Businesses large and small were grappling with how – or even whether – to comply with the new federal mandates forÌý. Many feared the costs would be staggering and could put them at a competitive disadvantage or drive them out of business.

Littler Mendelson responded by forming a separate health care consulting group with over 20 top attorneys to advise clients on how toÌý.Ìý The giant firm – with more than 900 lawyers operating from 55 offices nationwide – also created an online service to help companies determine liabilities and costs under Obamacare.Ìý NewÌýbusiness started pouring in.

“We’re advising hundreds and hundreds if not thousands of businesses,” Steven Friedman, co-chair of the firm’s employee benefits practice group, toldÌýThe Fiscal Times. “We’re working with employers to determine if there are strategies they can employ to somehow mitigate the effects of the law . . . and we’re coming up with some innovative solutions.”

This strategic expansion is part of a cottage industry thanks to the new health-care reform law. President Barack Obama signed the law in March 2010, but it won’t fully take effect until January. With a new slew of complicated laws and regulations on the books, someone has to interpret them for average Americans and the business community.

Leading law firms like Littler Mendelson, Proskauer and others continue to eye the possibilities. H&R Block and other tax preparation firms are expected to hire additional accountants to help individuals file their tax returns, which will provide vital information to comply with Obamacare.Ìý And certified public accounts and data management firms are poised to assist businesses with record keeping and other assistance.

Without question, tax professionals and tax form preparers are among the most important cogs in the Obamacare machine. That is because the IRS,Ìýin recent months, is central to implementing the health care reform system.Ìý ÌýÌý The Supreme Court held last year that Congress could regulate health care under its ability to tax.ÌýThat gave the IRS a leading role inÌý, along with the Department of Health and Human Services. There are 47 tax provisions – including the small business health care credit and the medical devices tax – that will take effect. The agency will have to administer those provisions and collect taxes where due.

•ÌýThe IRS determines whether people qualify for a health insurance premium tax credit as part of the minimum coverage requirement.Ìý •ÌýAmericans will report their insurance status when they file their tax forms. •ÌýThe IRS will collect a $95 penalty on those without insurance.Ìý •ÌýBusinesses with 50 or more full-time workers must provide health care insurance to their employees or face a $2,000 per-head penalty.Ìý •ÌýThe agency will collect the penalties when businesses do not comply.

Tax preparers play such an important role in Obamacare that HHS Secretary Kathleen Sebelius reportedly solicited aÌýto fund a marketing campaign to sell Americans on health reform. Gene King, a company spokesman, said yesterday that while Sebelius contacted H&R Block, the firm had yet to commit to any donation.Ìý Ìý H&R Block CEO Bill Cobb said last week in a conference call with investors that the company has “begun to invest in resources and technology that we expect will enable us to roll out initiatives this year that will benefit our clients.”

The potential for revenue growth by H&R Block and other tax-prep firms is tremendous. The tax preparation industry generated $9 billion in revenues in 2012 while employing 302,931 people at 109,758 firms, according toÌý. Hundreds of millions of dollars or more could easily be generated by those companies’ outreach on Obamacare.

Those Who Stand To Gain

Some accounting firms that don’t directly advise on the new health insurance law still stand to make a lot of money because of it.

Peisner Johnson & Co., a Dallas-area certified public accounting firm, specializes in handling companies’ state and local sales tax obligations. Because many firms are trying to keep their workforces below 50 employees, they are outsourcing some work – including handling sales tax records and payments.

Many Texas companies are outsourcing that work to Peisner Johnson, says Michael Fleming, the firm’s director of partner relations.

“Our out-sourced [state and local] tax returns business is growing by leaps and bounds,” Fleming told The Fiscal Times. “I’m not looking at exact figures here, but I would say year over year we’re probably up 20 percent this year.”Ìý

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After Scott Brown’s (R) win in Massachusetts’ special election, Democratic leaders no longer have a filibuster-proof majority in the Senate and are weighing the use of arcane budget rules to pass at least part of the long-debated health overhaul package.

The procedure, known as “,”Ìýlikely would limit the scope of the legislation. But it would also permit a bill to pass with a simple majority of 51 votes.

What Is Reconciliation?

Budget reconciliation, a provision of the 1974 Congressional Budget Act, is designed to force committees to make changes in mandatory – or entitlement – spending and revenues, such as Medicare. It was conceived by lawmakers as a way to bring down the deficit by easing the path for budget and tax deals.

The rules for budget reconciliation in the Senate restrict the procedure to provisions dealing with the budget. They also set strict protocols for consideration of the bills in both chambers. Under the procedures for reconciliation bills, debate in both houses is limited to 20 hours, and no Senate filibusters are allowed.

Congress has used reconciliation occasionally for non-budget legislation, including rewriting health care and welfare policy, as the Republican majority did in passing major welfare reform in 1996.

But the authors of budget reconciliation never envisioned the procedure as a fast-track system to enact complicated social policy measures. Indeed, Sen. Robert Byrd, D-W. Va., the patriarch of the Senate and a master of its rules, helped design a set of six conditions under which any portion of a reconciliation measure could be deemed “extraneous” to the budget — neither adding to nor subtracting from the deficit — and could be excised unless it garnered at least 60 votes.

Resorting to budget reconciliation is the legislative equivalent of breaking out the heavy artillery in a pitched battle. Since the early 1980s, it has been used 19 times, primarily to steer controversial fiscal and budgetary policies through the Senate, including former President Bill Clinton’s fiscal 1994 deficit reduction and tax package and President George W. Bush’s major tax cuts.

What Would The Democrats Gain By Using Reconciliation?

Since filibusters, which take 60 votes to stop, are banned under the reconciliation procedures, Democrats could pass health reform legislation with a simple 51-vote majority. That would allow the Democrats to pass a bill without Republican support and even with a few Democratic defections.

Does The Procedure Have Disadvantages For Democrats? Lawmakers and policy experts on both sides of the aisle warn that the strategy could backfire on the Democrats by leaving important provisions of the bill vulnerable to a parliamentary challenge and by making the Democrats appear overly partisan and high-handed. In addition, since the bills could deal only with issues of budget and spending, some social policy issues covered in the current legislation, such as abortion funding and coverage of immigrants, might not be allowed.

There could be technical problems as well, including questions about the timing of the measure. The congressional budget resolution on which reconciliation would be based covers five years, but most of the calculations for spending and saving in the current health overhaul are based on a 10-year horizon. Trying to marry those two timeframes could result in thorny “sunset” questions about whether elements of the health reform would be phased out after five years and then need to be reauthorized by Congress.

How Would It Work?

Every year, the House and Senate draft a budget resolution – a blueprint of anticipated federal spending and revenues for the coming fiscal year. To get the reconciliation process going, the House and Senate budget committees may include reconciliation instructions to one or more committees in the budget resolution that directs them to produce legislation by a certain date that meets the mandatory spending or tax targets.

Last spring, the budget committees agreed to include a directive for health care legislation at the behest of Democratic leaders and White House Chief of Staff Rahm Emanuel.

If reconciliation is used, the Senate Finance and healthÌýcommittees each are supposed to send proposed changes in laws within their jurisdictions to the Senate Budget Committee with changes that would save $1 billion over the next five years. The House Ways and Means, Education and Labor and Energy and Commerce Committees would face a similar challenge and have to report changes to the House Budget Committee.

Those proposed changes would then be translated by each budget committee into House and Senate bills.

When those bills reach the House and Senate floors, members have a maximum of 20 hours to debate them – and almost no opportunity to offer amendments – before taking a vote. In the Senate, the bill may be challenged on the floor by any senator who asserts that a provision runs afoul of the “Byrd Rule.”

Assuming that the House and Senate bills are approved, they generally are sent to a conference of House and Senate negotiators to be melded into a single piece of legislation. That final conference report, as it is called, is then returned to the floor for a final vote by the two chambers under strict rules that set a timetable for action and that prohibit any amendments. The compromise measure is also subject to Byrd Rule objections. If the bill is passed, it would then be sent to the president for his signature or veto.Ìý

This article is a condensed version of a KHN story and sidebar Ìýthat ran in August.

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The drive on Capitol Hill to create a bipartisan entitlement and tax reform commission to help “bend the cost curve” of health spending and address mounting deficits picked up momentum Tuesday, as Senate Minority Leader Mitch McConnell and a handful of moderate Democrats and Republicans voiced support for the effort.

The commission would draft proposals to control the long-term costs of Medicare, Medicaid and Social Security, which together account for 40 percent of all federal spending other than interest on the debt. The recommendations would require a swift up or down vote by a supermajority of members of Congress, to assure bipartisan support for unpopular measures to cut sensitive spending programs or to raise taxes if necessary.

The chief authors of the measure, Senate Budget Committee Chairman Kent Conrad, D-N.D., and Republican Sen. Judd Gregg of New Hampshire, say they will attempt to attach their plan to must-pass legislation raising the government’s debt ceiling in the coming weeks. Others, including independent Sen. Joseph Lieberman of Connecticut and Republican Sen. George V. Voinovich of Ohio, are circulating similar plans.

Conrad held hearings TuesdayÌýto drum up support for the approach. He was joined by a small group of lawmakers from both chambers warning that runaway government spending and a $1.4 trillion annual deficit were threatening to undermine the nation’s economy and the U.S. credit rating abroad. “It doesn’t take an economist to realize our course is unsustainable,” Voinovich said. “The federal government is the worst credit card abuser in the world and we’re putting everything on the tab of our children and grandchildren.”

McConnell, R-Ky., said he would have to see the composition and mandate of a commission before signing on, to make sure Republicans were adequately represented. But his comments echoed those of Conrad and others who believe a commission may be the only way to force Congress to come to grips with unsustainable spending on entitlement programs, the major cost drivers in the federal budget.

“I actually discussed that matter with the President back before he was sworn in and I indicated a willingness to discuss the appropriateness of having some kind of commission, and I’m willing to talk about that – particularly if the commission targets the real problem we have in the future which is the unfunded liabilities we have in Medicare, Medicaid and Social Security,” McConnell told reporters at a news conference.

The government is on track to accumulate deficits totaling $9 trillion between now and 2019, according to the Treasury and the Office of Management and Budget. While the administration’s spending in response to the recession and financial meltdown helped drive up the fiscal 2009 deficit to a record $1.4 trillion, most of the future problem will be due to rapid rises in entitlement spending on Medicare and Social Security for seniors and Medicaid for the poor and disabled. Experts say that these problems are not being addressed as part of the health care overhaul bill passed by the House last weekend or the plans being considered in the Senate.

The idea of threatening to hold up a measure allowing the government to raise the nation’s nearly $12 trillion debt limit to enable the Treasury Department to continue borrowing has attracted strong backing from Sens. Evan Bayh, D-Ind., 13 other Democrats and Lieberman. Bayh, who met late last week with Senate Majority Leader Harry Reid, D-Nev., to press his case for a commission, described the move as an “insurrection” by lawmakers fearful that the government was on an unsustainable spending path.

Lieberman said that it is essential to link action on a new debt ceiling with a commission to address the nation’s long-term fiscal problems “to ensure that we do not put ourselves or the nation into a position where we continually have to increase the nation’s debt ceiling limit to accommodate perpetual deficits and ever-growing national debt.”

Jim Manley, a spokesman for Reid, said the majority leader has been “actively talking with many of his colleagues and administration officials about this type of proposal,” but that no decision has been made. Manley emphasized, however, that “the process and policy needs to be a joint administration-House-Senate decision.” House Speaker Nancy Pelosi, D-Calif., opposes the approach, according to an aide, but House Majority Leader Steny Hoyer, D-Md., supports the concept.

The White House has signaled interest in the Conrad-Gregg commission approach, according to Conrad, but remains non-committal. During Tuesday’s Senate Budget Committee hearing, William Galston, a Brookings Institution senior fellow, said he has heard the administration may include a proposal for a bipartisan commission in the fiscal 2011 budget proposal that will be submitted to Congress early next year. The Office of Management and Budget declined to confirm or deny the speculation.

David Walker, the former Comptroller General of the United States, urged Congress to move swiftly next year to create a bipartisan commission to address the nation’s growing fiscal challenges.

“Importantly, everything must be on the table for any commission to be credible and to have a real chance of success,” said Walker, who is now president and CEO of the Peter G. Peterson Foundation. “This includes acknowledging the need to modernize the current social insurance programs, constrain federal spending, including defense spending, and raise additional revenues.”

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After a brief celebration of House passage of landmark health legislation, House and Senate Democrats and President Barack Obama face weeks, if not months, of difficult negotiations in constructing a final package that will win congressional approval.

Their challenge: Despite months of debate, disputes remain between liberal and moderate Democrats and between the House and the Senate on a raft of core issues. They include how much to spend on an overhaul; how to pay for it; how to deal with a government-run insurance option, and the scope of coverage and subsidies for the uninsured.

One thing is clear: The House-passed bill is almost certainly the high-water mark of liberal aspirations. On most issues, Democrats will likely have to tack to the right to win the support of Senate moderates. House Speaker Nancy Pelosi’s acquiescence on more-restrictive abortion language showed just how far party leaders are prepared to go to push through the legislation.

The House bill, which would cost $1.1 trillion over a decade,Ìýpassed late Saturday on a vote of 220 to 215. Like the $829 billion Senate Finance Committee bill, which is likely to be the template for that chamber’s legislation, the House legislation requires, for the first time, that most people have health insurance.

But compared to the Senate Finance bill, the House bill would cover more uninsured (eventually 36 million versus 29 million); offer bigger subsidies for individuals and families to buy coverage on new exchanges, or marketplaces; provide for a bigger Medicaid expansion, and use a markedly different financing scheme for a big chunk of the cost (a tax on wealthy Americans versus a levy on high-cost insurance plans.)

Now, as Senate Majority Leader Harry Reid, D-Nev., cobbles together legislation, he must maintain liberal support while winning over a handful of wavering moderates — including Ben Nelson of Nebraska, Evan Bayh of Indiana, Blanche Lincoln of Arkansas and independent Joseph Lieberman of Connecticut – to rack up the 60 votes needed to thwart a Republican filibuster.

Ultimately, because of the struggle to get those 60 votes, any bill passed by the Senate will enter House-Senate negotiations with a leg up, and perhaps form the foundation of a final Capitol Hill deal. “I don’t see it any other way,” said Nelson.

Forks in the Road

Among the outstanding questions in putting together a House-Senate bill:Ìý

• Will the Democratic leadership try to hold the bill’s price tag to $900 billion over 10 years, as requested by Obama, or adjust the cost up or down to address the sometimes-conflicting demands of the party’s rank and file?
• Will Democrats feel compelled to go with the House’s more ambitious coverage proposals, or endorse the Senate’s more modest ones?
• Will liberal Democrats prevail in including the House version of the public option, or bow to Reid’s idea that states should be allowed to opt out? It’s also possible a final bill would go in another direction, and trigger a public option only under certain conditions.

“They’ve (the House and Senate) really kind of taken two different forks in the road on health reform,” said Republican Rep. Dave Camp of Michigan. “This is very complicated, it’s a long way from being over and many of these provisions are integrated with one another. You can’t just pick and choose off a list and slap it together.”

Chip Kahn, president of the Federation of American Hospitals, predicted the House and Senate eventually would reach agreement, but added, “I have trouble visualizing what it will look like.”

“The entire revenue structure of both bills is different,” he said. “The way they approach Medicare Advantage is different, and that has a lot of regional implicationsThere are a lot of substantive differences.” Medicare Advantage is the part of Medicare where private insurers provide benefits to seniors.

Some political observers say recent Republican victories in the Virginia and New Jersey gubernatorial elections might make it more difficult for moderate-to-conservative Democrats from swing states to back ambitious health care legislation.

Feeling Conflicted

But at the same time, some senators admit to feeling conflicted about the size of the bill. While they want to contain overall spending, they also want to make sure that low- and middle-income constituents will be able to afford the mandatory insurance.

“Affordability is important, very important,” said Finance Committee Chairman Max Baucus, D-Mont. “We have to balance what’s the total cost of the bill, number one, then…keep premium costs low, keep out-of-pocket costs low and coverage high…It depends at least in a significant part on the total cost of the bill.”

Drew Altman, president and chief executive officer of the Kaiser Family Foundation, predicted there would be renewed attention to the affordability issue as the legislative process moves ahead. “What will be the deal for middle-class voters – which is always politically sensitive – who have to buy insurance in the exchange?” he said.

Concerns about that question, he added, are “going to create some upward pressure” on the cost of the legislation. “Policy makers have been in the unenviable position of having to struggle with the tradeoff between the cost of the legislation and the generosity of both the subsidy and the adequacy of the underlying [insurance] coverage.” KHN is a part of the foundation.)

Key DifferencesÌý

Here are some key differences between the main bills pending in Congress:

The Price Tag: With an overall cost of $1.1 trillion over the next decade, the House-passed bill is more expensive than either the legislation approved by Senate Finance or by the Senate Health, Education, Labor and Pensions Committee. Some health care analysts and lawmakers say a final House-Senate conference package would have to come closer to the $829 billion Finance bill to survive a final vote in the Senate. In a speech to a joint session of Congress in September, Obama “said first, he wanted a bipartisan bill. Second, he wanted a $900 billion bill or at about that level,” Baucus said. “That level is important.”

How to Pay for the Bill: The House bill would impose a 5.4 percent income surtax on individuals earning more than $500,000 and couples earning more than $1 million. That idea is unpopular in the Senate. The Finance plan, meanwhile, would slap a $6.7 billion annual fee on health insurers, based on their market share, and place a 40 percent excise tax on the highest-cost health insurance plans-a move economists say could help curb demand for such plans and for overused health services. That proposal has been rejected by House Democrats because of vociferous opposition from labor unions, which argue many workers made wage concessions in order to obtain or keep their health care coverage.

The bottom line: Democrats “are on different planets when it comes to payfors,” said Camp.

The Public Plan: While House progressives pushed for a robust public plan with payments tied to Medicare rates, party members from rural areas balked, saying their doctors and hospitals already are underpaid by Medicare and wouldn’t survive. The upshot: The House included a public plan that calls on the government to negotiate rates with health care providers.

The Finance bill doesn’t include a public plan of any sort, but Reid has said he would include one in any Senate measure, and give states the right to opt out if they didn’t want to take part. But ultimately, some analysts say, the Senate might take another route, approving a proposal touted by Republican Sen. Olympia Snowe of Maine that would create a public plan only in states where affordable private insurance wasn’t available to 95% of a state’s residents. Progressives in both chambers will push back hard against that approach, but might have to live with it to get legislation to Obama’s desk.

Coverage and Subsidies: Both the House and Senate Finance bills would require most people to have insurance. And both would provide subsidies to buy coverage to people with incomes of up to 400 percent of the federal poverty level, or about $88,000 for a family of four. But they would do it in different ways.

For example, under the House Democrats’ plan, a family of four earning $54,000 a year would pay $6,200 or 11 percent of their income on premiums and out-of-pocket costs, according to an analysis by the Congressional Budget Office and Joint Committee on Taxation. Under the Finance bill, that same family would pay $9,900 or 18 percent of income. As income levels increase the subsidy levels of the bills become more similar. For a family of four with income of $90,100, both bills would require the family to spend $16,600 or 18 percent of their income.

In another difference, the Finance Committee’s penalties for individuals who don’t carry coverage are weaker than those in the Senate health or House bills. Health insurers fear that would mean that some people would wait to buy health insurance until they got sick, driving up costs and premiums.

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The political peril of waiting until 2010 – a midterm election year – could mean the death of comprehensive health care legislation, according to some analysts. “If they’re going to do it, they have to do it this year,” said University of Virginia political analyst Larry Sabato. “Everyone knows that. They know it.”

If there isn’t a bill on Obama’s desk by Christmas, Obama supporters fear lawmakers could face a repeat of the brutal August town hall meetings where angry constituents railed against a government-run “public plan” and other elements of proposed bills. And under that scenario, lawmakers could return to Washington in January considerably less enthusiastic about health care legislation.

In addition, Tuesday’s election results – in which Republicans won the Virginia and New Jersey governors’ races – might make some moderate Democrats facing reelection next year hesitant to back a health care measure that will cost $900 billion or more over the next decade. Exit polling showed substantial numbers of voters in both states expressing concern that government “is doing too many things better left to business and individuals,” according to .

As for delaying health care until next year, Sabato said, “If you’re talking about having everything done except for tying it in a ribbon, that’s one thing. Once everything is lined up you could have the final votes once Congress comes backbut it has to be done.” But because of the risks of waiting, he doubts that Obama and congressional Democrats would let the health care debate drag into next year.

Steve Elmendorf, a former top aide toÌýRep. Richard Gephardt when he was House Majority Leader, agreed. ElmendorfÌýsaid that Senate Majority Leader Harry Reid of Nevada needs to keep his troops in town and get the health bill passed.

“I think they can’t ever stop,” said Elmendorf, now a lobbyist. “If it carries over to next year, you can’t leave for two weeks at Christmas and then come back. You always have to look like you’re trying to push the ball down the field.” Waiting until January won’t make it easier with moderate Democrats who have concerns about the bill or Republicans who have promised a lengthy floor fight, he said.

Others don’t think the situation is nearly so dire. They say that Democrats could deliver a bill to Obama by the State of the Union speech early next year or even in the spring. Between Christmas and the New Year, they say, people are focused on their families — rather than politics — and would be unlikely to participate in town hall meetings aimed at health care or any other legislative issue.

House Democrats are expected to begin debate on their health care overhaul measure on Friday and may vote on the bill as soon as Saturday. In the Senate, Reid is awaiting a Congressional Budget Office analysis of proposals he sent to the agency as part of his efforts to combine bills passed by the Finance Committee and the Health, Education, Labor and Pensions Committee into one measure that the chamber could begin considering later this month.

Obama took office vowing to make a health care overhaul his premier domestic policy goal, and for much of the year it appeared that the legislation had great momentum. Then a series of angry town hall meetings in August set back the legislation and raised questions about whether Congress could pass a bill this year. When the Finance Committee finally passed a measure last month with one Republican vote, it appeared that the health care bill was back on track, with both chambers moving full speed ahead.

But with some moderate Democrats hanging back, Reid has been unable to put together a 60-vote majority to take up and pass the bill. Reid and House Speaker Nancy Pelosi, D-Calif., both have struggled to win support from moderates who have expressed concern about the cost of the bill. Other House Democrats have threatened to block the measure over contentious abortion and immigration issues.

Reid shocked the Senate on Tuesday when he said that the chamber might not act on health care legislation this year. “We’re not going to be bound by any timelines,” he said. “We need to do the best job for the American people.”

Reid spokesman Jim Manley later clarified Reid’s remarks. “Our goals remain unchanged,” he said. “We want to get health insurance reform done this year, and we have unprecedented momentum to achieve that. There is no reason why we can’t have a transparent and thorough debate in the Senate and still send a bill to the President by Christmas.”

Even if House Democrats move their measure quickly, debate in the Senate could take considerably longer.

“I think this is as big and complicated an issue as has Congress has faced in a long, long time. I think it’s very difficult to truncate the time,” said Sen. Byron Dorgan, D-N.D. “The House of Representatives can do that by packaging up the rule and bringing it to the floor. This is going to be difficult and long, and I think it’s going to take awhile in the Senate.”

Noting the size and complexity of the health care bill, as well as its historic significance, Senate Minority Leader Mitch McConnell, R-Ky., has signaled that Republicans intend to have a long debate over the measure.

“We don’t think we ought to be passing a 2,000-page, trillion dollar bill. I think we ought to be going step by step to fix the problems the American people see in our health care system,” he told reporters.

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Related Document

(.pdf)

The bill’s general approach expands state-based high-risk insurance pools for Americans with pre-existing health problems, permits trade associations to organize to purchase group insurance, imposes caps on medical liability lawsuits and allows health insurance companies to sell policies across state lines. Most of these ideas — particularly efforts to reform medical malpractice laws — were left out of the Democratic approaches.

The GOP plan would also explicitly prohibit all federal funds from being used to pay for abortions. Rep. Bart T. Stupak (D-Mich.) is leading an effort by anti-abortion forces to include such a prohibition in the legislation.

A one page of the bill released by House RepublicanÌýin the lateÌýafternoon highlighted these other provisions: allowing dependents to remain on their parents’ policies through age 25; enhancing Health Savings Accounts, and promoting healthier lifestyles by giving employers greater flexibility to financially reward employees who adopt healthier lifestyles; and encouraging innovative state programs that reduce premiums and the number of uninsured.

The party released the bill on the GOP Web site, saying: Ìý“The full text of the 219-page, common-sense Republican alternative to Speaker Pelosi’s 1,990-page government takeover of health care is now available.” Over the weekend, House Minority Leader John Boehner called the Democratic bill “unaffordable.”

The Republican plan, which will be offered as an amendment to the Democratic bill when it is brought to the floor, also would authorize subsidies to states that reduce the annual per person premium for health insurance coverage or develop new programs that cover more of their residents over a 10-year period. The bill leaves out a number of important provisions of the Democrats’ 1,990-page bill, including new mandates for many employers to provide insurance for their employees or pay a penalty and for nearly all Americans to purchase insurance.

Below is the Republican legislation:

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For all the controversy over a government-run insurance option, the program outlined in health overhaul legislation likely would play a minuscule role in efforts to expand health care coverage, according to many health care experts and lawmakers.

Of the 30 million Americans likely to purchase insurance through exchanges created by the legislation, only six million — or one fifth — would enroll in a public insurance plan, according to a Congressional Budget Office analysis of the House bill. Viewing it another way, the six million using the public option would amount to only two percent of the 282 million Americans under the age of 65 who are projected to have health insurance by 2019, when the legislation is fully implemented.

And that number could shrink because states may decide to opt out of a public insurance plan, an escape clause that’s likely to be included in the Senate plan.

“The politics of this issue is totally disproportionate to its likely impact one way or another,” said Bruce Vladeck, a former administrator of the federal agency now called the Centers for Medicare and Medicaid Services.

Senate Majority Leader Harry Reid, D-Nev., has said the Senate overhaul bill would allow states to opt out of the public plan – a step political experts say at least some would likely take. Congressional Republicans are united in opposition to a government-backed insurance plan, and political leaders in heavily GOP states may also be opposed. Insurers, which fiercely oppose a public plan, would also be expected to lobby against it.

No matter what the states do, the government-run plan is not likely to attract a large membership, at least according to the CBO. The CBO reasoned that the plan may not be able to offer a price advantage – in part because the House bill requires a government-backed insurer to negotiate payment rates rather than dictate them to hospitals and doctors.

If the number of people in the public plan turns out to be six million in 2019, that would work out to an average of 120,000 per state. But that number probably would be smaller in the smallest states, perhaps totaling just tens of thousands.

No Details Yet Reid would allow states to opt out of the program by 2014, one year after the public plan would take effect. He hasn’t provided details on how such an opt out would work, or how the governors and the state legislatures might decide. Some advocates of the public plan fear that the states could end up with too much power to withdraw from a public plan, leaving residents with fewer health insurance choices.

“A lot will depend on the specific rules, and there’s a risk that the legislation would make it so easy for states to waive participation in the plan that it defeats the whole purpose of having a national health insurance entity,” said Jacob Hacker, a Yale University professor of political science who favors the public insurance program and an opt-out approach.

Others say, however, that the opt-out clause will rightfully allow states to decide what’s best for their residents.

Predicting the states’ responses is tricky, even where Republicans and conservative Democrats predominate. Some say the consumer appeal of a public plan could trump criticism that government plans would eventually drive out competition and lead to the federalization of health care.

Congressional Democrats say a government plan would spark competition with private insurers in the exchanges, or marketplaces, where under the legislation millions of Americans who don’t have employer-provided coverage would shop for policies. Advocates say that could especially help consumers in states, often smaller, more rural ones, where only one or two insurers dominate the market, and are typically lightly regulated.

Whether states would opt out of the public option would depend on several factors, including the political makeup of the state, the level of competition among insurers and whether insurance companies push state officials to keep out a government-backed plan.

“If insurance companies don’t want any public plans to compete with them, they will be pressing the governors and the legislatures to opt out,” said Rep. Henry Waxman, D-Calif., chairman of the Energy and Commerce Committee and one of the architects of the House Democratic bill. That legislation doesn’t include an opt-out provision.

Useful or Heavy Handed?

In many states, the decision would hinge on whether people view the public option as a useful way to increase competition or heavy-handed government interference in the marketplace.

In Oklahoma, Insurance Commissioner Kim Holland said in an interview that, given the state’s conservative political makeup, it’s likely “that as long as there is a sense that citizens have options and affordable options …[the legislature] won’t jump into participating in a public plan.”

But some congressional Republicans argued that it would be difficult for GOP-controlled states to reject a public option-thus barring their residents from a program that would be open to millions of Americans in other states.

“What you’d be saying to your people back home [is] `We’re going to take our state out of this but, by the way, you’re going to be paying increased taxes'” as part of a health overhaul, said Sen. Mike Johanns, a Nebraska Republican who was governor of the state from 1999 to 2005. “I think the people would look at that and think that’s the most foolish thing I’ve ever heard…It’s a false option.”

The opt-out provision touted by Reid is stirring debate in governors’ races that will be decided Tuesday. In New Jersey, Democratic Gov. Jon Corzine, who is running for reelection, said he would not opt out of a public option while his Republican challenger, Chris Christie, said that he would. In the Virginia governor’s race, Republican Bob McDonnell said he would opt out; Democrat Creigh Deeds has not said for certain what he would do.

The opt-out provision, if enacted, could also figure in scores of state legislative and gubernatorial races next year.

The issue could be especially contentious in Alabama where, according to the Government Accountability Office, Blue Cross and Blue Shield controls 96 percent of policies sold in the small-group health insurance market. Consumer advocates say the public plan is needed in their state to spur competition.

Rep. Artur Davis, an Alabama Democrat who is running for governor, said that while he is not an advocate of a public plan, he’d want it to be an option for his state’s residents. “For me, the public option is not the focus of this debate,” he said in an interview. “Having said that . . . if the federal legislation passes, it’s your task as governor to enforce that legislation.”

A spokesman for incumbent Republican Gov. Bob Riley said it would be “premature” to speculate on whether Riley would favor opting out of a public plan.

Even with strong Democratic majorities in the Alabama legislature, there might be pressure to shun a government-run plan. “I think Alabama is one of those states where they believe in self-sufficiency, they believe in trying to have less government intervention in their day-to-day lives, and right now the public option as proposed is contrary to that,” said Rep. Bobby Bright, D-Ala.

New York Approves

New York lawmakers and health policy analysts predicted their state would embrace a public plan to increase the number of health insurance choices. “My guess is in New York the public option is very popular so it would probably stay in,” said Democratic Sen. Charles Schumer.

Richard Gottfried, chairman of the New York State Assembly’s Health Committee, agreed, but added that state officials might press for flexibility to make the public option work more smoothly with its Children’s Health Insurance Program and Medicaid.

“It might make sense to combine the new public option with existing programs” to get more leverage in negotiating rates with doctors and hospitals, he said.

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One approach attracting widespread attention calls for the creation of a bipartisan commission to draft proposals to control the long-term costs of Medicare, Medicaid and Social Security. Together, the three programs account for 40 percent of all federal spending, other than interest on the debt.

The recommendations of the proposed commission would command a swift up or down vote by Congress. Senate Budget Committee Chairman Kent Conrad, D-N.D., and Republican Sen. Judd Gregg of New Hampshire, the chief authors of the proposal, say they may attempt to attach it to must-pass legislation raising the government’s debt ceiling in the coming weeks.

“My concern is the trajectory of our deficits and debt are completely unsustainable and that [while] health care reform helps, it is not sufficient” to control runaway entitlement spending, Conrad said in an interview. “We’ve got to do much more, and I don’t believe it will happen in the regular order. I think it requires a special process.”

The Obama administration signaled earlier this month that the fiscal 2011 budget now being drafted would include program cuts that would help to control the deficit and “put our country back on firm fiscal footing.”

Monday, Christina D. Romer, chair of the president’s Council of Economic Advisers, said the White House was interested in the Conrad-Gregg and other ideas floated by Sen. Evan Bayh, D-Ind., to create an entitlement commission next year, despite some past disappointments in such panels. But for now, she said, the administration’s primary focus is on passing a health care overhaul bill to extend coverage to millions of uninsured Americans – a plan that is estimated to cost about $900 billion over 10 years – and to begin imposing discipline on health care costs and expenditures.

“That’s the most constructive thing we can do to deal with the long-run budget deficit,” Romer told reporters after a speech before the Center for American Progress. “What we’re going to need besides that going forward, there certainly is the Conrad-Gregg Commission idea. We saw Senator Bayh mention something along the same lines, which is [that] Congress could at some point get its act together and work with the president and come up with a proposal.”

Record deficit, and growing

The government ended the 2009 fiscal year Sept. 30 with a record $1.4 trillion budget deficit, according to the Treasury and the Office of Management and Budget, and is on track to accumulate deficits totaling $9 trillion by 2019. While administration spending in response to the recession and financial meltdown helped drive up the fiscal 2009 deficit, most of the future problems will be due to rapid rises in entitlement spending on Medicare and Social Security for seniors and Medicaid for the poor and disabled.

“Some of this is just the result of the aging of the population, but the far greater source is the fact that health care costs, both public and private, are rising much faster than” the gross domestic product (GDP), Romer said in her speech. “It is simply not a problem that can be kicked down the road indefinitely.”

Senate Budget Committee ranking member Sen. Judd Gregg (R-NH) (L) and Chairman Kent Conrad (D-ND). (4/27 Photo: Chip Somodevilla/Getty Images)

U.S. public and private health expenditures are expected to reach $2.5 trillion this year and account for 17.6 percent of the GDP, according to an by theÌýNational Coalition on Health Care, a nonpartisan group. By 2018, national health care expenditures are projected to soar to $4.4 trillion.

National health care spending will increase faster than the growth in the nation’s economy. Between now and 2018, the average increase in national health expenditures is projected at 6.2 percent a year, compared to a 4.1 percent annual rise in GDP, according to the health care coalition study.

The idea of creating a bipartisan entitlement commission has been discussed, off and on, for two years. But it began to attract the interest of the White House, some Democratic leaders and Senate Minority Leader Mitch McConnell, R-Ky., after angry comments at a series of town meetings in August and subsequent polling signaled growing public alarm over the Democrats’ efforts to pass costly health care legislation in the face of a budget deficit level not seen since World War II.

Obama administration officials have vigorously defended the massive government spending over the past year to bail out Wall Street and stimulate the economy as a necessary response to the worst recession since the Great Depression. And they have argued that the health care legislation would not add to the deficit but would take the first essential steps toward slowing the rate of growth of health care spending, or “bending the cost curve.”

A booming elderly population

The Senate Finance Committee, for example, identified $404 billion worth of savings in Medicare and Medicaid over the coming decade; provided funding for comparative effectiveness research, electronic medical record keeping, and preventative medicine practices to help slow the growth of health care spending. And it proposed the creation of an independent Medicare advisory committee to recommend savings measures to Congress.

Source: Congressional Budget Office

But Congressional Budget Office analysts and many health care experts have discounted the efficacy of those approaches in slowing the rate of spending. They warn that, with a fast growing population of elderly citizens making more demands on federal health care programs, spending on Medicare and Medicaid will exceed the entire Defense budget by 2019, regardless of what Congress does this year with health care reform.

“I don’t think there’s anything in the Finance Committee bill that really makes systemic reforms,” said Michael D. Tanner, a senior fellow and health care policy expert with the libertarian Cato Institute.

“Even if all that stuff is included, it’s a first step,” acknowledges James R. Horney, director of federal fiscal policy at the left-leaning Center on Budget and Policy Priorities, a strong advocate of expanded health insurance coverage. “None of these are silver bullets, but over time those are the kinds of steps we will need to take.”

Sen. Gregg, the ranking Republican on the Budget Committee, said the Democrats’ health care reform proposals, designed to extend coverage to millions of uninsured Americans, “creates a brand new entitlement without at the same time controlling the cost and expenditures of existing entitlements,” such as Medicare, Medicaid and CHIP, the Children’s Health Insurance Program. He and Conrad contend that Congress must take a much more aggressive approach to containing health care costs.

‘Jump off the political cliff together’

The proposed Bipartisan Task Force for Responsible Fiscal Action would operate in a manner similar to the successful Defense Base Closure and Realignment Commission () since their recommendations would not be subject to congressional amendments, Gregg said. And because a three-fifths supermajority would be required in both chambers to adopt the recommendations, the two political parties would have to work in harmony to address the politically charged subject of entitlement reform.

“That’s why we structured it this way,” Gregg said. “The simple fact is that these are the types of issues which require people to join hands and jump off the political cliff together, or else it doesn’t get done.”

Bayh, a centrist, was one of nine Democrats who wrote to Senate Majority Leader Harry Reid, D-Nev., last week calling on Congress to approve a “special process” to control the deficit. Bayh said he would not support an increase in the debt ceiling “unless there’s some mechanism to start getting the deficit under control.”

The national debt — the accumulation of all the past budget deficits– is fast approaching $12 trillion, and the Democratic controlled Congress is contemplating setting the maximum level for government borrowing on the debt at nearly $13 trillion, an all time record.

Entitlement reform commissions have a mixed track record. A bipartisan appointed by President Ronald Reagan and House Speaker Thomas P. (Tip) O’Neill Jr. of Massachusetts in 1983 succeeded in extending the Social Security trust fund’s solvency for several generations by raising the retirement age from 65 to 67, imposing a six-month delay in a cost of living adjustment and requiring government employees to pay into Social Security for the first time.

There was a bipartisan political consensus at the time that something had to be done to save Social Security, which was on the brink of insolvency. By contrast, there was no consensus about what to do to address the long term budgetary challenges of providing health care and retirement benefits to the baby-boom generation when former senators Bob Kerrey, D-Neb., and John C. Danforth, R-Mo., headed up the in 1994, during the Clinton administration.

Kerrey and Danforth floated a plan including cuts in Social Security checks for future retirees, an increase in the retirement age to 70, a cap on tax breaks for employer-paid health insurance and means-testing for veterans benefits. Kerrey and Danforth could never muster the 60 percent majority they needed from commission members to send their recommendations on to Congress, and their final report was shelved.

Whether the Conrad-Gregg commission approach would fare any better is open to speculation, but experts and lawmakers readily agree that real long-term health care and Social Security cost savings would necessitate highly unpopular measures, such as reducing health care benefits and cost-of-living adjustments, boosting taxes and fees, or, in the case of Social Security, raising the eligibility age even higher or increasing payroll taxes.

“Everybody knows what the options are, that’s not the problem,” said William A. Galston, a senior fellow in governance studies at the Brookings Institution. “People have known for ten years what the options are. The question is a political question, not an analytical question.”

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House Speaker Nancy Pelosi, D-Calif., and many liberal Democrats in the House and Senate, are pressing for inclusion of a robust “public option” in health care reform legislation, saying it is essential to compete with the private insurance industry to drive down costs, but the Senate Finance Committee twice rejected that approach before voting out a health care bill early last week.

Baucus is meeting behind closed doors with Senate Majority Leader Harry Reid, D-Nev., and Sen. Christopher Dodd, D-Conn., to negotiate a compromise health care bill to send to the Senate floor. This compromise plan will meld provisions of bills passed by the Finance Committee and Health, Education, Labor and Pensions Committee and is expected to be sent to the Senate floor later this month.

Baucus told reporters today that it is highly unlikely Democrats could muster the 60 votes needed to overcome a GOP filibuster and pass health care legislation that includes a public option.

“There are various versions of the public option bandied about …Ìý[and] we’re trying to see what makes the most sense,” Baucus said. “The goal is health care reform that can get 60 votes. I don’t know if there are 60 votes for the pure kind of” public option proponents are demanding.

Baucus took questions from reporters during a conference call sponsored by Families USA, a nonprofit health care advocacy group. During the session, he charged that the insurance industry hurt its credibility with members of Congress by releasing what he termed was a badly flawed and one-sided study, which concluded that the Finance Committee bill, if enacted, would drive up insurance premiums. “It galvanized, solidified a lot of feelings in the Senate against the insurance industry,” Baucus said.

He also said the negotiators are reviewing a provision of the Finance Committee bill that would impose a $4 billion-a-year tax on medical device manufacturers, based on their market share, to help finance the expanded health insurance program. Lawmakers from Minnesota, Indiana and other states with heavy concentrations of these industries have opposed the measure, saying it would harm their region’s economies. “Frankly, the device manufacturers are divided and they’re all over the lot,” Baucus said. He added that all sectors of the health care industry should share in the cost of health care reform, and “no group should be exempt.”

But by far the most contentious issue facing Senate negotiators is whether the final version of the health care overhaul should include a public option. There are a number of different approaches to a government-run insurance program that have emerged from committees in the Senate and House.

The toughest version, strongly advocated by liberals, would link reimbursement rates for health care providers to those paid by Medicare — an approach that would bring down overall health care costs by $110 billion over the coming decade, according to the Congressional Budget Office. Another approach, favored by centrist Democrats, would mandate the government to negotiate reimbursement rates with providers. CBO says this approach would save about $25 billion over 10 years.

The Finance Committee version would use privately operated insurance cooperatives to provide affordable coverage to uninsured Americans, bypassing the government option altogether, while the Senate HELP bill calls for creation of a strong government insurance program that would negotiate rates.

Sen. Thomas Carper, D-Del., is promoting another model that would leave it up to the states to decided whether to establish a public plan or not. Sen. Chuck Schumer, D-N.Y., has embraced the idea, saying that it would allow states to opt in or out of a public plan.

Over the weekend, Obama administration officials said that the president continues to support the concept of a government sponsored insurance option, but is not demanding that it be included in the final legislation. White House Chief of Staff Rahm Emanuel, in two television appearances on Sunday, said that the public option could provide much needed competition, but that “it’s not the defining piece of health care.”

Baucus said today that “Personally, I want any mechanism that keeps the insurance industry’s feet to the fire.” But he questioned whether a robust public option would survive on the Senate floor, in light of the concern of Republicans and some conservative Democrats that it would be a dangerous step toward government control of the health care industry.

As for the “opt in, opt out” approach, Baucus said: “That’s new, that’s interesting … We’re trying to figure out what some of the unintended consequences [of it] will be.”

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Sen. Mark Pryor, an Arkansas Democrat, intends to provide it.

Pryor is among several senatorsÌý– including Ron Wyden, D-Ore.,ÌýSam Brownback, R-Kan.,Ìýand Budget Committee Chairman Kent Conrad, D-N.D.Ìý– who want to help rural hospitals in their states get the funding boost that comes with the “critical access” designation. The catch: The same senators are among those pushing hardest to hold the line on the cost of health care reform.

Source: The Medicare Rural Hospital Flexibility Program and CMS.

“When there are local interests, cost constraints go out the window,” said Robert Bixby, executive director of the , a budget watchdog group. “When you see those things, it does make you wonder about the ability to follow through on some of the very aggressive provider restraints they assume in these bills.”

Asked whether Pryor saw any inconsistency, his spokeswoman said the senator is committed to “ensuring people living in rural America are able to get to an emergency room in a reasonable amount of time when they need to.” Access to care is a critical issue in isolated areas, other lawmakers and rural health care advocates say, and hospitals need extra funding and flexibility.

Congress created the “critical access hospital” category in 1997 to ensure access to care in isolated parts of the country. Under the law, hospitals that are at least 35 miles away from other health facilities can be deemed “critical access” hospitals; those hospitals can collect 101 percent of their costs from Medicare, for a maximum of 25 beds, rather than the usual 95 percent of allowable costs.

States With Highest Number of Critical Care Hospitals

• Kansas: 83
• Iowa: 82
• Minnesota: 79
• Texas: 76
• Nebraska: 65

SOURCE: Centers for Medicare & Medicaid Services

States With Lowest Number of Critical Care Hospitals

• Alabama: 3
• Massachusetts: 3
• South Carolina: 5
• New Mexico: 6
• Virginia: 7

SOURCE: Centers for Medicare & Medicaid Services

Growth in such hospitals exploded, and by 2006, there were 1,280 critical access facilities. And many of them won the designation despite being located within 35 miles of other medical facilities; state officials routinely waived the requirement with federal acquiescence.

The rapid growth slowed three years ago when Congress, worried about billions of dollars in added Medicare costs, eliminated states’ rights to waive the 35-mile rule. Since then, only a couple of dozen new critical access hospitals have been designated. The total is currently about 1,300.

Now lawmakers from rural states want to ease the rules, partly by making it easier for hospitals to qualify for “critical access” status even if they are less than 35 miles from another facility. Supporters note that the hospitals, besides providing emergency and limited inpatient treatment, are often the mainstays of small-town economies. “Hospital reimbursement systems that work well in larger cities do not necessarily work in rural towns, where people still need health care,” Pryor’s spokeswoman said, “but the same volume of patients is not present.”

The administrator and CEO of Five Rivers Medical Center, John Tucker, said getting the critical access designation would turn a projected $300,000 loss this year to a $400,000 surplus, allowing him to improve equipment and technology. “It would help us maybe thrive where we ordinarily just survive, like it has done with so many rural hospitals across the country,” Tucker explained.

Conrad acknowledged in a recent interview that rural lawmakers may push for changes to expand the critical access program when health care overhaul legislation reaches the Senate floor. “That’s certainly an item for discussion before we’re finished,” Conrad said. “Most of my hospitals are critical access hospitals … [They] are important to so many members.”

Pryor and Brownback want to restore states’ rights to waive the 35-mile distance requirement and declare that additional critical access hospitals are necessary for public health and safety. For his part, Wyden has indicated he would press to give critical access hospitals the flexibility to expand beyond the required limit of 25 beds to meet the needs of their communities.

During the Finance Committee’s consideration of health care legislation, Wyden filed but did not offer his amendment, which would have cost $1.7 billion over the next decade; he couldn’t point to a spending cut or revenue increase to offset the cost. His spokeswoman, Jennifer Hoelzer, said that Wyden’s focus on a complete overhaul of the system would result in cost savings that could be used for critical access hospitals.

The finances of Hillsboro Medical Center in North Dakota improved markedly after it got a “critical access” designation — and higher Medicare payments. Sens. Kent Conrad, D-N.D., Ron Wyden, D-Ore., David Pryor, D-Ark., and Sam Brownback, R-Kans., want to make it easier for other rural hospitals to get the designations, as part of a health overhaul.

“When he talks about the need to bend the cost curve down, he’s [saying] we’re spending enough money in health care right now, we’re just not spending it efficiently,” Hoelzer said. “If you can actually inject choice and competition you’re going to come up with savings that can go to things like critical access hospitals.”

Executives of the hospitals and supportive lawmakers say the extra money is a drop in the bucket. In 2007, Medicare payments to these hospitals totaled $7 billion, or 5 percent of all Medicare inpatient and outpatient payments to hospitals, according to the Medicare Payment Advisory Commission, which advises Congress on Medicare issues.

Critical access hospitals now account for more than half of all rural hospitals and a fifth of all hospitals across the country.

Some experts say that the waiver process led to a subversion of the intent of the 1997 legislation, which was to create a small number of critical access hospitals in isolated areas to stabilize patients and then transfer them to larger hospitals. “Over time, it’s become clear that the concept has changed, so it looks like almost any rural hospital is being considered as a critical access hospital, with no longer the expectation the patient will be transferred,” said Robert , a former Medicare official who is now at the Urban Institute.

Maggie Elehwany of the Ìýsaid that changing the bed limit regulation, as Wyden wants to do, would enable rural hospitals to respond better to crises such as an outbreak of swine flu. The hospitals, rather than being limited to 25 beds, would have the flexibility to expand or contract the number of beds, as long as the annual average was 20.

The 13 Democrats and 10 Republicans on the Finance Committee represent states with a total of 619 critical access hospitals, nearly half of all such facilities. Montana, the home state of Sen. Max Baucus, the chairman of the committee, has 47. North Dakota, which Conrad represents, has 36, among them tiny Union Hospital in Mayville, N.D.

In 2000, the hospital was on course to lose $500,000 and either drastically cut back its services or shut down, according to Roger Baier, the chief executive officer. In desperation, officials decided to seek the critical access designation to boost its Medicare payments by as much as 7 percent. “We decided this would be the best approach to keep our doors open,” Baier said.

Union won the designation even though it was only 19 miles from another hospital in neighboring Hillsboro. State officials waived the 35-mile requirement, concluding that the hospitals had different patient service areas and that some of the roads connecting the two facilities were in bad condition. Now the 25-bed hospital has $800,000 in reserves.

In 2004, Hillsboro Medical Center got its own waiver and converted into a critical access hospital. “We were in the red for years until we became a critical access hospital, and that really turned things around,” said Patricia Dirk, the hospital’s administrator.

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