By Nicole Gaouette and Catherine Dodge
Dec. 24 (Bloomberg) -- The Senate approved legislation that would make the broadest changes to the U.S. health-care system in decades, advancing President Barack Obama’s top domestic priority after months of partisan wrangling.
The Senate voted 60-39, with all Democrats and two independents backing an $871 billion measure that would extend coverage to tens of millions of uninsured Americans. Republicans opposed the legislation, saying it would raise taxes, widen the federal deficit and hurt private companies such as Hartford, Connecticut-based Aetna Inc.
“Progress and opportunity are what this historic bill represents,” Senate Majority Leader Harry Reid, a Nevada Democrat, said on the Senate floor before the vote.
Republican Leader Mitch McConnell, of Kentucky, pledged to continue fighting a measure he said doesn’t solve the problem of skyrocketing health-care costs.
“This fight isn’t over,” McConnell said. “My colleagues and I will work to stop this bill from becoming law.”
The Senate and House must now work together on a compromise between their two versions, a process that Democrats want to finish before the president’s State of the Union address in late January or early February. Negotiations will center on the different tax proposals in each measure, provisions on abortion and a new government-run insurance program that’s included in the House bill and not the Senate’s.
Partisan Rancor
Both bills represent the biggest expansion of health coverage since Congress created the Medicare program for the elderly in 1965 and would restructure a system that represents about 18 percent of the world’s largest economy. Obama has linked the effort to curb rising medical costs to the long-term health of the U.S. economy.
The Senate’s passage follows a debate that dominated Capitol Hill for the year and was marked by partisan rancor. Reid was forced to mend rifts within his own party that threatened to derail the measure.
Republicans rejected attempts by Democrats to hold the vote on final passage earlier in the week. It was the first time the Senate held a vote on Christmas Eve since 1895, according to the Senate Press Gallery.
“With the passage of this bill, Harry Reid will have earned his place in the Senate’s history,” Senator Tom Harkin, an Iowa Democrat, said Dec. 22.
Government Aid
Like a $1 trillion House bill passed on Nov. 7, the 10-year Senate plan requires that Americans get insurance or pay a penalty, while at the same time requiring insurers to accept all comers, regardless of preexisting conditions. It offers expanded government aid for the poor and sets up new online purchasing exchanges so the uninsured can shop for policies.
Minnetonka, Minnesota-based UnitedHealth Group Inc. and other health insurers would get millions of new customers, also a benefit for companies such as medical-device maker Medtronic Inc. of Minneapolis and drugmaker Pfizer Inc. of New York. At the same time, their industries would face billions of dollars in new fees.
Health-insurer stocks rallied earlier this week after the Senate bill cleared its first procedural hurdle. Changes from an earlier version, including a one-year delay in the planned fees and the lack of a competing new government insurance program, or public option, boosted the shares. The six-member S&P 500 Managed Health Care Index jumped 2.9 percent on Dec. 21.
Reid struck last-minute deals with Democrats including Nebraska Senator Ben Nelson, to get their support, issuing a 383-page amendment on Dec. 19 to go along with a 2,074-page measure released last month.
Medicaid Agreement
Nelson’s deal would exempt his state from paying its share to expand the Medicaid program for low-income Americans. Republicans accused Democrats of corrupting the Senate and attorneys general from 10 states, all Republicans, launched investigations into the constitutionality of Nebraska’s treatment.
Senator Richard Durbin, an Illinois Democrat and member of the Senate leadership, said the arrangement with Nelson wasn’t unusual. “For students of history, you can go back just a few years when several senators from Mississippi and Alaska changed Medicaid” regulations to create conditions favorable to their states, Durbin told reporters. “It’s not unusual; to say it’s never happened before is an exaggeration,” Durbin said.
To win over Nelson and other centrists, Reid eliminated the public option, a top goal of many Democrats. As an alternative, the U.S. Office of Personnel Management, which oversees benefits for federal workers and members of Congress, would contract with private insurers to offer multistate plans on the exchange.
Public Option
That’s likely to be a major issue when the House and Senate try to craft a compromise. House Speaker Nancy Pelosi has long fought for a public option that would compete with private insurers to keep premiums low, and labor unions are pushing lawmakers to fight for the program in the so-called conference.
Unions are also unhappy with the Senate’s inclusion of a tax on high-end, or Cadillac, benefit plans. Labor leaders say the tax would end up hurting too many workers, and their arguments have won favor with House Democrats, who opted instead for a surtax on millionaires to fund their bill.
“The House bill is the model for genuine health-care reform,” Richard Trumka, president of the AFL-CIO, the largest labor federation, said in a Dec. 17 statement. “Working people cannot accept anything less than real reform.”
The Senate bill also increases the Medicare payroll tax on individuals earning more than $200,000 or families making more than $250,000. And it includes a 10 percent levy on indoor tanning salons.
Medicare Savings
For most of the funding, both the House and Senate rely on hundreds of billions of dollars in Medicare savings, another potential point of contention in the House-Senate conference. While Democrats say the savings will come from reducing fraud, abuse and overpayments to providers and insurers, Republicans argued that seniors’ benefits will be in jeopardy.
After the release of a letter from the Congressional Budget Office, Republicans also said that the Democrats misrepresented the bill’s Medicare savings and its deficit-reducing impact.
The non-partisan agency said the Democrats can’t claim those savings could both be used to finance expanded coverage and to pay future expenses for the elderly covered in the program. Doing so “would essentially double count a large share of those savings,” CBO wrote.
Abortion is also likely to figure in the compromise negotiations. While both the House and Senate bills bar federal funds from being used for abortion, the House restrictions might discourage insurers from offering any abortion coverage in the new purchasing exchanges, abortion-rights supporters say.
Abortion Rights
Pelosi said the language passed in her chamber “goes beyond” the status quo that bars federal abortion funding. And Democrats who support abortion rights and voted for the House bill have threatened to reject a final measure if it contains the House language.
While they will wrangle over the details, Democrats understand they have to get a final compromise passed in both chambers and send it to Obama, said New York Senator Chuck Schumer. He said he was confident the two bodies could find a compromise.
“It’s the same thing that brought the 60 Democrats together,” Schumer said in an interview. “Each side knows we can’t fail. Each side knows they have to give.”
--With assistance from Kristin Jensen, Jonathan D. Salant, Ryan J. Donmoyer and James Rowley in Washington. Editors: Bob Drummond, Robin Meszoly
To contact the reporters on this story: Nicole Gaouette in Washington at +1-202-624-1924 or ngaouette@bloomberg.net; Catherine Dodge in Washington at +1-202-624-1828 or cdodge1@bloomberg.net
To contact the editor responsible for this story: Jim Kirk at +1-202-654-4315 or jkirk12@bloomberg.net