Late Sunday night, after hours of tense debate, the House passed
HR 3950, the health care reform bill passed by the Senate on December 23. Shortly thereafter, the House passed a smaller
reconciliation bill, HR 4872, the
Health Care and Education Affordability Reconciliation Act of 2010, containing
numerous changes to the Senate bill.
The margin was narrow - 219 to 212 - and as expected, not a
single Republican voted for either bill.
Next, HR 3950 goes to President Obama for signature. The reconciliation bill, HR 4872, goes to the
Senate, where Democrats will attempt to use the reconciliation process to pass
it through a simple majority.
The reconciliation process is complicated and Democrats face
a number of hurdles before they can bring HR 4872 to a vote. The goal of course is to avoid a Republican
filibuster and the 60 votes required to break it. Assuming HR 4872 satisfies all of the
requirements of the reconciliation process, Democrats will be able to limit
floor debates to 20 hours and pass the bill with only 51 votes.
Most significantly, every provision of a reconciliation bill
must relate to reducing federal spending or increasing federal revenue. Republicans will try to use this rule (called
the Byrd Rule, after Senator Robert Byrd) to remove provisions of HR 4872; the
Democrats are obviously working hard to avoid this.
The end game for Republicans at this point is to strip
enough provisions from HR 4872 that House Democrats will not be willing to
accept the total health care reform legislative package that's able to make it
through the Senate. (The Senate
Democrats already passed the legislation that is going to President Obama for
signature - the amendments in the reconciliation bill are necessary to bridge
the gap between Senate and House Democrats.)
The reconciliation bill as passed by the House will make
some significant changes to the original Senate health care reform bill. The House Rules Committee has published a
summary of these changes, excerpted below.
THE HEALTH CARE & EDUCATION AFFORDABILITY RECONCILIATION ACT of 2010
Prepared by Committees on Ways & Means, Energy & Commerce, and
Education & Labor, March 18, 2010
Title I - Coverage, Medicare, Medicaid and Revenues
Subtitle A - Coverage
Sec. 1001. Affordability. Improves the financing for premiums
and cost sharing for individuals with incomes up to 400% of the federal poverty
level. Subsection (a) improves tax credits to make premiums more
affordable as a percent of income; and subsection (b) improves support for cost
sharing, focusing on those with incomes below 250% of the federal poverty
level. Starting in 2019, constrains the growth in tax credits if premiums
are growing faster than the consumer price index, unless spending is more than 10%
below current CBO projections.
Sec. 1002. Individual responsibility. Modifies the assessment that
individuals who choose to remain uninsured pay in three ways: (a) exempts the
income below the filing threshold, (b) lowers the flat payment from $495 to
$325 in 2015 and from $750 to $695 in 2016 and © raises the percent of income
that is an alternative payment amount from 0.5 to 1.0% in 2014, 1.0 to 2.0% in
2015, and 2.0 to 2.5% for 2016 and subsequent years to make the assessment more
Sec. 1003. Employer responsibility. Improves the transition to the
employer responsibility policy for employers with 50 or more full-time
equivalent workers (FTE) by subtracting the first 30
full time employees from the payment calculation (e.g., a firm with 51 workers
that does not offer coverage will pay an amount equal to 51 minus 30, or 21
times the applicable per employee payment amount). The provision also changes
the applicable payment amount for firms with more than 50 FTEs that do not
offer coverage to $2,000 per full-time employee. It also eliminates the
assessment for workers in a waiting period, while maintaining the 90-day limit
on the length of any waiting period beginning in 2014.
Sec. 1004. Income definitions. Modifies the definition of income
that is used for purposes of subsidy eligibility and the individual
responsibility requirement. The modifications conform the income
definition to information that is currently reported on the Form 1040 and to
the present law income tax return filing thresholds. The provision also
extends the exclusion from gross income for employer provided health coverage
for adult children up to age 26.
Sec. 1005. Implementation funding. Provides $1 billion to the Secretary
of Health and Human Services to finance the administrative costs of
implementing health insurance reform.
Subtitle B - Medicare
Sec. 1101. Closing the Medicare prescription drug
"donut hole". Provides a $250 rebate for all Medicare Part D enrollees who enter
the donut hole in 2010. Builds on pharmaceutical manufacturers' 50%
discount on brand-name drugs beginning in 2011 to completely close the donut
hole with 75% discounts on brand-name and generic drugs by 2020.
Sec. 1102. Medicare Advantage payments. Freezes Medicare Advantage
payments in 2011. Beginning in 2012, the provision reduces Medicare
Advantage benchmarks relative to current levels. Benchmarks
will vary from 95% of Medicare spending in high-cost areas to 115% of Medicare
spending in low-cost areas. The changes will be phased-in over 3, 5 or 7
years, depending on the level of payment reductions. The provision
creates an incentive system to
increase payments to high‐quality plans by at least 5%. It
also extends CMS authority
to adjust risk scores in Medicare Advantage
for observed differences in coding patterns
relative to fee-for‐service.
Sec. 1103. Savings from limits on MA plan
administrative costs. Ensures Medicare Advantage plans spend at least
85% of revenue on medical costs or activities that improve quality of care,
rather than profit and overhead.
Sec. 1104. Disproportionate share hospital (DSH) payments. Advances Medicare disproportionate
share hospital cuts to begin in fiscal year 2014 but lowers the ten-year
reduction by $3 billion.
Sec. 1105. Market basket updates. Revises the hospital market basket
reduction that is in addition to the productivity adjustment as follows: -0.3
in FY14 and -0.75 in FY17, FY18 and FY19. Removes Senate provision
that eliminates the additional market basket for hospitals based on coverage
levels. Providers affected are inpatient hospitals, long-term care
hospitals, inpatient rehabilitation facilities, psychiatric hospitals and
Sec. 1106. Physician ownership-referral. Changes to December 31, 2010
the date after which physician ownership of hospitals to which they self refer
is prohibited and provides a limited exception to the growth restrictions for
grandfathered physician owned hospitals that treat the highest percentage of
Medicaid patients in their county (and are not the sole hospital in a county).
Sec. 1107. Payment for Imaging Services. Sets the assumed utilization rate at
75 percent for the practice expense portion of advanced diagnostic imaging
Subtitle C - Medicaid
Sec. 1201. Federal funding for States.
Strikes the provision for a permanent 100% federal matching rate for
Nebraska for the Medicaid costs of newly eligible individuals. Provides federal
Medicaid matching payments for the costs of services to newly eligible
individuals at the following rates in all states except expansion states: 100%
in 2014, 2015, and 2016; 95% in 2017; 94% in 2018; 93% in 2019; and 90% thereafter.
In the case of expansion states, reduces the state share of the costs of
covering nonpregnant childless adults by 50% in 2014, 60% in 2015, 70% in 2016,
80% in 2017, 90% in 2018. In 2019 and thereafter, expansion states would
bear the same state share of the costs of covering nonpregnant childless adults
as non-expansion states (e.g., 7% in 2019, 10% thereafter).
Sec. 1202. Payments to primary care physicians.
Requires that Medicaid payment rates to primary care physicians for
furnishing primary care services be no less than 100% of Medicare payment rates
in 2013 and 2014 (the first year of the Senate bill's Medicaid
coverage expansion to all individuals with incomes under 133% of
poverty). Provides 100% federal funding for the incremental costs to States
of meeting this requirement.
Sec. 1203. Disproportionate share hospital
payments. Lowers the reduction in federal Medicaid DSH
payments from $18.1 billion to $14.1 billion and advances the reductions to
begin in fiscal year 2014. Directs the Secretary to develop a methodology
for reducing federal DSH allotments to all states in
order to achieve the mandated reductions. Extends through FY 2013 the
federal DSH allotment for a state that has a $0
allotment after FY 2011.
Sec. 1204. Funding for the territories.
Increases federal funding in the Senate bill for Puerto Rico, Virgin Islands,
Guam, American Samoa, and the Northern Marianas Islands by $2 billion.
Raises the caps on federal Medicaid funding for each of the territories.
Allows each territory to elect to operate a Health Benefits Exchange.
Sec. 1205. Delay in Community First Choice Option. Postpones from October 1, 2010 until
October 1, 2011 the effective date of the option established for State Medicaid
programs to cover attendant care services and supports for individuals who
require an institutional level of care
Sec. 1206. Drug rebates for new formulations of
existing drugs. For purposes of applying the additional rebate, narrows
the definition of a new formulation of a drug to a line extension of a single
source or innovator multiple source drug that is an oral solid dosage form of
Subtitle D - Reducing Fraud, Waste, and Abuse
Sec. 1301. Community Mental Health Centers. Establishes new requirements
for community mental health centers that provide Medicare partial
hospitalization services in order to prevent fraud and abuse.
Sec. 1302. Medicare prepayment medical review
limitations. Streamlines procedures to conduct Medicare prepayment reviews to
facilitate additional reviews designed to reduce fraud and abuse.
Sec. 1303. CMS-IRS data match to identify fraudulent
providers. Allows the Secretary of Treasury to share IRS data with HHS employees to help
screen and identify fraudulent providers or providers with tax debts, and to
help recover such debts. Provides strict controls on the use of such
information to protect taxpayer privacy.
Sec. 1304. Funding to fight fraud, waste and abuse. Increases funding for the
Health Care Fraud and Abuse Control Fund by $250 million over the next
decade. Indexes funds to fight Medicaid fraud based on the increase in
the Consumer Price Index.
Sec. 1305. 90-day period of enhanced oversight for
initial claims of DME suppliers. Requires a 90-day period to withhold
payment and conduct enhanced oversight in cases where the HHS
Secretary identifies a significant risk of fraud among DME
Subtitle E - Revenues
Sec. 1401. High-cost plan excise tax. Reduces the revenue collected by the
tax by 80 percent. This is achieved by: delaying the
application of the tax until 2018, which gives the plans time to implement and
realize the cost savings of reform; increasing the dollar thresholds to $10,200
for single coverage and $27,500 for family coverage ($11,850 and $30,950 for
retirees and employees in high risk professions); excluding stand-alone
dental and vision plans from the tax; and permitting an employer to reduce the
cost of the coverage when applying the tax if the employer's age and gender
demographics are not representative of the age and gender demographics of a
national risk pool. Under the modified provision, the dollar thresholds
are indexed to inflation and the dollar thresholds are automatically increased
in 2018 if CBO is wrong in its forecast of the premium
inflation rate between now and 2018.
Sec. 1402. Medicare tax. Modifies the tax to include net
investment income in the taxable base. Currently, the Medicare tax does
not apply to net investment income. The Medicare tax on net
investment income does not apply if modified adjusted gross income is less than
$250,000 in the case of a joint return, or $200,000 in the case of a single
return. Net investment income is interest, dividends, royalties, rents,
gross income from a trade or business involving passive activities, and net
gain from disposition of property (other than property held in a trade or
business). Net investment income is reduced by properly allocable
deductions to such income.
Sec. 1403. Delay of the annual limitation on
contributions to a health FSA. Delays the provision by two
years until 2013.
Sec. 1404. Brand name pharmaceuticals. Delays the industry fee on sales of
brand name pharmaceuticals for use in government health programs by one year to
2011, and increases revenue raised by the fee by $4.8 billion.
Sec. 1405. Excise tax on medical device
manufacturers. Delays the tax by two years to 2013 and converts the
industry fee to an excise tax on the first sale for use of medical devices at a
rate of 2.9 percent. Exempts from the tax Class I medical devices,
eyeglasses, contact lenses, hearing aids, and any device of a type that is
generally purchased by the public at retail for individual use.
Sec. 1406. Health insurance providers. Delays the industry fee by 3 years to
2014 and modifies the annual industry fee for revenue neutrality. In the
case of tax-exempt insurance providers, provides that only 50 percent of their
net premiums that relate to their tax-exempt status are taken into account in
calculating the fee. Provides exemptions for voluntary employee benefit
associations (VEBAs) and nonprofit providers more than 80 percent of whose
revenues is received from Social Security Act programs that target low income,
elderly, or disabled populations.
Sec. 1407. Delay of elimination of deduction for
expenses allocable to Medicare part D subsidy. Delays the provision by two years to
Sec. 1408. Elimination of unintended application of
cellulosic biofuel producer credit. Adds an additional revenue
provision. In 2008, Congress enacted a $1.01 per gallon tax credit for
the production of biofuel from cellulosic feedstocks in order to encourage the
development of new production capacity for biofuels that are not derived from
food source materials. Congress is aware that some taxpayers are seeking
to claim the cellulosic biofuel tax credit for unprocessed fuels, such as black
liquor. The provision would limit eligibility for the tax credit to
processed fuels (i.e., fuels that could be used in a car engine or in a home
Sec. 1409. Codification of economic substance
doctrine and penalties. Adds an additional revenue
provision. The economic substance doctrine is a judicial doctrine that
has been used by the courts to deny tax benefits when the transaction
generating these tax benefits lacks economic substance. The courts have
not applied the economic substance doctrine uniformly. The provision would
clarify the manner in which the economic substance doctrine should be applied
by the courts and would impose a penalty on understatements attributable to a
transaction lacking economic substance.
Sec. 1410. Time for payment of corporate estimated
for a one-time adjustment to corporate estimated taxes for payments made during
calendar year 2014.
Sec. 1411. No impact on Social Security trust
that Title II of the Social Security Act (the old age, survivor, and disability
benefits program (OASDI)) is not amended or modified by
Subtitle F - Other Provisions
Sec. 1501. TAA for communities. Appropriates $500 Million a year for
fiscal years 2010 through 2014 in the Community College and Career Training
Grant program for community colleges to develop and improve educational or
career training programs. Ensures that each state receives at least 0.5 percent
of the total funds appropriated.
Title II - Health, Education, Labor, and Pensions
Subtitle A - Education
Section 2001. Short Title; References. Provides that this subtitle may be
cited as the "SAFRA Act," and that, except as otherwise
provided, whenever an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other provision of
the Higher Education Act of 1965.
Part I-Investing in Students and Families
Section 2101. Federal Pell Grants. Amends the Higher Education Act to
include mandatory funding for the Pell Grant. This provides additional
mandatory funding to augment funds appropriated to increase the federal
maximum Pell Grant award by the change in the Consumer Price Index. The
mandatory component of the funding is determined by inflating the previous
year's total and subtracting the maximum award provided for in the
appropriations act for the previous year or $4860, whichever is greater.
Beginning in the 2018-2019 academic year, the maximum Pell award will be at the
Section 2102. Student Financial Assistance. This section provides $13.5 billion
in mandatory appropriations to the Federal Pell Grant program.
Section 2103. College Access Challenge Grant Program. This section amends section
786 of the Higher Education Act by authorizing and appropriating $150 million
for fiscal years 2010 through 2014 for the College Access Challenge Grant
program created under the College Cost Reduction and Access Act of 2007.
Provides that the allotment for each State under this section for a fiscal year
shall not be an amount that is less than 1.0 percent of the total amount
appropriated for a fiscal year.
Section 2104. Investment in Historically Black
Colleges and Universities and Minority Serving Institutions. This section amends section 371(b) of
the Higher Education Act by extending funding for programs under this section
created under the College Cost Reduction and Access Act of 2007 for programs at
Historically Black Colleges and Universities and minority-serving institutions
through 2019, including programs that help low-income students attain degrees
in the fields of science, technology, engineering or mathematics by the
following annual amounts: $100 million to Hispanic Serving Institutions, $85
million to Historically Black Colleges and Universities, $15 million to
Predominantly Black Institutions, $30 million to Tribal Colleges and
Universities, $15 million to Alaska, Hawaiian Native Institutions, $5 million
to Asian American and Pacific Islander Institutions, and $5 million to Native
American non-tribal serving institutions.
Part II-Student Loan Reform
Section 2201. Termination of Federal Family
Education Loan Appropriations. This section terminates the authority
to make or insure any additional loans in the Federal Family Education Loan
program after June 30, 2010.
Section 2202. Termination of Federal loan Insurance
section is a conforming amendment with regard to the termination of the FFEL program, limiting Federal insurance to those loans in
the Federal Family Education Loan program for loans first disbursed prior to
July 1, 2010.
Section 2203. Termination of Applicable Interest Rates. This section makes a
conforming amendment with regard to the termination of the FFEL
program limiting interest rate applicability to Stafford, Consolidation, and PLUS loans to those loans made before July 1, 2010.
Section 2204. Termination of Federal payments to Reduce
Student Interest Costs. This section makes a conforming amendment with
regard to the termination of the FFEL program by
limiting subsidy payments to lenders for those loans for which the first
disbursement is made before July 1, 2010.
Section 2205. Termination of FFEL PLUS Loans. This section makes a conforming change
with regard to the termination of the FFEL program for
federal PLUS loans by prohibiting further FFEL origination of loans after July 1, 2010.
Section 2206. Federal Consolidation Loans. This section makes conforming
changes with regard to the termination of the FFEL
program for federal consolidation loans. This section also provides that,
for a 1 year period, borrowers who have loans under both the Direct Lending
program and the FFEL program, or who have loans under
either program as well as loans that have been sold to the Secretary, may
consolidate such loans under the Direct Lending program regardless of whether
such borrowers have entered repayment on such loans.
Section 2207. Termination of Unsubsidized Stafford loans
for Middle-Income Borrowers. This section makes conforming changes
with regard to the termination of the FFEL program for
Unsubsidized Stafford loans by prohibiting further FFEL
origination of loans after July 1, 2010.
Section 2208. Termination of Special Allowances. This section makes conforming
changes with regard to the termination of the FFEL
program by limiting special allowance payments to lenders under the FFEL program to loans first disbursed before July 1, 2010.
Section 2209. Origination of Direct Loans at Institutions
Outside the United States. This section provides for the
origination of federal Direct Loans at institutions located outside of the
United States, through a financial institution designated by the
Section 2210. Conforming amendments. This section makes conforming
technical changes with regard to the termination of the FFEL
program for Department of Education agreements with Direct Lending
Section 2211. Terms and Conditions of Loans. This section makes conforming
technical changes with regard to the termination of the FFEL
program to clarify the terms and conditions of Direct Loans.
Section 2212. Contracts. This section directs the Secretary to
award contracts for servicing federal Direct Loans to eligible non-profit
servicers. In addition, this section provides that for the first 100,000
borrower loan accounts, the Secretary shall establish a separate pricing
tier. Specifies that the Secretary is to allocate the loan accounts of
100,000 borrowers to each eligible non-profit servicer. The section also
permits the Secretary to reallocate, increase, reduce or terminate an eligible
non-profit servicer's allocation based on the performance of such
servicer. In addition, this section appropriates mandatory funds to the
Secretary to be obligated for administrative costs of servicing contracts with
eligible non-profit servicers. This section also requires the Secretary
to provide technical assistance to institutions of higher education
participating or seeking to participate in the Direct Lending program.
This section appropriates $50 million for fiscal year 2010 to pay for this
technical assistance. Additionally, this section authorizes the Secretary to
provide payments to loan servicers for retaining jobs at location in the United
States where such servicers were operating on January 1, 2010. This
section appropriates $25,000,000 for each of fiscal years 2010 and 2011 for
Section 2213. Agreements with State-Owned Banks. This section amends
Part D of Title IV to direct the Secretary to enter into an agreement with an
eligible lender for the purpose of providing Federal loan insurance on student
loans made by state-owned banks.
Section 2214. Income-Based Repayment. The section amends the
Income-Based Repayment program to cap student loan payments for new borrowers
after July 1, 2014 to 10% of adjusted income, from 15% percent, and to forgive
remaining balances after 20 years of repayment, from 25 years.
Subtitle B - Health
Sec. 2301. Insurance Reforms. Extends the prohibition of lifetime
limits, prohibition on rescissions, limitations on excessive waiting periods,
and a requirement to provide coverage for non-dependent children up to age 26
to all existing health insurance plans starting six months after
enactment. For group health plans, prohibits pre-existing condition
exclusions in 2014, restricts annual limits beginning six months after
enactment, and prohibits them starting in 2014. For coverage of non-dependent
children prior to 2014, the requirement on group health plans is limited to
those adult children without an employer offer of coverage.
Sec. 2302. Drugs Purchased by Covered Entities. Repeals the underlying 340B
expansion to inpatient drugs and exemptions to GPO
exclusion. Exempts orphan drugs from required discounts for new 340B
Sec. 2303. Community Health Centers. Increases mandatory funding for
community health centers to $11 billion over five years (FY 2011 - FY 2015).