[Congressional Record Volume 155, Number 90 (Tuesday, June 16, 2009)]
[Senate]
[Pages S6621-S6626]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           HEALTH CARE REFORM

  Mr. ALEXANDER. Madam President, I am looking for a way to offer an 
amendment to the health care bill that would sentence every Senator who 
votes to increase Medicaid eligibility to 150 percent of the Federal 
poverty level to a term of 8 years as Governor in his or her home 
State, so they can have an opportunity to manage the program, to raise 
taxes, and to find a way to pay for that sort of proposal. If we 
Senators were to increase Medicaid in that way, and go home, we would 
find first that Medicaid is a terrible base upon which to build an 
improved health care system, because it is filled with lawsuits. It is 
filled with Federal court consent decrees that sometimes are 20 and 25 
years old and take away from the Governor's and the legislature's 
authority to make decisions. It is filled with inefficiency. It is 
filled with delays. Governors request waivers to run their systems, and 
it may take a year or more for approval from the Federal Government for 
relatively simple requests. And finally, it is filled with an 
intolerable waste of taxpayer money because of fraud that is documented 
by the Government Accountability Office. As much as 10 percent of the 
entire program--$32 billion a year--according to the Government 
Accountability Office is lost to fraud. That is the Medicaid Program.
  The second thing a Senator who goes home to serve as Governor for 8 
years would find is that increasing coverage in this way will require 
much higher State taxes at a time when most every State is making a 
massive cut in services, and a few States are nearly bankrupt. For 
example, in my State of Tennessee, if the Kennedy bill were to pass, 
which would increase Medicaid expansion by 150 percent and increase 
reimbursement rates to 110 percent of Medicare, it would require, based 
on our estimates, a new State income tax of about 10 percent to pay for 
the increased costs just for our State, as well as perhaps adding 
another half a trillion dollars or so to the Federal debt.
  Finally, if we were to base new coverage for the 58 million people 
now in Medicaid, and others who need insurance, upon this government-
run Medicaid Program these Americans--who are the people we are talking 
about in this debate and who are the ones we hope will have more of the 
same kind of health care the rest of us have--we would find that a 
large number of them would have a hard time finding a doctor. Today 40 
percent of doctors already refuse to provide full service to Medicaid 
patients because of the low reimbursement rates, and if we simply add 
more to that Medicaid Program, these people will have an even harder 
time getting served.
  There is a better idea. Instead of expanding a failing government 
health care program which traps 58 million of our poorest citizens in 
that government-run program that provides substandard care, the better 
way to extend medical care to those low-income Americans now served by 
Medicaid is to give them government tax credits, or government 
subsidies, or vouchers, or money in their pockets they can use to 
purchase private health insurance of their choice. That sort of option 
for health care reform is before the Senate, if it could only be 
considered. It has been offered on one end by Senator Coburn and 
Senator Burr. It has been offered at the same time by Senator Gregg of 
New Hampshire. It has been offered in a bipartisan way by Senator Wyden 
and Senator Bennett who have offered a proposal that would basically 
give these dollars to the people who need help, let them buy their 
insurance, and according to the same Congressional Budget Office that 
said the Kennedy proposal costs at least 1 trillion more dollars, the 
CBO has said that Bennett-Wyden would cost zero more.
  I ask that I am informed when I have 1 minute left.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
Senator has 5 minutes remaining.
  Mr. ALEXANDER. Madam President, during the last 6 months, the four 
words we have heard most in Washington are ``more debt'' and 
``Washington takeover,'' and all four words apply to the health care 
debate. We have seen a Washington takeover of banks, of insurance 
companies, of student loans, of car companies, and now, perhaps, of 
health care. The President insists on a government-run insurance option 
as part of a health care reform plan which would inevitably lead to a 
Washington-run health plan.
  Why would it do that? Well, putting a government-run and subsidized 
plan in competition with our private health insurance plans would be 
like putting an elephant in a room with some mice and saying: OK, guys 
and gals, compete. I think we know what would happen. The elephant 
would win the competition and the elephant would be your only remaining 
choice.
  As for more debt, the Congressional Budget Office, in a letter sent 
to Senator Kennedy, estimated that his bill, which is the only 
legislation the Senate Health Committee is considering, would add 
another $1 trillion during the next 10 years in order to cover 16 
million uninsured Americans, leaving 30 million uninsured. That is 
another $1 trillion over the next 10 years that, according to 
yesterday's Washington Post, already is nearly three times as much as 
was spent in all of World War II. The Post said the proposed new debt 
over the next 10 years, before we get to the health care bill, is three 
times as much as we spent in World War II. The Congressional Budget 
Office estimate didn't even consider the cost of the Kennedy bill's 
proposals to expand Medicaid coverage.
  So let's talk about Medicaid. Every State offers it. It provides 
health care in a variety of ways to low-income Americans who are not 
eligible for Medicare. The Federal Government pays about 60 percent of 
the costs and writes most of the rules; the States pay the rest. Fifty-
eight million low-income Americans are trapped in Medicaid. It is the 
only place of any significant size where we don't have competition in 
our health care system. Think of the elephant in the room.
  It was my experience as Governor--I believe it is for most 
Governors--that it is not only an administrative mess with substandard 
care, the Medicaid Program, but its costs have spiraled out of control, 
threatening the viability of public universities and community colleges 
because there is no money left for the States to support them.
  Here is what would happen in Tennessee if the Kennedy bill passed, 
according to the State of Tennessee's Medicaid director. Our State 
costs would go up $572 million if we increased coverage to 150 percent 
of Federal poverty. If the Fed pays for this, the Fed's cost would be 
$1.6 billion--I mean the Federal budget paying for all of it, because 
normally the Federal budget pays two-thirds, the State one-third. If 
the State has to also provide Medicaid payments to physicians at 110 
percent of Medicare, this would add another $600 million in costs to 
the State of Tennessee. Thus, the proposal of the combination of the 
Health and the Finance Committees' bills that are being considered 
would be 1.2 billion new dollars for Tennessee. If you add the Federal 
Government's increase in costs

[[Page S6622]]

just for the Tennessee program to which the Tennessee program was 
expanded, it would be $3.3 billion.

  So you can see why the Kennedy bill has been called so expensive. 
That is not all. The Finance Committee has been discussing turning back 
to the States by 2015 these increased costs, although the Finance 
Committee is talking about a smaller expansion of coverage. So imagine 
a Senator going home to the State of Tennessee--it won't be me, because 
I have already had the privilege of being Governor--but say if one went 
back to be Governor of Tennessee, what would one find if we passed the 
Kennedy bill as it is now proposed? We would find a bill by 2015 of 1.2 
billion in today's dollars, and where would the Governor get the money? 
Well, when one Governor proposed a 4-percent State income tax in 
Tennessee in 2004, a 4-percent income tax would bring in 400 million 
new dollars. We need $1.2 billion under the Kennedy bill to pay for the 
expansion of Medicaid. So to raise nearly $1.2 billion, a new State 
income tax of more than 10 percent would be needed, if all other 
services were held flat, and the Governor has already said that most 
State functions will see a decrease in funding after the stimulus money 
goes away.
  This same problem would be true for all States. The National 
Governors Association says if we assume that all individuals under 150 
percent of poverty are covered and there is no change in reimbursement 
rates, the cost to the States would be $360 billion more over the next 
10 years. If you also increase the reimbursement rate for physicians 
from say 72 percent to 83 percent, the Governors Association says the 
new cost is $500 billion more over 10 years.
  Then there is the fraud in the Medicaid Program. The Government 
Accountability Office says 10 percent of it is fraud--$32 billion a 
year--about three-fourths of the amount we spend on prescription drugs 
for all seniors. Then there is the problem of access of care, with 40 
percent of doctors already not being willing to provide full service to 
patients who are on Medicaid. So why would we expand this government-
run program when it is filled with inefficiencies, delay, and waste, 
when it would bankrupt States, when it would add hundreds of billions 
of dollars to the Federal debt, and when it would provide substandard 
service when, instead, we could pass the Coburn-Burr bill, or the Gregg 
bill, or the Wyden-Bennett bill and give to the 58 million low-income 
Americans who are trapped in a failing government program the dollars 
they need to purchase private health insurance much like the rest of us 
have?
  I hope I can find a way to offer an amendment that would require any 
Senator who votes for a 150-percent increase in Medicaid, who says that 
Medicaid expansion will go to 150 percent of the Federal poverty level, 
will be sentenced to go home and serve for 8 years as Governor of his 
or her State so they can find out what it is like to manage such a 
program or to raise taxes to pay for it.
  I ask unanimous consent to have printed in the Record following my 
remarks the letter from Douglas Elmendorf of the Congressional Budget 
Office to Senator Kennedy of June 15 stating that his bill would add $1 
trillion more over the next 10 years to the debt, and that doesn't even 
include the Medicaid expansions I have talked about.
  I also ask unanimous consent that an article from the Wall Street 
Journal of yesterday talking about State budget gaps, which shows what 
dire straits many States are in be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                    Washington, DC, June 15, 2009.
     Hon. Edward M. Kennedy,
     Chairman, Committee on Health, Education, Labor, and 
         Pensions, U.S. Senate, Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office (CBO) 
     and the staff of the Joint Committee on Taxation (JCT) have 
     completed a preliminary analysis of the major provisions 
     related to health insurance coverage that are contained in 
     title I of draft legislation called the Affordable Health 
     Choices Act, which was released by the Senate Committee on 
     Health, Education, Labor, and Pensions (HELP) on June 9, 
     2009. Among other things, that draft legislation would 
     establish insurance exchanges (called ``gateways'') through 
     which individuals and families could purchase coverage and 
     would provide federal subsidies to substantially reduce the 
     cost of that coverage for some enrollees.
       The attached table summarizes our preliminary assessment of 
     the proposal's budgetary effects and its likely impact on 
     insurance coverage. According to that assessment, enacting 
     the proposal would result in a net increase in federal budget 
     deficits of about $1.0 trillion over the 2010-2019 period. 
     Once the proposal was fully implemented, about 39 million 
     individuals would obtain coverage through the new insurance 
     exchanges. At the same time, the number of people who had 
     coverage through an employer would decline by about 15 
     million (or roughly 10 percent), and coverage from other 
     sources would fall by about 8 million, so the net decrease in 
     the number of people uninsured would be about 16 million.
       It is important to note, however, that those figures do not 
     represent a formal or complete cost estimate for the draft 
     legislation, for reasons outlined below. Moreover, because 
     expanded eligibility for the Medicaid program may be added at 
     a later date, those figures are not likely to represent the 
     impact that more comprehensive proposals--which might include 
     a significant expansion of Medicaid or other options for 
     subsidizing coverage for those with income below 150 percent 
     of the federal poverty level--would have both on the federal 
     budget and on the extent of insurance coverage.


          Key Provisions Related to Health Insurance Coverage

       Subtitles A through D of title I of the Affordable Health 
     Choices Act would seek to increase the number of legal U.S. 
     residents who have health insurance. Toward that end, the 
     federal government would provide grants to states to 
     establish insurance exchanges and--more importantly--would 
     subsidize the purchase of health insurance through those 
     exchanges for individuals and families with income between 
     150 percent and 500 percent of the federal poverty level; 
     those subsidies would represent the greatest single component 
     of the proposal's cost. The proposal would also impose a 
     financial cost on most people who do not obtain insurance, 
     the size of which would be set by the Secretary of the 
     Treasury.
       The draft legislation released by the HELP Committee also 
     indicates that certain features may be added at a later date. 
     Because they are not reflected in the current draft, however, 
     CBO and the JCT staff did not take them into account. In 
     particular, the draft legislation does not contain provisions 
     that would change the Medicaid program, although it envisions 
     that the authority to extend Medicaid coverage will be added 
     during Senate consideration of the bill. (By itself, adding 
     such provisions would increase the proposal's budgetary costs 
     and would also yield a larger increase in the number of 
     people who have health insurance.) The draft legislation also 
     indicates that the committee is considering whether to 
     incorporate other features, including a ``public health 
     insurance option'' and requirements for ``shared 
     responsibility'' by employers. Depending on their details, 
     such provisions could also have substantial effects on our 
     analysis. (A summary of the key provisions that were included 
     in this analysis is attached.)


         Important Caveats Regarding This Preliminary Analysis

       There are several reasons why the preliminary analysis that 
     is provided in this letter and its attachments does not 
     constitute a comprehensive cost estimate for the Affordable 
     Health Choices Act:
       First, this analysis focuses exclusively on the major 
     provisions on health insurance coverage contained in certain 
     subtitles of title I of the draft legislation. Although other 
     provisions in title I, along with provisions in the other 
     five titles of the legislation, would have significant 
     budgetary effects, the analysis contained in this letter and 
     its attachment is limited to the provisions in subtitles A 
     through D regarding health insurance coverage.
       Second, CBO and the JCT staff have not yet completed 
     modeling all of the proposed changes related to insurance 
     coverage. For example, the proposal would allow parents to 
     cover children as dependents until they are 27 years old, and 
     our analysis has not yet taken that provision into account. 
     (Other instances are listed in the attachment.) Although this 
     analysis reflects the proposal's major provisions, taking all 
     of its provisions into account could change our assessment of 
     the proposal's effects on the budget and insurance coverage 
     rates--though probably not by substantial amounts relative to 
     the net costs already identified. As our understanding of the 
     provisions we have analyzed improves, that could also affect 
     our future estimates.
       Third, the analysis of the proposal's effects on the 
     federal budget and insurance coverage reflects CBO's and the 
     JCT staff's understanding of its key features and discussions 
     with committee staff--but does not represent a full 
     assessment of the legislative language that was released by 
     the committee. Although our reading of the draft language has 
     informed our analysis, we have not had time to complete a 
     thorough review of that language, which could have 
     significant effects on any subsequent analysis provided by 
     CBO and the JCT staff.
       In particular, the draft legislation includes a section on 
     ``individual responsibility'' that would generally impose a 
     financial cost on

[[Page S6623]]

     people who do not obtain insurance--but is silent about 
     whether people are required to have such coverage. On the 
     basis of our discussions with the committee staff, we 
     understand that it was the committee's intent to impose a 
     clear requirement for individuals to have health insurance, 
     and this analysis reflects that intent. However, the current 
     draft is not clear on this point, and if the language remains 
     ambiguous, that would affect our estimate of its impact on 
     federal costs and insurance coverage.
       Fourth, some effects of the insurance proposals that we 
     have modeled have not yet been fully captured. For example, 
     we have not yet estimated the administrative costs to the 
     federal government of implementing the proposal or the costs 
     of establishing and operating the insurance exchanges, nor 
     have we taken into account the proposal's effects on spending 
     for other federal programs. Those effects could be noticeable 
     but would not affect the main conclusions of this analysis.
       Fifth, the budgetary information shown in the attached 
     table reflects many of the major cash flows that would affect 
     the federal budget as a result of the proposal and provides 
     our preliminary assessment of its net effects on the federal 
     budget deficit. Some cash flows would appear in the budget 
     but would net to zero and not affect the deficit; CBO has not 
     yet estimated all of those cash flows.


                     Likely Effects of the Proposal

       The proposal would have significant effects on the number 
     of people who are enrolled in health insurance plans, the 
     sources of that coverage, and the federal budget.
       Effects on Insurance Coverage. Under current law, the 
     number of nonelderly residents (those under age 65) with 
     health insurance coverage will grow from about 217 million in 
     2010 to about 228 million in 2019, according to CBO's 
     estimates. Over that same period, the number of nonelderly 
     residents without health insurance at any given point in time 
     will grow from approximately 50 million people to about 54 
     million people--constituting about 19 percent of the 
     nonelderly population. Because the Medicare program covers 
     nearly all legal residents over the age of 65, our analysis 
     has focused on the effects of proposals on the nonelderly 
     population.
       People obtain insurance coverage from a variety of sources. 
     Under current law, about 150 million nonelderly people will 
     get their coverage through an employer in 2010, CBO 
     estimates. Similarly, another 40 million people will be 
     covered through the federal/state Medicaid program or the 
     Children's Health Insurance Program (CHIP). Other nonelderly 
     people are covered by policies purchased individually in the 
     ``nongroup'' market, or they obtain coverage from various 
     other sources (including Medicare and the health benefit 
     programs of the Department of Defense).
       According to the preliminary analysis, once the proposal 
     was fully implemented, the number of people who are uninsured 
     would decline to about 36 million or 37 million, representing 
     about 13 percent of the nonelderly population. (Roughly a 
     third of those would be unauthorized immigrants or 
     individuals who are eligible for Medicaid but not enrolled in 
     that program.) That decline would be the net effect of 
     several broad changes, which can be illustrated by examining 
     the effects in a specific year. In 2017, for example, the 
     number of uninsured would fall by about 16 million, relative 
     to current-law projections. In that year, about 39 million 
     people would be covered by policies purchased through the new 
     insurance exchange. At the same time, about 147 million 
     people would be covered by an employment-based health 
     plan, 15 million fewer than under current law. Smaller net 
     declines (totaling about 8 million) would occur in 
     coverage under Medicaid and CHIP and in nongroup coverage 
     because of the subsidies offered in the exchanges.
       Budgetary Impact of Insurance Coverage Provisions. On a 
     preliminary basis, CBO and the JCT staff estimate that the 
     major provisions in title I of the Affordable Health Choices 
     Act affecting health insurance coverage would result in a net 
     increase in federal deficits of about $1.0 trillion for 
     fiscal years 2010 through 2019. That estimate primarily 
     reflects the subsidies that would be provided to purchase 
     coverage through the new insurance exchanges, which would 
     amount to nearly $1.3 trillion in that period. The average 
     subsidy per exchange enrollee (including those who would 
     receive no subsidy) would rise from roughly $5,000 in 2015 to 
     roughly $6,000 in 2019. The other element of the proposal 
     that would increase the federal deficit is a credit for small 
     employers who offer health insurance, which is estimated to 
     cost $60 billion over 10 years. Because a given firm would be 
     allowed take the credit for only three consecutive years, the 
     pattern of outlays would vary from year to year.
       Those costs would be partly offset by receipts or savings 
     from three sources: increases in tax revenues stemming from 
     the decline in employment-based coverage; payments of 
     penalties by uninsured individuals; and reductions in outlays 
     for Medicaid and CHIP (relative to current-law projections).
       The proposal would not change the tax treatment of health 
     insurance premiums. Nevertheless, the reduction in the number 
     of people receiving employment-based health insurance 
     coverage, relative to current-law projections, would affect 
     the government's tax revenues. Because total compensation 
     costs are determined by market forces, CBO and the JCT staff 
     estimate that wages and other forms of compensation would 
     rise by roughly the amounts of any reductions in employers' 
     health insurance costs. Employers' payments for health 
     insurance are tax-preferred, but most of those offsetting 
     changes in compensation would come in the form of taxable 
     wages and salaries. As a result, the shift in compensation 
     brought about by the proposal would cause tax revenues to 
     rise by $257 billion over 10 years. (Those figures are 
     generally shown as negative numbers in the attached table 
     because increases in revenues reduce the federal budget 
     deficit.)
       The government would also collect the payments that 
     uninsured individuals would have to make. CBO and the JCT 
     staff assume that the annual amount, which would be set by 
     the Treasury Secretary, would be relatively small (about $100 
     per person). Moreover, individuals with income below 150 
     percent of the federal poverty level would not have to pay 
     that amount. As a result, collections of those payments would 
     total $2 billion over 10 years.
       Finally, although the proposal would not change federal 
     laws regarding Medicaid and CHIP, it would affect outlays for 
     those programs. CBO assumes that states that had expanded 
     eligibility for Medicaid and CHIP to people with income above 
     150 percent of the federal poverty level would be inclined to 
     reverse those policies, because those individuals could 
     instead obtain subsidies through the insurance exchanges that 
     would be financed entirely by the federal government. 
     Reflecting those reductions in enrollment, federal outlays 
     for Medicaid and CHIP would decline by $38 billion over 10 
     years.
       I hope this preliminary analysis is helpful for the 
     committee's consideration of the Affordable Health Choices 
     Act. If you have any questions, please contact me or CBO 
     staff. The primary staff contacts for this analysis are 
     Philip Ellis, who can be reached at (202) 226-2666, and Holly 
     Harvey, who can be reached at (202) 226-2800.
           Sincerely,
                                             Douglas W. Elmendorf,
                                                         Director.
       Attachments.
                                  ____


    A Summary of the Key Provisions of the HELP Committee's Proposal

               Congessional Budget Office, June 15, 2009

       Most of the proposal's key provisions would become 
     operative in a state when that state establishes an insurance 
     exchange (called a ``gateway'') through which its residents 
     could obtain coverage; such exchanges might start offering 
     health insurance in some states in 2012; all exchanges would 
     be fully operational by 2014.
       The proposal is assumed to require most legal residents to 
     have insurance (though the draft language is not explicit in 
     this regard). In general, the government would collect a 
     payment from uninsured people, but individuals with income 
     below 150 percent of the federal poverty level (FPL) would be 
     exempt and the payment would be waived in certain other 
     cases. The Congressional Budget Office (CBO) and the staff of 
     the Joint Committee on Taxation (JCT) assumed that the annual 
     payment amount, which would be set administratively, would be 
     relatively small (about $100 per person).
       New health insurance policies sold in the individual and 
     group insurance markets would be subject to several 
     requirements regarding their availability and pricing. 
     Insurers would be required to issue coverage to all 
     applicants, and could not limit coverage for preexisting 
     medical conditions. In addition, premiums for a given plan 
     could not vary because of enrollees' health and could vary by 
     their age to only a limited degree (under a system known as 
     adjusted community rating). Existing policies that are 
     maintained continuously would be ``grandfathered.''
       There would be no change from current law regarding 
     Medicaid or the Children's Health Insurance Program (CHIP).
       Insurance policies covering required benefits that are sold 
     through the exchanges would have actuarial values chosen by 
     the Secretary of Health and Human Services from specified 
     ranges within three tiers. (A plan's actuarial value reflects 
     the share of costs for covered services that is paid by the 
     plan.) CBO and the JCT staff assumed that the chosen 
     actuarial values would be 95 percent (for the highest tier), 
     85 percent (for the middle tier), and 76 percent (for the 
     lowest tier). Plans would be allowed to offer added coverage 
     or benefits for an extra premium.
       The subsidies available through the exchanges would be tied 
     to the average of the three lowest premium bids submitted by 
     insurers in each area of the country for each tier of 
     coverage. For people with income between 150 percent and 200 
     percent of the FPL, the subsidies would apply to that average 
     bid for the highest-tier plans; for people with income 
     between 200 percent and 300 percent of the FPL, the subsidies 
     would apply to that average bid for the middle-tier plans; 
     and for people with income between 300 percent and 500 
     percent of the FPL, the subsidies would apply to that average 
     bid for the lowest-tier plans.
       The subsidies would cap premiums as a share of income on a 
     sliding scale starting at 1 percent for those with income 
     equal to 150 percent of the FPL, rising to 10 percent of 
     income at 500 percent of the FPL. Those income caps would be 
     indexed to medical price inflation, so that individuals would 
     (on average) pay a higher portion of their income for 
     exchange premiums over time. Individuals

[[Page S6624]]

     and families with income below 150 percent of the FPL would 
     not be eligible for those subsidies. (The proposal envisions 
     that Medicaid would be expanded to cover those individuals 
     and families but the draft legislation does not include 
     provisions to accomplish that goal.)
       Subsidies would be delivered by the Department of Health 
     and Human Services via the insurance exchanges with some 
     provisions for income verification. Subsidy amounts would be 
     determined using a measure of income for a previous tax year, 
     implying that subsidies received for a given year (for 
     example, in 2013) would be based on income received two years 
     prior (for example, in 2011). Individuals might be eligible 
     for larger subsidies if their income declined significantly 
     in the intervening period or if other extenuating 
     circumstances arose. (The draft legislation's provisions 
     regarding verification of income are unclear, which is 
     reflected in the analysis.)
       The proposal does not include a ``public plan'' that would 
     be offered in the exchanges, nor does it contain provisions 
     that would require employers to offer health insurance 
     benefits or impose a fee or tax on them if they did not offer 
     insurance coverage to their workers.
       In general, individuals with an offer of employer-sponsored 
     insurance would not be eligible for exchange subsidies under 
     the proposal. However, employees with an offer from an 
     employer that was deemed unaffordable could get those 
     subsidies; because the exchange subsidies would limit the 
     share of income that enrollees would have to pay (as 
     described above), CBO and the JCT staff assumed that an 
     ``unaffordable'' offer from an employer would be one that 
     required the employee to pay a larger share of income for 
     that plan than he or she would have to pay for coverage in an 
     exchange.

[[Page S6625]]

     [GRAPHIC] [TIFF OMITTED] TS16JN09.002
     


[[Page S6626]]

       The proposal would offer subsidies to small employers whose 
     workers have low average wages and who offer health benefits 
     to those workers. The amount of the subsidy would vary with 
     the size of the firm (up to a limit of 50 workers), and firms 
     that contribute larger amounts toward their workers' health 
     insurance would receive larger subsidies. The credit would be 
     available indefinitely, but firms would be eligible to take 
     the credit for only three consecutive years at a time.


               Key Provisions Not Yet Taken Into Account

       There are several features of the proposal that CBO and the 
     JCT staff have not yet reflected in their budget estimates. 
     The most significant features of the proposal that have not 
     yet been estimated would do the following:
       Require insurers to offer dependent coverage for children 
     of policyholders who are less than 27 years of age.
       Delegate authority to a Medical Advisory Council to 
     establish minimum requirements for covered health benefits 
     and to determine the level of coverage that individuals would 
     need to obtain in order to qualify as having insurance.
       Require insurers to maintain a minimum level of medical 
     claims paid relative to premium revenues (otherwise known as 
     a ``medical loss ratio''), or to repay certain amounts to 
     policyholders; the HHS Secretary would have the authority to 
     set the minimum medical loss ratio.
       Apply ``risk adjustment'' (a process that involves shifting 
     payments from plans with low-risk enrollees to plans with 
     high-risk enrollees) to all health insurance policies sold in 
     the individual and group insurance markets.
       Allow employers to buy health coverage through the 
     exchanges.
       Require health insurance plans participating in the new 
     exchanges to adopt measures that are intended to simplify 
     financial and administrative transactions in the health 
     sector (such as claims processing).

             [From the Wall Street Journal, June 15, 2009]

          States' Budget Gaps Are Another Test for Washington

                         (By Jonathan Weisman)

       As the White House eagerly scans the economic landscape for 
     signs of recovery, a looming drought in the form of state 
     budget deficits could make any ``green shoots'' wilt.
       States face a cumulative shortfall of $230 billion from 
     this year through 2011, and there is little sign in bailout-
     weary Washington of any attempt to create yet another aid 
     program to solve that problem. But if the federal government 
     did want to hold that drought at bay, it has options: passing 
     another stimulus plan; assisting states in the bond market; 
     assuming a greater share of Medicaid payments. If the 
     recovery stalls a few months from now, those may suddenly 
     become central to the rescue efforts.
       While discouraging talk right now of any federal response 
     to state budget woes, the Obama administration is anxiously 
     eyeing state efforts to close persistent budget gaps. So far, 
     42 U.S. states have slashed enacted budgets to cope with 
     rising demand for services and plunging revenue, according to 
     the National Governors Association. About half have also 
     raised taxes.
       Those policies run counter to Washington's efforts to prime 
     the economic pump, with a $787 billion stimulus plan, plus 
     hundreds of billions of dollars more in new lending, mortgage 
     relief and other efforts. About $246 billion of the stimulus 
     funds are already going to the states, to offset rising 
     Medicaid costs, stave off education cuts and help with 
     infrastructure problems. Friday, the Treasury made $25 
     billion in bond authority available for state and local 
     governments under the Recovery Zone Bonds program, a little-
     known piece of the massive stimulus law.
       But all that money will start drifting away next year, when 
     the administration hopes a recovery will be taking hold. And 
     that is exactly when states anticipate their fiscal problems 
     could be even worse. 'The states have so few options to 
     respond,'' said Nick Johnson, director of the state fiscal 
     project at the Center on Budget and Policy Priorities, a 
     liberal think tank. ``Drawing down reserve funds, various 
     accounting gimmicks--those options are either gone or won't 
     do enough. The remaining options threaten to slow the 
     recovery.''
       If Washington were inclined to help, the easiest approach 
     would be a second stimulus bill pouring more money directly 
     into state coffers. But with a federal budget deficit 
     approaching $2 trillion, there is little chance of that.
       So creativity is in order.
       House Financial Services Committee Chairman Barney Frank 
     has been searching for low-cost ways to step in. His staff 
     has looked into a raft of measures to loosen state borrowing 
     and lower the interest rates state governments must offer on 
     their bonds. The Massachusetts Democrat would like to create 
     a reinsurance fund, financed through premiums paid by bond 
     sellers, which would offer bond purchasers additional 
     assurance that their money is safe.
       Legislation also could mandate that ratings companies such 
     as Standard & Poor's would have to use the same criteria to 
     rate state bonds as are used to rate corporate bonds--a 
     requirement that doesn't exist now, sometimes to the 
     disadvantage of states. 'Where there's the full faith in 
     credit behind these municipal bonds, where the full taxing 
     power of a state or city is behind them, they never 
     default,'' Mr. Frank said, yet the bonds are ``treated as if 
     they're risky.''
       In the short run, the Treasury or Federal Reserve could use 
     existing programs established to prop up consumer borrowing 
     to underwrite state bond offerings, he said. That would bring 
     more lenders into the state bond market and lower interest 
     costs for cash-strapped states.
       President Barack Obama suggested in a recent C-SPAN 
     interview that some kind of clever bond-market moves may be 
     in the works. ``We are talking to state treasurers across the 
     country, including California, to figure out are there some 
     creative ways that we can just help them get through some of 
     these difficult times,'' he said.
       But crafting the right balance would be tough.
       Treasury officials have told California state legislators 
     that the U.S. is monitoring the situation but isn't keen to 
     provide assistance, according to people familiar with the 
     matter ``It's hard to help just one state,'' says a 
     government official. On the other hand, there is worry about 
     setting up a broad short-term assistance program that some 
     fret could turn into a permanent federal subsidy.
       The move to bail out California--or any other state--is 
     made harder by the current political climate, particularly 
     opposition from home-state Republicans on Capitol Hill.
       Rep. John Campbell, one of four California Republicans on 
     Mr. Frank's committee, said a federal intervention would only 
     halt state efforts to come to terms with budgets and could 
     create incentives to spend even more. ``The states are kind 
     of on their own because the bullets are out of the federal 
     gun,'' he said, ``not because they couldn't print some more 
     money but because I hope there's a recognition that printing 
     and borrowing more money is going to have extremely negative 
     consequences.''
       In response, Mr. Frank shrugs: ``How am I going to get 
     representatives from Pennsylvania and New York to send money 
     to California if Republicans from California are fighting 
     it?''

  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. ALEXANDER. I yield the floor.
  The PRESIDING OFFICER. The Senator from California is recognized.

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