The administration has laid out a two-prong strategy for getting health care reform this year. The first part is to present Congress with only the bare outline of a plan and let legislators fill in the details. The second is to bring the bill to the floor under the budget reconciliation process. The budget resolution passed in April contains reconciliation instructions for several committees to produce a health care reform bill by October 15. Consequently, under congressional budget rules, this health care bill cannot be filibustered and requires only 50 votes in the Senate.
Neither part of the strategy is failsafe. How can the president expect Congress to work out the details when it doesn’t agree on them? Take the goal of creating a public insurance plan that can compete along side private insurers. Few if any Republicans are willing to support such a provision for fear that the public plan would drive private plans out of business and expand the government’s role in health care. After the GM nationalization, the GOP cry that the Democrats will use the public plan to gin up a government takeover of health care ought to spook enough voters to make moderate Democrats nervous. Other parts of the plan including a “play or pay” employer mandate and the possibility of taxing some employer-provided health benefits are just as controversial.
The plan to use the reconciliation process is just as tricky. The use of the reconciliation process is governed by the Byrd Rule, named for America’s senior senator Robert Byrd. Essentially, the Byrd Rule places two important restrictions on the use of reconciliation. The first is that it disallows any “extraneous” provisions in which “changes in outlays or revenues … are merely incidental to [its] non-budgetary components.” As Ezra Klein pointed out a few months ago, health care legislation will certainly contain many provisions that may run afoul of this rule.
But is regulating insurers “merely incidental” to government revenues? How about reforming hospital delivery systems? How about incentives for preventive treatment? Or the construction of a public plan? An individual mandate?
The second relevant provision of the Byrd Rule is that the bill cannot contain provisions that increase the deficit in a year not covered by the reconciliation instructions unless their effects lead to an overall reduction in the deficit. Consequently, because the budget resolution is based on a five-year window, a health care reform bill passed via reconciliation must be budget neutral or decrease the deficit beyond 2014 (its short term costs are covered by the $635 billion set aside contained in the budget resolution).
The upshot is that if Republicans raise a point of order on either of these grounds and it is upheld by the Senate parliamentarian, a 3/5s majority is required to waive it. So essentially, the bill (or at least some of its provisions) would lose filibuster protection.
Klein is correct to worry about points of order based on “merely incidental” provisions. But as he points out, these are essentially judgment calls by the parliamentarian (and the Democrats can always follow the GOP strategy of firing uncooperative parliamentarians.)
So I think it is the second Byrd Rule objection that may be the more dangerous one. The effects of the health care bill on the deficit will be scored by the Congressional Budget Office. It will be much more difficult politically to confront the CBO over an adverse scoring decision than it would be to fire the parliamentarian. So budget neutrality is an absolute necessity for the reconciliation gambit to work.
I believe it will prove very difficult to produce a meaningful health care reform bill that is budget neutral over the long run (or at least one that will be scored by the CBO that way). First, any budgeting for a health care plan is going to rely heavily on cost savings through hard to quantify reforms like electronic medical records. If the CBO comes back with a low number for these savings, other cuts or revenue increases will be required. Second, many of the revenue enhancements expected to be in any reform bill such as employer “play or pay” or the taxing of some employer-provided benefits may not sit well with many moderate Democrats. As these provisions get scaled back to keep the moderates on board, expenditure cuts will be necessary to ensure Byrd Rule compliance.
For 60 years, Democratic presidents have sought to reform the health care system. Clearly, President Obama thinks this time will be different. Perhaps it will be, but it is far from a done deal.