Guest Article

Post-Election Survey of Legislative Strategies For Overhauling 2010 Health Law

By Alvin D. Lurie
December 1, 2010
Copyright 2010, A.D. Lurie

Bismarck is famously quoted as comparing the making of legislation to the making of sausages: "It's something you don't want to see." Whatever he saw in the late 1800s was as nothing compared to what we've witnessed in the six months ending last March, as Democrats and Republicans in Congress and the White House engaged in a fierce donnybrook over the health care legislation introduced by the Democrats late in 2009 to fulfill the campaign promise of Obama in his successful bid for the presidency. What hopes the young president had "to change the way Washington worked" were dashed -- indeed, smashed -- in the battles that ensued. Bipartisanship was the first casualty of that war.

We did get massive health care reform legislation. It was voted into law at the end of March 2010 by the 111th Congress. It is possible that the 112th Congress will vote it out of law. The incumbent Republicans in both houses of Congress and other candidates for office vowed in the intervening seven months leading up to the midterm elections on November 2 that, if they obtained control of the Congress, that is what they would do. They didn't quite accomplish mathematical control, although they came close, convincingly capturing the House and coming within several votes of doing likewise in the Senate (as the vote count stands at this writing). The President himself acknowledged in a post-election press conference the day following the election that he had taken a "shellacking" and that it made him feel "bad."

Technically the President was not on the ballot this time. But, of course, the long shadow of 2012 cast its spell over the mood and motives of the President at that fateful November 3rd press conference, as he answered reporters' questions about the election results. For scores of Democratic incumbents and wannabes, the results of that day were more immediate. Several factors have been cited by the political pundits as the root causes of that historic Democratic defeat, but right at the top, along with "the economy" and jobs, was enactment of the health reform law. It was in the Pledge to America (the Republicans' campaign manifesto) and is, for the Republicans, an article of faith with the voters that they attempt to make good their boasts during the campaign to repeal the law. Statements from their Congressional leadership following the President's press conference underscored unambiguously their determination to do just that.

The big question: Is it possible? There is little doubt that it will be Item One on the docket of the House next January. How it will fare in the Senate is another matter. Even were the Republicans to have accomplished a sweep of both houses, more than a majority vote of the Senators would have been needed. By my count, a trifecta is needed if they are to pull off a repeal:

1. New legislation to repeal and/or amend the recent reform law with the requisite majorities in both houses of Congress after the November elections;
2. Enough votes in the Senate to invoke cloture in order to cut off filibustering by Democrats opposing the repealer efforts (i.e., 60 votes under the present rules of the Senate); and
3. Enough votes in both Houses to override the anticipated veto by the President of the repealer law (2/3rd of the members voting in each House), to enact repeal without the President's signature.

A lot will depend on how the President reacts. Of course, in the unlikely eventuality that he were not to exercise his veto power, the third leg would be obviated. In the furious final weeks of campaigning around the country by Mr. Obama, as he attempted to hold his shaky Congressional majorities in place, his sharp attacks on the rival party gave no hint that a softer, gentler president might emerge from the wreckage.

There was, consequently, great interest from all quarters in his televised November 3rd press conference. What viewers saw was a chastened, if not wounded, warrior, eager to show a conciliatory mien, ready to work with Republicans, even to the point of compromising on specific aspects of health reform that Republicans might suggest that did not undercut essential goals. In answer to specific questions by reporters, he gave, as examples -- among others -- of what he considered essential benefits, elimination of denied insurance coverage for preexisting conditions and mandatory continued insurance coverage for policyholders' children up to age 26.

He also volunteered that paperwork burdens imposed on small businesses by a requirement to provide 1099 Forms to all vendors of goods and services could be considered for repeal. While that particular provision of the health care law has evoked strong hostility from the business community, there is much else in the new law that will similarly impose great burdens and expense on businesses large and small, which Obama did not mention; and he did not give examples of the modifications he would find acceptable.

But it was clear that the message he wanted to convey was that the door was open to some modifications, but not complete repeal. There is little doubt that the Republicans will not insist on total repeal, that is, rejection of everything in the present law. However, the innocuous references Obama made to provisions he wanted to retain and those he would not oppose eliminating do not go anywhere near the modifications that the Republican leadership is certain to require as the price of desisting from their repeal efforts.

Is it likely that the gap between the parties can be closed by negotiation? There is widespread consensus among Americans generally regardless of party affiliation -- or nonaffiliation -- that there is much in the Nation's present health care system that needs fixing. The steadily rising and unsustainable costs of the delivery of health care are what the Democrats claim as one of the chief benefits of the new law, along with increased insurance coverage and elimination of injustices that deny benefits under various circumstances. Republicans, unconstrained by electoral politics, would presumably subscribe to these same goals as a general proposition, if not the specific details for accomplishing them. The devil, as it is said, is in the details, and it is far from certain that agreement between the parties on the specifics can be reached.

One does not need reminding that there are fundamental philosophical differences between the parties, most particularly as regards the appropriate size and role of government in regulating industry, and the appropriate degree of burdens and constraints to be imposed on private companies in the conduct of their businesses. Achieving the proper balance between regulation and burden is not easily accomplished even among like-minded folks, and no one can accuse the Democrats and Republicans of being of like minds on the reformation of health care, or, for that matter, of much else after the rancor and bitterness that characterized their debates in Congress last year and this.

Indeed, it is possible any hope of a rational and reasonable bipartisan settlement between them went off the rails when the Democratic congressional leadership and the White House made the so-called "public plan option" the centerpiece of their program. The Democrats only succeeded in passing the health reform legislation when their leadership -- presumably with acquiescence of the President -- dropped that requirement. It might be noted, in passing, that it is perhaps premature to assume that calls for the public option will not be heard again in future discussions of revision of the present law, especially after its recent prominent mention in the draft statement released (leaked?) November 9th by the co-chairmen of the Fiscal Responsibility and Reform Commission, suggesting that, if government health care costs outpace targets in the long term, a "robust public option" should be considered in establishing the state insurance exchanges required to be set up in several years under the new law. At least one Democratic member of the House has already picked up on this reference to underscore her support for reconsideration of the public option in any subsequent negotiations, and others in the liberal wing of the party can be expected to reaffirm their commitment to it. Presumably it will encounter stiff resistance from the overwhelmingly large republican majority in the House of the next Congress.

The law that was passed in March not only carries with it heavy government costs, e.g., in establishing the departmental organizations and staffing for rule-making, compliance and enforcement; but it already has and will continue indefinitely to impose enormous financial and administrative burdens on the private sector. Theoretically, every existing employer-provided plan will have to perform the very costly exercise of (i) reviewing the plan documents to ascertain whether they are grandfathered (and thus excused from required amendments), (ii) if not, making the necessary plan changes and taking other actions, progressively, as different requirements come into force, and (iii) continually being alert to the possibility that later desired amendments to the plan will cause loss of grandfather protection., with resulting new expenditures to satisfy their legal obligations. (I say "theoretically" because it is a certainty that there will be massive (often inadvertent) noncompliance, particularly among small plans, that will not incur compliance expenditures, at their peril.)

Such costs include professional fees and expenses, additional in-house administrative burden and wages, payroll taxes, possible penalties, etc. The costly burdens do not end with document purity. In the ongoing operation of plans the new law requires constant monitoring to assure observance of such things as maintenance of specified ratios of plan participants' wages to premium costs, adherence to rules affecting whether participants can purchase insurance from the state insurance exchanges, and circumstances requiring the employer to provide insurance purchase vouchers to some or all of its employees. These and many more requirements are predicated on mathematical ratios, percentages, maximum limits, and similar tests that will apply to every participant in every non-grandfathered plan in the country, as well as some requirements for grandfathered plans.

The Republican and Democratic negotiators will have their work cut out for them as they try to bridge their differing views as to the acceptable burdens on business. As noted, the President, while expressing receptivity to Republicans' suggestions for improving the way the law works, was quite guarded, giving relatively innocuous examples. He himself described them as tweaks. The initial remarks of Senator Mitch McConnell (R. KY), the Minority Leader, in response to the President's facially conciliatory words, were less guarded, declaring that, for an accommodation to occur, Obama would have to move closer to Republican positions. He obviously did not have in mind mere tweaks.

If the Republicans were not to achieve a majority in the Senate, it is not clear how reforming legislation would reach the President's desk. It is doubtful that the Democrats in the Senate would be inclined to initiate a bill to modify significantly the law they had expended so much capital to accomplish. But a president eager to show a new face to the public (surely not unmindful of his own reelection bid in 2012), might exert influence on the presumptive continuing Senate majority leader, Harry Reid (who held on to his seat by a thin reed and doubtless will himself have an eye on retaining his leadership after the 2012 elections), to engineer enough Democratic votes in the Senate to pass meaningful legislation. "Enough," in this scenario, would mean 60 votes between Republicans and Democrats, in order to prevent a filibuster by Democrats committed to no compromise. There are presumably many Democrats in the Senate who would be happy to demonstrate a change of heart to the voters in the 2012 elections.

As noted, the preceding game plan assumes that the Republicans do not capture the Senate this year, as appears likely at this writing. But if, after all the votes are counted or recounted, they do win control, but just barely, they could change the rules governing filibusters so that such blocking tactics could be shut off with less than the current 60 votes, say down to 51; such that, with a simple majority of the full membership in the 112th Senate, they could pass their legislation. Passage in the House, which is not subject to the filibuster rule, could be effected with just a majority of a quorum, not a problem in the 112th Congress, where the Republicans will hold such an overwhelming majority.

However, if the President were to veto the bill, Republicans would then need the third leg of the trifecta to override, i.e., 2/3rds of the members voting in each of the Houses. (The words of the Constitution are ambiguous, describing the veto-overriding process as requiring reconsideration by the House in which the vetoed bill had originated, following which, if "two thirds of that House shall agree to pass the bill," the other House shall like reconsider "and if approved by two thirds of that House, it shall become a Law." Art. I, Sec. 7. The language could equally support a 2/3rds-of-those-voting reading as a 2/3rds-of-the-entire-membership-of-each-House reading.) But the foregoing discussion is predicated on the hypothesis that the White House and the Republican leadership in Congress reach an accord on an acceptable overhaul of the present health law, and that a sufficient number of Democrats in the Senate provide the necessary votes to overcome the technical requirements for passage and enactment.

Absent accord between the parties, one Republican tactic that might be effective would be to borrow a page from the playbook with which the Democrats accomplished the health care reform legislation in March of this year, by breaking up the repealer legislation into two separate bills, one of which was designed to satisfy the reconciliation tactic, which precludes filibuster of a bill not dealing with matters having a revenue effect. So the Democrats first got the House to pass the exact bill which the Senate had already adopted (called the Patient Protection And Affordable Care Act, or "PPACA"), and then placed the rest of their reform agenda into a separate "reconciliation" bill (called the Health Care And Education Reconciliation Act, or "HCERA"), which passed with only simple majorities in both Houses.

To follow that strategy, the task for Republicans in 2011 might require a further refinement, utilizing three separate bills, since they would not have the benefit of a bill which the Democrats had already adopted, that the Senate could then simply rubber-stamp. They would, first, have to draft a bill to repeal PPACA, but incorporate in the repealer the features of PPACA that both the Republicans and Democrats could embrace, but without the costly, overregulating government bureaucracy and deficit escalation that the Republicans have so sharply criticized, and without any elements having a revenue impact. Next, a bill could be drafted to repeal HCERA, but retaining from it only elements meeting the same criteria just described for the PPACA repealer. A third bill would incorporate any elements that had been excluded from the previous two because of having revenue impact. Presumably only the first two would be insulated from filibuster; but that exposure for the third bill could be minimized, if not eliminated, by revision of the filibuster mathematics noted above, possibly with some Democratic votes if the Republicans do not obtain a simple majority in the Senate, as has been suggested above.

A side benefit of this approach for Republicans can be posited: were the Democrats to propose amendments to the third bill that retained "big government" features of the present legislation, these could be highlighted by the debate on the proposed amendments, and so subjected to the scrutiny and pointed analysis that had not accompanied the passage of the 2500-page PPACA with its massive provisions. In that way specific attention would be focused on the real costs to government (federal and state), and also to private business, attributable to implementation of these provisions. Such costs would doubtless far exceed any cost savings claimed for the legislation, and might actually directly impact recovery from the current recession, e.g., by forcing businesses -- especially small ones -- to restrict their hiring, or drop health coverage for their employees, or both, thus further exacerbating the stubborn unemployment problem and the numbers of uninsured among the employed and the unemployed. Such consequences would frustrate the very purposes of health care reform. That alone might induce Democratic members of Congress who were otherwise inclined to refrain from offering such amendments, whether on principle or political calculations (especially as the 2012 elections drew nearer).

Those are some of the scenarios by which overhaul of this year's health reform law could be accomplished, by mutual actions of the two major parties, while preserving the major benefits it was designed to accomplish. Is there another way the Republicans might achieve a de facto scaling back of the aspects of the law that are most objectionable to them? There were reports in the press even before the recent elections that some Republican strategists were considering a tactic apart from outright repeal, namely to "starve the beast," that is, to deny to the IRS (and presumably the other two administrative agencies having enforcement authority under the new law, the departments of Labor and of Health and Human Services) the necessary appropriations to implement their respective functions, principally the Service's revenue collecting duties and the rule-making authority of all three. In the immediate wake of the election, a story in the New York Times on November 6 reported that "Republican leaders said that they plan to use spending bills to block federal insurance regulations to which they object." The story quoted Representative Eric Cantor (R. VA), the House Republican Whip, as stating, "If all of Obamacare cannot be immediately repealed, then it is my intention to begin repealing it piece by piece, blocking funding for its implementation and blocking the issuance of the regulations necessary to implement it." Mr. McConnell concurred that he, too, "wanted to shut off money for the new law." Mr. Cantor was further quoted as proclaiming it "my intention to use every tool at our disposal to achieve full repeal."

Veteran congressmen are very familiar with this appropriations squeeze, that has been frequently employed to work the will of the Congress by indirection. Democrats can be expected to strenuously resist "full repeal," whether frontally or by way of the purse. The Times article quotes Senator Tom Harkin (D. IA), as ready to "fight any attempt to defund the law or repeal its consumer protections. " He speaks as current chairman of the powerful Senate Health, Education and Labor Committee and its health appropriations subcommittee. So the gauntlet has been thrown and tossed back. How much of that is posturing and positioning only the principals can know at this point. One thing can be sure; repeal efforts will not be easy or certain of attainment. It might well trigger a repeat of much of the angry debate that characterized the recent reform efforts and, more significantly, the preoccupation with its attainment that occurred in so many offices of our Washington bureaucracy. It will not soon be forgotten that the White House and the Congress had been grappling with health reform for over six months before it was enacted this past March, almost to the exclusion of all else, essentially putting on hold the President's ambitious agenda, to say nothing of the financial recovery itself. That, it is generally agreed among observers, accounted for a large part of the President's sharp drop in the opinion poll and the disappointing election results, and could be enough to discourage the White House from going down that road again. The choice for Mr. Obama might be to take that road and face a replay of the voter revolt of 2010, or to not take that road and face a replay of the voter revolt of 2010. The solution for the President might be found in the wisdom of Yogi Berra: when you come to a fork in the road, take it.

Post Script: One brief final observation should be made. This article, true to its title, has surveyed the legislative paths by which repeal of the Health Care Law might be accomplished, an action requiring interaction of the President and the Congress. No mention has been made to this point of that third branch of the government, the Judiciary, that could, after a legal challenge of the law worked its way through the three levels of the Federal courts, rule the law unconstitutional in whole or in part. Such a Supreme Court decision, if it were to eventuate, would be years away, after the Nation had gone through the entire Sturm und Drang -- the legislative proceedings recounted above, the recasting of the entire health care system, the administrative agency regulations, compliance actions, allowance or disallowance of benefit claims - making it all moot. Is this just some Kafkaesque conceit? The lawsuit that could lead to this is already in court, and, as these lines are written, summary judgment motions have been filed by the parties. The plaintiffs are the attorneys general of many of the States; the defendant is the United States of America. That is all that will be said here about a judicial attack upon the health law. That is a subject for a different article.

Copyright 2010 Alvin D. Lurie

Alvin D. Lurie is a practicing pension attorney. He was appointed as the first person to administer the ERISA program in the IRS National Office in Washington. He is general editor of Bender's Federal Income Taxation of Retirement Plans (LexisNexis), a 2-volume treatise and he is also editor of the annual compendium of articles published under the title New York University Review of Employee Benefits and Executive Compensation.(LexisNexis). Mr. Lurie is the first recipient of the Lifetime Employee Benefits Achievement Award sponsored by the Employee Benefits Committee of the American Bar Association Tax Section. He can be contacted at Alvin D. Lurie, P.C. in Larchmont, New York, at (914) 834-6725 or via email: allurie@verizon.net.

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