Editor’s Note: In the aftermath of President Obama’s State of the Union address, what is the state of health reform? Where do we go from here? In the post below, Timothy Jost addresses these questions. In other posts, Henry Aaron of the Brookings Institution and Joseph Antos of the American Enterprise Institute examine the same issues.

The comments on this post feature an exchange between Jeff Goldsmith and Jost. That exchange is continued in a subsequent post by Goldsmith.

Although President Obama’s State of the Union address made it clear that he has a long list of  urgent priorities for the coming year, the President certainly did not signal retreat on the signature initiative of his first year—health care reform.  His words were “do not walk away from reform, not now, not when we are so close,” “finish the job” and “let’s get it done.”  Indeed, he repeated “let’s get it done” twice.

So how do we “get it done?”

The smartest approach procedurally would be for the House and Senate to pass a reconciliation bill—a budget bill that requires only a simple majority to pass—that makes the requisite fixes to the Senate bill agreed upon by House and Senate leaders in their informal conference last month.  With this, the House should have the votes to pass the reconciliation bill along with the Senate bill.

With the loss of the Massachusetts Senate seat, the Democrats lack a filibuster-proof majority to adopt amendments to the current legislation.  But Democrats in the House do not have the votes to pass the Senate bill without a reconciliation bill fix.  Sections of the Senate bill, such as the excise tax on high-cost health plans, the allocation of the premium subsidies, and the state exchanges are objectionable to progressive House members; the abortion provisions are objectionable to conservative House Democrats; and no one likes the “Cornhusker kickback.”  Although Democrats still hold a substantial majority in the House, few members would vote to pass the Senate bill unchanged.

What about a scaled-back bill?

Republicans have suggested that Congress begin anew with a scaled back, “bipartisan,” incremental bill.  First, a few comments on bipartisanship.  One could argue that bi-partisanship is the reason we still don’t have health reform.  The Democrats lost precious months over the summer, when public support for the legislation was still strong, courting Republican senators.  Had the Democrats moved forward forcefully on their own at that point, reform would already be done. 

Second, as President Obama said in his January 29 conversation with the Republican congressional delegation, the reform legislation is built on bipartisan ideas.  It takes fundamentally a traditional Republican approach—managed competition, tax credits for private insurance premiums, public coverage limited to the poor.  Further, a host of specific Republican proposals were incorporated into the final bill, such as interstate sales of insurance and high risk pools, and even malpractice reform. 

Third, there is simply not enough in the proposals the Republican have put forward to build meaningful reform.  The Congressional Budget Office analysis of the Republican proposal found that it would only cover 3 million of the uninsured, leaving 52 million Americans uninsured by 2019, and that it would reduce the deficit by only half as much as the Senate bill.

But, leaving aside which party writes the bill, is incrementalism even a good idea?  As many have said in the past few days, it is not possible to unravel the reform legislation and still come up with a plan that guarantees Americans that they can keep the coverage they have if they like it and offers them coverage if they need it.  It is possible to write very short health reform bills only if you create a public insurance system.  The Canada Health Act is 13 pages long, including the French translation (although there is more law implementing the bill at the provincial level).  The current English National Health Services Act is 272 pages long. But if you want to build a health care system based on private rather than public insurance, things get much more complicated. 

So long as we maintain a private insurance system, you can’t require health insurers to accept all comers, with their preexisting conditions, unless you require all to purchase insurance.  You can’t require everyone to purchase insurance unless you offer premium and cost-sharing subsidies to those who cannot afford the full price of health insurance and expand Medicaid to cover those who cannot afford to pay anything for premiums.  If we have an individual mandate and offer premium subsidies, we must have carrots and sticks to keep employers from dumping their employees into the publicly-subsidized nongroup market.  And, of course, once you offer public funding for health insurance, those who oppose abortion will insist that you make sure no public funding goes for abortion, those who are concerned about immigration will insist none goes to undocumented aliens, language clarifying that Congress is not in favor of rationing or euthanasia will be needed to address the fear-mongers, and those who hold out the longest will get a little pork added for their constituents.  Before you know it, you have a 500 page bill just for insurance reform.

One can question whether the back 1500 pages of each bill were really necessary. As one of the few Americans who have slogged through them, I can say that there are a lot of good ideas in there.  Some of the provisions, such as payment cuts to Medicare Advantage plans and adjustments in Medicare fee-for-service payments were necessary to pay for reform.  Some, such as a host of Medicare payment pilot and demonstration projects and patient-centered outcomes research, are likely to pay an important role in bending the health care cost curve, which is essential if reform is to succeed. They may improve the quality of health care as well, which, frankly, needs improvement.  But perhaps all of the new programs for wellness, prevention, public health, workforce reform, fraud and abuse control, Indian Health Service reform, and the CLASS program could have been handled through separate legislation, making the bill a smaller target.  Some legislators saw this as the one chance to get health reform done in our generation, and perhaps shot a little too high.  In any event, if a thousand pages were lopped from the Senate bill at this point, it still could not get 60 votes again in the Senate or 218 in the House.

We tried incremental reform after the Clinton health reform failure.  It did get us the Children’s Health Insurance Program, which has covered millions of children, the one segment of the uninsured population that is decreasing (although reauthorization of the bill had to await a Democratic president).  But the primary incremental reform effort of the 1990s, the Health Insurance Portability and Accountability Act of 1996 (HIPAA), also called the Kennedy-Kassebaum Act because of its bipartisan sponsors, did little to fix the private health insurance market.  It ended health status underwriting and restricted pre-existing conditions clauses within group plans, but continued to allow  insurance premiums to grow far faster than inflation and insurers to operate with little accountability. HIPAA did almost nothing to improve the nongroup market.  Band-aids didn’t work then and won’t work now.

Getting it done through reconciliation

So the only option really left is to fix the Senate bill through the budget-reconciliation process to make it more acceptable to House Democrats, and then get it adopted into law.  This course of action has been urged in separate letters to the House and Senate leadership by fifty of the top health policy experts in the country, representing a range of political and policy perspectives, including David Cutler, Henry Aaron, Ted Marmor, Theda Skopcol, Jon Gruber, Jon Oberlander, Jacob Hacker, Harold Pollack, Karen Pollitz, Sara Rosenbaum, and many others. 

There is nothing underhanded, overbearing, or even particularly unusual about budget reconciliation.  Republicans passed both the 2001 and 2003 Bush tax cuts and the 1996 legislation ending the Aid to Families with Dependent Children program through budget reconciliation.  In health care, the CHIP program, Medicare Advantage, COBRA continuation coverage, and the EMTALA emergency treatment mandate were adopted through reconciliation.  Most years have reconciliation legislation.

Budget reconciliation is technically complex, and because of Senate rules, Congress is limited in what it can accomplish through it.  The process is described in an interview with former Senate Parliamentarian Robert Dove and a post by me on January 26 at the O’Neill Institute’s blog, a post by Jeff Davis at the Treatment, and a paper by Paul van de Water and James Horney (who between them have years of experience with the CBO and Senate Budget Committee) on the Center on Budget and Policy Priorities site. 

The reconciliation process is in fact already underway.  Congress passed a concurrent budget resolution last spring laying the groundwork for reconciliation and two of the House committees passed health reform as budget reconciliation legislation.  The House could pass a budget reconciliation bill in a matter of days, if it could agree on legislation with the Senate. 

The Senate would take longer, since Senate committee action may (this is not clear) still be necessary.  But the Senate also considers reconciliation under expedited rules (only 20 hours of debate are permitted), and could pass reconciliation in weeks rather than months.  Senate rules of relevancy, and in particular the Byrd rule, limit the issues that can be addressed through reconciliation to those that affect the revenues and outlays of the federal government.   Many of the issues that divide the House and Senate fall into this category.  Reconciliation could clearly be used, for example, to revise or eliminate the tax on high-cost health plans, alter the premium subsidies, increase cuts in the Medicare Advantage program, address state subsidies for the Medicaid program, and eliminate the “cornhusker kickback.” .  Reconciliation could not, on the other hand, change the Senate abortion language, since both the House and Senate bills prohibit federal expenditures for abortion.  Whether or not it could be used to create a national exchange is unclear.  A national exchange would eliminate the start-up money for the state exchanges found in the Senate bill and could reduce the cost of federal premium subsidies, but the Parliamentarian would need to be convinced.

The primary question at this point is whether a reconciliation bill can pass the Senate without the House first adopting the Senate bill, and if not, whether the House trusts the Senate enough for it to pass the Senate bill along with a “sidecar” reconciliation bill in faith that the Senate will accept the reconciliation bill unchanged.  This problem remains to be worked out, but if an acceptable resolution can be reached, we could still have comprehensive health care reform this spring.

Failure is not an alternative

The most likely other alternative at this point is to not get it done, to walk away from reform and accept failure.  From a policy standpoint this would be a disaster—fifty million Americans would remain uninsured, millions more would probably join them before the recession is over, providers would bear an ever higher burden of uncompensated care, employers would continue to drop health coverage or shift the cost of care to workers, and health insurance premiums would continue to grow. 

From a political standpoint it would seem to be a disaster as well for the Democrats.  Although the caricature of health reform that many Americans seem to have accepted is unpopular, Democrats have already voted for reform and are unlikely to become heroes at the polls simply because they could not get it done.  Failing to adopt reform would simply be proof that the Democrats cannot govern, even with overwhelming majorities, and does not seem like their best strategy for 2010.  Plus many of the activists who got Obama and the Democrats elected in 2008 have already indicated that Democrats cannot count on their help if Congress now abandons reform.  Once reform was in place, many Americans might realize that it is not the hobgoblin they have been led to believe it is.

To return to Obama’s words, “do not walk away from reform, not now, not when we are so close,” “finish the job,” “let’s get it done.”  Of course, Obama and his staff need to put their muscle behind his words.  But if they do, and if Democrats can stick together, we can “get it done.”