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House Reconciliation Runs Afoul of Byrd Rule

Oct 5, 2015 | Health Care

Update: CBO has released scores of the three reconciliation bills showing net ten-year savings of $57 billion but a deficit increase of $1 billion in 2025. The blog has been updated to reflect these numbers, and the second-decade numbers have been updated base on the official estimates.

Since Republicans took full control of Congress in the 2014 midterm elections, there has been plenty of discussion about the use of reconciliation, a fast-track process that most critically allows the Senate to pass legislation with 51 votes by allowing it to bypass the 60 vote requirement needed to end a filibuster, for repealing parts of the Affordable Care Act (ACA).

The relevant committees in the House of Representatives, this week, finally detailed their plans, but the proposed reconciliation package may run into trouble in the Senate because it appears to increase deficits in the second decade by in the range of $400 billion.

The bulk of the package comes from the Ways and Means Committee, plus some smaller policies from the other two relevant committees. The bills eliminate:

  • The individual mandate;
  • The employer mandate;
  • Auto-enrollment in health insurance for employers with 200 or more employees;
  • The Independent Payment Advisory Board (IPAB);
  • The medical device tax;
  • The Cadillac tax on high-cost insurance plans;
  • The Prevention and Public Health Fund; and
  • Funding for Planned Parenthood (which would be redirected elsewhere).

The package would strike many, but not all, of the provisions of the ACA. It would leave the Medicaid expansion and health insurance exchanges with subsidies in place, although the individual mandate repeal would reduce insurance coverage in 2025 by 14 million people in those programs and would increase exchange premiums by 20 percent, according to the Congressional Budget Office (CBO). The bills would also leave in place the other Medicare cuts and tax increases that were used to finance the law.

CBO and JCT estimate that the reconciliation package would reduce deficits, on net, by $57 billion over ten years.

Rough Estimate of the House Reconciliation Package
  Ten-Year Cost/Savings (-)
Individual and employer mandate repeals -$159 billion*
Auto-enrollment repeal -$8 billion
IPAB repeal $7 billion
Medical device tax repeal $24 billion
Cadillac tax repeal $91 billion
Prevention Fund repeal -$13 billion
Planned Parenthood defunding <-$1 billion
Total -$57 billion

Source: CBO, Joint Committee on Taxation
*Includes $12 billion of revenue from interaction between mandates and Cadillac tax repeal

While the reconciliation package would satisfy the ten-year deficit reduction requirements, it appears likely to increase deficits significantly in the following decade, largely as a result of the costs of the Cadillac tax and IPAB repeal growing rapidly beyond the first ten years while the savings in the bill grow more slowly. The estimates show the savings declining continuously after 2018 until the bills increase the 2025 deficit by about $1 billion.

If trends continue, the bill would increase second decade deficits in the range of $400 billion, which would violate the Byrd Rule in the Senate. That procedural hurdle allows a point of order – requiring 60 votes to overrule – against any provision that increases deficits beyond ten years if not offset by other savings within the bill. Therefore, each provision in the reconciliation package (if it moves to the Senate as is) that increases deficits beyond ten years can be blocked by only 41 senators.

This point of order could be avoided by removing or adjusting the repeal of the Cadillac tax, which we’ve shown will raise substantial revenue and help control health care costs. Alternatively, the Cadillac tax could be replaced with a more direct limitation on the employer tax exclusion. It could also be overridden with 60 votes.

Yet even if the legislation passes, it will almost certainly be vetoed by the President. Reconciliation is a powerful tool that could have been used to enact serious entitlement reform, tax reform, and deficit reduction. It is unfortunate Congress failed to use it for any of these purposes.