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The obscure Senate rule that could sink Obamacare repeal, explained

Sen. Mitch McConnell
Aaron P. Bernstein | Reuters
Sen. Mitch McConnell

The fate of the Republican drive to repeal and replace Obamacare — and of the 24 million more Americans who could be uninsured if they succeed — now lies with obscure, complex Senate rules.

One rule in particular will determine what Republicans can include in the bill, how much of Obamacare they can repeal, and perhaps whether the bill can pass at all. And the last-minute additions that got conservatives on board with the House version of the American Health Care Act might run into trouble, according to experts and recent legislative precedents.

If those provisions are thrown out, it could once again put the Republican effort to repeal and replace Obamacare in jeopardy. The ensuing fight would pit conservatives against moderates and institutionalists and make it more difficult for the Senate to pass a plan that House Republicans can stomach.

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It's a predicament seven years in the making, since Republicans started swearing to repeal Obamacare as soon as they took control of the government. Trump's unlikely ascent to the White House gave them that chance.

"Republicans have already tacitly conceded that they can't fully repeal the law because of these limitations. But some of Obamacare's parts that they are most eager to roll back, such as its insurance regulations, could also be tricky to undo under reconciliation's rules."

But with a slim majority in the Senate, they chose to use "budget reconciliation" — a process that allows a bill to pass with only 50 votes but comes with restrictions that make it less than ideal for complex policymaking — to pass their plan. Then a messy debate in the House led to an ungainly compromise of a bill, one that risks running afoul of the rules governing reconciliation now that the legislation is in the Senate. The result is that the fate of the whole enterprise could now rest with the Senate's parliamentarian.

Obamacare, in other words, may live or die on the Byrd Rule — a 20-year-old quirk in the Senate's rules that most Americans have never heard of.

The Senate is using budget reconciliation to pass its health care bill

Republicans swept into power this year and pledged to immediately get to work on their long-promised goal of repealing Obamacare. But they had one problem: They held only 52 seats in the Senate; under the usual legislative process, where a bill can be filibustered and held up if 40 senators oppose it, Democrats could block any repeal plan.

The Senate got rid of the filibuster for Supreme Court nominations to confirm Neil Gorsuch to the Supreme Court. But Senate traditionalists refused to nix the legislative filibuster, and so Republicans turned to "budget reconciliation" — a process designed for spending and revenue bills that requires only 50 votes to move a bill — to repeal and replace the health care law.

Reconciliation was designed to make sure the Senate could more easily pass bills dealing with the federal budget, particularly if Congress wanted to reduce the deficit, without the threat of a filibuster from the minority party. (The process begins with a congressional resolution instructing committees in the House and the Senate to draw up legislation that saves the federal government a set amount of money.) So the special privileges under reconciliation come with conditions.

Those conditions, meant to make sure reconciliation is actually used for bills that affect the budget, are the next obstacle the American Health Care Act will have to overcome.

But those restrictions are a hurdle to any plan to repeal and replace Obamacare. Overhauling the health insurance system, as the law did, includes all sorts of provisions that have nothing to do with federal spending or revenue. Republicans have already tacitly conceded that they can't fully repeal the law because of these limitations. But some of Obamacare's parts that they are most eager to roll back, such as its insurance regulations, could also be tricky to undo under reconciliation's rules.

The Byrd Rule of budget reconciliation will determine what Republicans can actually do in their health care plan

The restrictions of reconciliation will set the parameters of the Senate's health care debate — and are already proving difficult for lawmakers to navigate and limiting what ideas they can consider.

The Senate, for example, needs to come up with a bill that will save the federal government as much money, or more, as the House version.

That's going to be a problem for the health care bill — senators want to bolster the financial assistance for lower-income people buying private insurance and soften the House bill's Medicaid cuts, which will cost more money. If they increase spending, they must offset it somewhere else, perhaps by delaying the repeal of Obamacare's taxes.

They also have to make sure that the bill actually saves money. There was a brief panic last week that the House bill didn't achieve that goal, which also would have put the whole enterprise at risk because the bill wouldn't comply with the Senate's rules.

The mother of all conditions is known as the Byrd Rule. The rule came about in the 1980s, after Sen. Robert Byrd of West Virginia, a Democrat, grew frustrated with reconciliation. His colleagues were using it to advance all sorts of policies, not just those related to spending and revenue. So he introduced his standard for what can be included in a reconciliation bill, which has since been enshrined in federal law.

A bill being considered under reconciliation has to check every box of the six-part Byrd Rule. If it fails any one of those tests, it must be stripped out.

  1. The provision must change federal spending or revenue.
  2. If the bill does not meet the budget resolution's instructions to reduce the federal deficit, any provision that results in either increased spending or decreased revenue is removed until it does meet those targets.
  3. The provision must only affect policies that fall under the jurisdiction of the specific committees that were instructed in the budget resolution.
  4. The provision's effect on spending or revenues must be more than incidental to its policy impact.
  5. The provision cannot increase the federal deficit at some point in the future, beyond the typical 10-year "budget window" that is used to evaluate legislation.
  6. The provision cannot change Social Security.

Most of the time, if part of a bill fails that six-part test, that provision is removed and the rest of the legislation is allowed to advance.

But some violations can be considered "fatal" — meaning that the entire bill would need 60 votes to pass. Those could include any provisions that violate No. 3, on the issue of jurisdiction, I'm told. Congress is said to have controversially exempted itself from part of the health care bill because the bill would otherwise have been risk of such a fatal Byrd Rule violation. Member benefits, like their health insurance, fall under a different committee's jurisdiction, one that wasn't included in the budget resolution. Without the exemption, the bill could have lost its 50-vote privileges in the Senate.

The American Health Care Act has been shaped by those restrictions since the beginning. The original version of the House bill, which failed before House Speaker Paul Ryan could bring it to the floor in late March, didn't touch most of Obamacare's regulations. Senate aides told me this was because of the Byrd Rule.

It was only after House conservatives revolted, helping to sink the bill the first time, that the compromise of allowing states to waive those rules emerged.

But that step is also where the bill might run into trouble in the Senate. The first step there will be what's known as a "Byrd bath." Republican and Democratic staff will go through the House bill with Senate parliamentarian Elizabeth MacDonough and make their arguments about which provisions violate the Byrd Rule and which ones don't.

"Because some of these questions will be matters of gray, the question is interpretation of the Byrd Rule given past precedent," Sarah Binder, who studies Senate procedure at George Washington University, told me. "Both parties will try to convince her of their position for or against a Byrd Rule violation."

The AHCA's changes to Obamacare insurance rules are at risk under the Byrd Rule

After House Republicans failed to muster support for their bill in late March, conservatives and moderates came up with a compromise that allowed the bill to squeak through. They agreed to allow states to waive some of Obamacare's insurance rules, such as the prohibition that insurers charge sick people more than healthy people, as long as they met certain conditions.

That amendment proved to be just enough to get conservatives on board and barely let the bill squeak through the House. But it could have a Byrd problem.

Democrats and other outside experts believed the Obamacare waivers aren't permissible under reconciliation, either because they don't have a budget impact or because any impact would be incidental (1 and 4 on the Byrd list).

Those provisions, they argue, are intended to alter how the insurance market works, not to reduce federal spending or increase revenue. So even if there might be an impact — say, if fewer people buy insurance with federal assistance, which would reduce government spending — it is an afterthought. That's not their purpose.

"I have argued for a long time, having gone through a number of Byrd baths in my lifetime, if it's a regulatory change at the state level, or private industry level, it's hard to make the case that that will have a direct federal budgetary consequence," Bill Hoagland, a former Senate Budget staffer who now works at the Bipartisan Policy Center, told me.

That would be bad news for the GOP bill. Its fate could rest on how the Congressional Budget Office scores the legislation, Hoagland told me.

As a general rule, regulatory changes would likely not be permissible under the Byrd Rule, as he said. Especially if no states took those waivers — as some moderate House Republicans suggested — then there would be no budgetary impact, and the provision would likely be struck.

But if the CBO concludes that a number of states would take the waivers, and the resulting impact on the federal budget is sizable enough, the parliamentarian may be able to justify the waivers under the Byrd Rule. The bill does make a specific pot of money, $8 billion, available only to states that seek waivers.

"It'll come down unfortunately to CBO, when they put out the cost estimate on that bill," Hoagland said. "Is it big or is it small?"

Several Republican governors, including Wisconsin's Scott Walker, have signaled they'd be interested in a waiver. But CBO is in the midst of its formal evaluation of the House bill, with a final analysis due on May 24. What it projects states would do will be crucial to making the waivers work under the Byrd Rule.

Some Senate conservatives want to overrule the parliamentarian if needed. But senior Republicans aren't on board.

If conservatives can't change Obamacare's insurance rules, it could put the whole repeal-and-replace effort in jeopardy. House conservatives already made this a make-or-break issue for them, refusing to back the bill until they won some rollback of these regulations. Senate conservatives reportedly want to take the concept of waivers even further, requiring states to opt in to the regulations rather than out of them.

But the core problem remains. Any such changes might not be permissible under the Byrd Rule. The Senate is allowed to waive the Byrd Rule, but it requires 60 votes to do so. No Democrats is going to help Senate Republicans push their Obamacare repeal bill through. Senators have asked 57 times for a Byrd Rule waiver; only eight of those have been approved, according to the Congressional Research Service.

Conservatives have one more card to play: They have already begun to argue that the Senate can actually overrule the parliamentarian if they want.

Under the Byrd Rule, all determinations are technically made by the presiding officer in the Senate. On a bill as momentous as Obamacare repeal, that could be Vice President Mike Pence. But historically, the presiding officer has deferred to the parliamentarian's judgment. So if MacDonough said waiving Obamacare's regulations didn't comply with the Byrd Rule, that policy would traditionally be stripped out.

Some Senate conservatives have said that's unacceptable. On something as important to them as Obamacare repeal, they want to gut as much of the law as possible no matter what the parliamentarian says. They'd argue for Pence to ignore MacDonough and declare that these provisions are acceptable under reconciliation.

"The parliamentarian merely advises, the vice president decides," Cruz told Politico recently. "Mike Pence is the ultimate decider."

But they're going to run into a big problem: Their senior colleagues disagree. Other Republicans argue that overruling the parliamentarian is tantamount to gutting the rules that make reconciliation special.

If the Senate overruled MacDonough and allowed these provisions to sneak through under reconciliation, then that sets the precedent for future Senates to do the same thing. Any policy could be brought up for a vote under reconciliation.

"If something like that were to happen, it would set a new precedent for the Senate that would allow anybody to bring up any bill on any other bill at any other time, even under reconciliation," Sen. Mike Enzi (R-WY) told me. "You would have a never-ending list of votes any time reconciliation came up."

It would be a devastating blow to the historical 60-vote threshold for advancing most bills in the Senate and an unacceptable step for senators who pride themselves on tradition and deliberation.

"Rulings aren't supposed to be left to the discretion of who sits in the presiding officer's chair. That would sort of be parliamentary mayhem," GWU's Binder said. "That would be the ultimate nuclear option."