With cost cuts, health care reform bill is back on track

Winston Churchill once said about the United States, "In the end, America will do the right thing . . . after she's exhausted all other possibilities." Well, concerning universal health care, it looks like America, in the end, may do the right thing.

House Democratic leaders have reached an agreement with conservative 'Blue Dog' House Democrats, and it now appears a revised health care reform bill will head to a House Energy and Commerce Committee vote soon, perhaps as early as Friday; a House floor vote will not occur until September.

The key changes in the House bill, which would still have to be reconciled with any health care bill passed by the Senate, are: a lower-than-expected price tag of $900 billion over 10 years; a scaled-back version of the public option for health insurance -- one where the government health agency negotiates rates with providers, instead of pegging them to Medicare rates; and a penalty exemption for small businesses with payrolls of less than $500,000, up from $250,000, for failing to provide health insurance for employees, Bloomberg News reported Thursday.

Positive developments in Senate, too

In the upper chamber their was progress as well. Senate Finance Committee Chairman Max Baucus, D-Montana, said the Congressional Budget Office, Congress' independent watchdog, estimated that the Senate's health care reform bill, with 95 percent coverage by 2015, will have a price tag below $900 billion, and would reduce the federal budget deficit in the tenth year of the program, The Wall Street Journal (NWS) reported Thursday. Earlier cost estimates had the budget deficit rising substantially.

No Senate Finance Committee vote on the bill is expected before the Senate recesses on August 7, according to Senate Majority Leader Harry Reid, D-Nevada, The Washington Post (WPO) reported Thursday.

Economic Analysis: Both the House and Senate bills require all Americans to obtain health insurance and both encourage the concept of non-profit cooperatives to help achieve universal coverage. Still, a number of details remain unclear. What will be the cut-off point between the co-ops and the public option? That is, when does a citizen who can't afford to pay for a private-sector health insurance premium become eligible for the public option? Further, it's not clear the Senate bill will include a public option: how will this difference be reconciled? Meanwhile, a tax on health insurance benefits, at this juncture, remains a non-starter.

Bottom Line: As it stands now, based on the tone of lawmaker comments, it looks like health care reform legislation will pass each chamber in the fall, probably by late September, but the bulk of the negotiations on the "meat issues" will default to the House/Senate Conference Committee. And what a battle royal that will be! Think about it: about 20 Senators and Representatives wheeling, dealing, and cajoling with more than $2 trillion in U.S. GDP at stake. And all the while, the physician, pharma, insurance, hospital, and organized labor lobbies will be feeding reams of briefs to all parties, in a stretch-run attempt to shape the conference committee report to their liking. This will probably be the most important, negotiated agreement in Congress since the Omnibus Budget Reconciliation Act of 1993 (OBRA-93) that raised income taxes to eliminate the budget deficit.

Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.
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