT) said that any bill passing the Senate will have a public option and despite hesitation from committee members he is dedicated to passing legislation before the August recess.

The public plan has long been considered essential by most Democrats but a non-starter by Republicans. Baucus stated that, in addition to opposition over the public plan, he has received complaints from members that they had not had time to review actual legislative language, nor had a chance to see a CBO score of the proposals to see the cost and what offsets are needed. He acknowledged these concerns but also stated that he would stick to a timeline of unveiling language the week of June 15th and begin mark-ups the week of June 22nd.

After the meeting, ranking member Charles Grassley (R-IA) voiced his frustration over the discussions: “Our caucus is very, very much against a public option,” he said. “It is just very, very difficult. But I suppose that somewhere out there is something politically realistic that is not a public option that satisfies Republicans and Democrats but isn’t a government-run system.” He and other Republicans who participated in the discussions stated their opposition any bill including a public option and a mandate for employers to provide health insurance.

On the House side, Ways and Means Committee Chairman Charles Rangel (D-NY) held a press conference today unveiling his timeline for his committee’s health care bill. He expects to release language in mid-June and have a mark-up after the July 4th recess. Rep. Rangel held a meeting of the committee’s Democrats to discuss various components of health care reform, but did not discuss specific funding mechanisms.

Quick Hits
Baucus staff sat down with the business community after his committee walk-through (subscription)….. Is Senator Kennedy’s illness preventing health care reform?…. Washington Post columnist Michael Gerson on the proposed health care reforms.