Democrats Unveil House Plan for Health Care Reform

After months of struggle, House Democrats unveiled sweeping legislation Thursday to extend health care coverage to millions who lack it and create a new option of government-run insurance. A vote is likely next week on the plan patterned closely on President Barack Obama's own.

Health Care Reform
Health Care Reform

Speaking on the steps of the U.S. Capitol, Speaker Nancy Pelosi said Congress was "on the cusp of delivering on the promise of making affordable, quality health insurance available to every American — and laying the foundation for a brighter future for generations to come."

Officials said the measure, once fully phased in over several years, would extend coverage to 96 percent of Americans. Its principal mechanism is creation of a new government-regulated insurance "exchange" where private companies could sell policies in competition with the government. Federal subsidies would be available to millions of lower-income individuals and families to help them afford the policies.

Speaking to a group of small business leaders, President Obama praised the House plan Thursday, saying that small businesses that participate in the health care plan could save a quarter on their premiums by 2016. He also said that the plan meets two of his goals; it is paid for and will reduce the deficit.

Obama said that few people have a bigger stake in health reform than small business leaders. He says the House version of a health care bill would help millions of small businesses cut growing health care costs and was written with small businesses owners in mind.

Obama also said small businesses have been hit harder than most and their owners understand the need for changes to the nation's health care system.

The president said too many entrepreneurs can't take a chance on new ideas because they cannot leave their jobs to start new projects. He says that situation hurts the economy.

The reform plan ceremony marked a pivotal moment in Democrats' yearlong attempt to answer Obama's call for legislation to remake the nation's health care system by extending insurance, ending industry practices such as denying coverage on the basis of pre-existing medical conditions, and slowing the growth of medical spending nationwide.

Democrats issued a statement saying their measure "lowers costs for every patient" and would not add to federal deficits. They put the cost of coverage at under $900 billion over 10 years, a total that evidently didn't include additional spending.

Pelosi was flanked by rank-and-file Democrats as she made her remarks.

Across the Capitol, Senate Democrats, too, are hoping to pass legislation by year's end. Legislation outlined by Majority Leader Harry Reid earlier this week would include an option for a government-run plan, although states could drop out if they wished, a provision not in the House measure.

With Republicans expected to oppose the measure unanimously, Pelosi and her lieutenants worked for weeks to resolve differences within the Democratic rank and file.

The toughest of them covered the terms under which the government insurance option would function. Liberals generally wanted the government to dictate the rates to be paid to doctors, hospitals and other health care providers, with the fee levels linked to Medicare.

Moderates, fearing the impact on their local hospitals, held out for negotiated rates between the government and private insurers — and won.

Sen. Olympia Snowe, the only Republican among the House and the Senate who voted yes to reform legislation, told CNBC that she will not support a bill that includes a public option. Instead, she favors the fallback option, which would allow government to step in only if insurers do not create low-cost plans. (See Below Video for the Full Interview)

"It could drive the industry to be competitive [and] doesn't put the government in the driver's seat at the outset," she said. "If the insurance industry doesnt submit affordable plans, then a fallback would kick in for that year."

Not all liberals were ready to sign on either. Rep. Lynn Woolsey, D-Calif., a co-chair of the Congressional Progressive Caucus, was noncommittal about whether progressives would accept the negotiated rates. "This is not walkaway time and it is not acceptance time," she said.

Democrats control 256 seats in the House, are overwhelmingly favored to win one special election next week and are competitive for another. As a result, they can afford 30 defections or more on the legislation and still prevail.

The legislation would be financed by a combination of cuts in planned Medicare spending and an income tax surcharge of 5.4 percent on individuals making at least $500,000 annually and couples making at least $1 million.

The bill would require nearly everyone by 2013 to sign up for health coverage either through their employer, a government program or the new exchange.

In the meantime, a temporary government program would help people turned down by private insurers because of medical problems, lawmakers said. After that, insurers no longer could refuse to provide coverage to the sick, nor could they charge more because of poor health of the insured.

The plan also calls for a significant expansion of Medicaid, the federal-state health program for low-income people. And it would impose a requirement on employers to offer insurance to their workers or face penalties.

Pelosi and the leadership have yet to work out disputes over abortion services and health care for immigrants, issues that must be settled before the bill can come to a vote.

Republicans long ago decided to oppose the approach requested by Obama and taken by Democrats, and health care is expected to figure in next year's congressional election campaign.

"Americans' health care is too important to risk on one gigantic bill that was negotiated behind closed doors," said Rep. Dave Camp, R-Mich. "The Medicare cuts will hurt seniors, the tax increases will kill jobs and the government takeover of health care will increase premium costs."

Pelosi has also said the bill would strip the health insurance industry of a long-standing exemption from antitrust laws covering market allocation, price fixing and bid rigging. Democratic officials said the bill also would give the Federal Trade Commission authority to look into the health insurance industry at its own initiative. The officials spoke Wednesday on condition of anonymity, saying they were not authorized to pre-empt a formal announcement.

"I'm pretty confident that we've got the right pieces in place," said Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee, one of the three panels that approved different versions of the legislation months ago.

"We can quibble over parts of it, but the fact is when you're taking a 60-year-old system that grew up in a rather haphazard fashion and you're trying to bring some coherence to it, these are sort of the things you have to do at the beginning of that process."

If Obama does get to sign a health overhaul bill, he will have bucked decades of failed attempts by past administrations, most recently by former President Bill Clinton in the 1990s. There's still no guarantee that Congress can complete the legislation before year's end, as the president wants.