What lies ahead now that the U.S. health reform bill has passed in the House and Senate? What are the next steps and key issues in both bills that - if included in the final bill - could change the face of healthcare? Here’s my take on the topic that so many in the industry are following with great interest.

House and Senate Bills in a Nutshell:

On November 7, 2009, the House of Representatives passed the Affordable Health Care for America Act (H.R. 3962) on a vote of 220-215.  The Congressional Budget Office (CBO) estimates that the 1,990 page bill would spend $1.055 trillion over a decade, mostly on health insurance subsidies, payments to the proposed new government-run health plan, a major expansion of the Medicaid program, and new long-term care benefits. 

To finance this, the House bill envisions $456 billion in payment cuts (largely from hospitals and Medicare health plans) and $574 billion in new or expanded taxes on individuals, employers, and healthcare businesses.  The provider payment cuts and new taxes are somewhat front-loaded, that is, coming earlier in the 10-year Congressional budget timeframe.  The bulk of new spending and the benefits of increased health insurance coverage would fall later, in 2015-2019.  

Meanwhile, the U.S. Senate has passed the Patient Protection and Affordable Care Act. CBO projects (revised here) this 2,074-page bill would increase federal health spending by $871 billion over 10 years.  The bulk of new spending would go for health insurance subsidies, higher Medicaid and CHIP enrollment, and tax credits for small employers.  The Senate bill proposes to offset these costs through $491 billion in Medicare payment cuts to hospitals and health plans, $387 billion in new taxes and surcharges, and another $100 billion from a variety of other changes to tax laws.

Areas of Major Differences:

Substantively, the House passed bill and the Senate bill are different in several key respects.  For example:

• Public Plan:  The House bill proposes the creation of a public health insurance plan.  The new public plan, operated and financed by the federal government, would compete with privately run (non-profit and for-profit) health insurers.  In contrast, the Senate legislation favors the establishment of privately run, multi-state insurance plans administered by the federal Office of Personnel Management (OPM).  Health insurance exchanges would be required to offer at least two such plans, one of which must be nonprofit.

• Individual Mandate:  Both bills mandate that every American buy health insurance or face a fine or tax penalty.  In the House bill specifically, violators would face a tax penalty of 2.5% of their income.  The Senate bill is more modest, imposing an initial fine of $95 or 0.5% of an individual's income, whichever is higher in 2012, growing to $750 or 2% of income in 2016.

• Employer Mandate:  The House passed legislation would require all but the smallest employers pay for at least 65% of each employee's family health premium or pay a new tax on payrolls.  With some exceptions, the Senate bill does not mandate employer coverage but would allow the government to contract with private nonprofit insurers in order to provide coverage for those who are unable to obtain it through their employers. The government would also ensure that these plans meet standards for quality and affordability.

• Federal Regulation of Health Insurance:  Historically, health insurance has been regulated on the state level by state insurance commissioners and state laws.  Both the House and Senate bills would significantly expand the federal role in regulating health insurance, particularly in benefit packages and rate setting.  For example, both bills ban lifetime limits on coverage, ban exclusion of coverage based on pre-existing medical conditions, and limit premium differences based on health status and sex.  However, the House bill goes farther by allowing the federal government to preempt state regulation in the future.

• Abortion:  Coverage for abortion continues to be a sticking point. The House bill prohibits insurers in the newly formed health insurance exchanges that accept federal subsidies from offering abortion coverage.  The Senate version would allow insurance plans operating within the exchanges to offer abortion coverage, but enrollees would be required to write separate checks for the service.

In addition, the House and Senate bills vary in other important ways, including the extent of Medicare payment reductions, the range of new taxes, and how the federal government would administer the array of new programs and agencies created.

Areas of General Consensus:

There are areas where the two bills converge, at least in principle, although again the details vary considerably.  Among the Democrats, who hold majorities in both chambers, there appears to be general agreement in these policy areas:

• Major expansion of Medicaid and CHIP:  To cover the uninsured, Congress will likely rely heavily on expansion of Medicaid program and CHIP.  Medicaid and CHIP enrollment is expected to increase by about 14-15 million, an increase of 25-40% depending on the state.

• Health Insurance Exchanges:  Individuals and employers will be able to buy health insurance through Exchanges, a standardized marketplace for buyers and sellers of health insurance coverage that meets new federal standards.  The House proposes a nationwide, federally administered exchange, while the Senate supports state-run exchanges.  If a public plan is created, this is where it would compete with private health plans.

• Federal Subsidies to Buy Health Insurance:  Both bills would subsidize the cost of health insurance for moderate income families who are not otherwise eligible for Medicaid or CHIP.  Families with incomes under 400% of the federal poverty level ($88,200 for a family of four in 2009) would receive federal subsidies to reduce the cost of coverage purchased through an Exchange. 

• Payment and Delivery System Reforms:  There is wide consensus in both political parties on the need for new provider payment methods to encourage efficiency and reward higher quality and patient safety.  In addition, many policymakers are eager to develop new models of care delivery, including patient-centered medical homes and chronic care management.  Both health reform bills call for testing of new payment methods and care models, particularly in the nearly $500 billion Medicare program and $400 billion Medicaid program.

• Prevention and Wellness:  Both bills propose a significant expansion of federal initiatives to promote prevention and wellness, including a new trust fund to finance local grants and a ban on public programs charging co-payments for preventive services.

Next Steps in the Process

The two bills are now being reconciled to iron out differences.  As expected, the negotiations are playing out mostly behind the scenes, with the Obama Administration also weighing in with its policy preferences.

In addition to the notable ideological differences between the two chambers and the two political parties, the House and Senate bills are written very differently, even on topics where the intent is virtually identical.  This could make the conference committee process more time consuming.

Once the conferees have a single bill, they will bring it to the House and Senate for up-or-down votes.  Passage in the Senate will require 60 votes, while House approval will require a simple majority. 

If both chambers pass the resulting bill, it will be sent to the President, who will likely sign the bill into law.  Even then, many of the bill’s provisions wouldn’t be enacted until between 2013 and 2016 – which means legislation could be introduced to prohibit some of the provisions from ever becoming reality. 

Any Questions on Health Reform Legislation?

The health reform bills are highly complex and continue to evolve.  If you have questions about the legislation, please email me at editor@getinsidehealth.com.  I am happy to try to answer on our new GetInsideHealth blog.  

Tom