Partisan Climate in Congress Likely Obstacle to Health Care Reform

Published February 1, 2006

Political tensions are already high, but they are likely to ratchet up further for the remainder of the 109th Congress as the November elections draw nigh. It’s not a presidential election year, and Republicans currently control both Houses of Congress, but Democrats hope to make gains by exploiting some high-profile issues, such as the Jack Abramoff lobbying scandal, perceived mishandling and delays in response to Hurricane Katrina, and public unease with continued Iraq involvement.

What this partisan climate means for health policy is that issues requiring difficult votes and/or some degree of trust and cooperation will be shelved. This would include finding a way to pay for the new Medicare prescription drug benefit and reforming Medicaid.

“Basically, I don’t think that a lot will get done [on health care issues],” said a Democratic Senate Finance Committee staff person. John O’Neill, tax and pensions advisor for Senate Finance Committee Chairman Chuck Grassley (R-IA), put things more optimistically: “I see things getting signed into law by the end of next year.”

Most Likely Items for Hill Action

$500 FSA Rollover

Finance Committee staff representing both Republicans and Democrats indicate that changing the “use-it-or-lose-it” provision governing Flexible Spending Accounts (FSAs) is a viable possibility. Both Houses of Congress have passed a pension reform bill–the Pensions Protection Act of 2005 (H.R. 2830) and the Pension Security and Transparency Act of 2005 (S. 1783)–and now must meet in conference to iron out the differences. The House-passed version would allow FSA owners to carry over $500 into the next year. “We don’t have any philosophical problems with this,” said a Senate Democratic Finance Committee staff member, “but it will depend on the ability of our committee to find the money to pay for it [lost revenue created by allowing carryover].”

Grassley has also long been in support of nixing the use-it-or-lose-it rule. This might be the year.

High-Risk Pool Reauthorization

Congress is on the verge of passing legislation to create and provide administrative funds for state high-risk pools. All that remains is for the Senate to pass the State High Risk Pool Funding Extension Act of 2005 (H.R 4519), which passed the House in December. Senators support the bill, but it is currently being held up because of larger political issues (an example of how even “noncontroversial” items are held hostage during times of acrimony).

Thirty-three states have high-risk pools, and several more are ready to create them during this year’s legislative sessions. High-risk pools are an important component of market-based reform because they offer relatively affordable health insurance coverage to sick people who don’t have job-based coverage.

The misguided alternative to high-risk pools are state mandates such as “guaranteed issue,” which require carriers to offer health insurance to anyone requesting coverage, no matter their health condition. Janet Trautwein, executive vice president of the National Association of Health Underwriters, likens this to “requiring home insurers to offer a homeowner’s policy to folks who wait until their home is on fire to seek insurance.”

Association Health Plans

A 10-year standstill on Association Health Plans (AHPs) could see movement. Health Education, Labor, and Pensions Chairman Mike Enzi (R-WY) and former state insurance commissioner Sen. Ben Nelson (D-NE) have introduced a bill, the Health Insurance Marketplace Modernization and Affordability Act of 2005 (S. 1955), that would create AHPs. In addition, it would pave the way for insurance companies to offer low-cost policies exempt from some state mandates.

Under Enzi’s bill, unless a mandate has passed 45 states, companies will not have to offer the coverage. Other provisions would affect rating laws and would move insurance market rules toward greater harmonization, allowing insurance companies to design a low-cost policy option that could be offered in all states.

“We think we have taken the best of the AHP concepts and put together a bill that can move forward,” said Stephen Northup, lead health policy advisor to Enzi. “It has a strong chance of moving this year because it is bipartisan and does not have a price tag, two important things in the Senate right now.” Enzi is working to schedule a vote on the bill in his committee in February.

The House already has passed AHP legislation, and Senate Majority Leader Bill Frist (R-TN) has indicated insurance market reform such as the Enzi/Nelson bill is one of his top three health priorities. The toughest job will be to get a final product through conference between the two houses that all the stakeholders can live with.

Wild Cards, Swan Songs

Physician Frist is in his final year as a member of the Senate and wants to leave a sound health legacy (which would play well in a potential presidential bid). His priority list includes both tort and tax reform, as well as insurance market reform.

House Ways and Means Committee Chairman Bill Thomas’ (R-CA) agenda is described by many as a wild card because he plays his cards very close to his vest. Unless the House leadership makes an exception, his term as chairman of the Ways and Means Committee will come to an end this year. He has been supportive of health care tax credits and of getting the uninsured covered, and he has advocated capping the tax exclusion for employees who receive job-based coverage, as one way to pay for the uninsured. What he will decide on as his swan song is anyone’s guess.

Bush: HSAs All the Way

This month, President George W. Bush will send Congress his budget proposals for 2007. Many of his proposals, such as health care credits and AHPs, will likely remain the same as in previous years. Encouraged by data showing Health Savings Accounts (HSAs) are helping the uninsured afford coverage, Bush will likely try to build on that success.

One new possible proposal would make HSAs even more affordable by offering a tax deduction equal to the premium cost to those who purchase HSA-qualified coverage on their own (lacking job-based coverage). People who receive coverage from their employer already have a tax benefit because they do not pay income tax on the portion of their salary that goes toward premium payments. The proposed change would bring greater tax equity to those who not only don’t have an employer to pay any of their insurance premiums but also pay more in taxes than those in job-based coverage.

Looking toward long-term reform, the president is also likely to propose an increase in the amount people can contribute to their HSA account. Current law allows contributions only in an amount equal to the deductible. Since people may spend their entire HSA on their deductible and still need more cash to make copayments (often around 20 percent), consumers could use a higher ceiling on the contribution level. In addition, this would allow people to save greater amounts for retirement health care, taking some of the pressure off Medicare.

Both of these presidential initiatives have strong support from the Congressional leadership, but they cost money–which doesn’t bode well for immediate passage.

Laura Clay Trueman ([email protected]) is executive director of the Coalition for Affordable Health Coverage and senior director of Jefferson Government Relations, LLC.