Five Million Americans Hang in the Balance Between the House, Senate Health Bills

As the congressional health-care marathon enters its final weeks (or final months for those pessimistic about Capitol Hill timetables), the remaining obstacles seem to be limited to the perpetually contentious issues of abortion, the taxation of generous Lexus-level insurance plans, and, yes, the public option. Lost in the shuffle are the estimated 5 million Americans who would gain health-insurance coverage under the House bill, but not under the legislation that survived a Senate filibuster.

We may have become blasé about billions or even trillions of dollars, but it should be difficult to ignore 5 million people, roughly equivalent to the population of Colorado. According to projections by the Congressional Budget Office (CBO), the House bill would fail to provide health-insurance coverage for 18 million people when fully implemented, while the Senate version of the legislation would leave 23 million depending on hospital emergency rooms and neighborhood clinics.

Or to put it in the more upbeat fashion preferred by the White House: The House bill would provide first-time health coverage to an estimated 36 million people while the Senate bill would add 31 million to rolls.

But precisely who are these 5 million Americans whose access to health coverage hangs in the balance during the three-way negotiations among House and Senate Democrats along with the Obama White House? If Congress were debating, say, a tax bill with voters in certain brackets losing out, you would hear their bleats of outrage constantly on television and read about their dismay in the newspapers. But because of the Rube Goldberg intricacy of the health-care bills and the hard-to-crack vagueness of the CBO reports these 5 million have become the Forgotten Americans.

Spoiler alert: As we shall see, these 5 million Americans whose future health-care coverage is at the crux of the final House-Senate negotiations are not necessarily the people whom you would expect to fall through the holes in the safety net. What, if in fact, many of them are members of the struggling middle class. But that is getting ahead of our story.

Since, in general, the House bill offers more generous subsidies to help the uninsured and extends Medicaid to cover more Americans than the Senate legislation, it is widely assumed that the 5 million who would lose out in the Senate bill are on the economic margins. (The House version also would cost $128 billion more over 10 years.) But it is difficult to prove this conclusively based on the CBO coverage estimates.

What we do know from the CBO projections is that 10 million more Americans would receive health insurance from their employers under the House bill. A major reason is that the House legislation would levy tougher penalties (in most cases an 8-percent payroll tax) on businesses that did not provide health insurance for their workers.

But under the Senate bill, 5 million more individuals and families would buy health care from state insurance exchanges established by the legislation and many of these people would be eligible for a government subsidy. In addition, the House bill would extend Medicaid eligibility to 150 percent of the poverty line ($33,000 for a family of four), while the Senate plan lifts the threshold to 133 percent of poverty (family income: $29,000).

As you can tell from this over-simplified summary, it is impossible from the published CBO numbers to put human faces on those who would get short shrift under the Senate legislation. Adding to the mind-numbing complexity and muddying the winners-versus-losers calculations is that the House bill provides more generous subsidies to individuals and families who have to buy their own health insurance, as long as their income is below 250 percent of the poverty line ($55,000 for a family of four).

But for those families whose income is between $55,000 and $88,000 (400 percent of the poverty line), the Senate bill offers greater assistance in purchasing health insurance. At $33,000, a family of four would save $1,500 under the House bill. At $88,000, these savings would evaporate in the House bill and a family would pay $800 more for health insurance compared to the Senate plan. (For those masochists craving greater detail, I recommend this new paper comparing the two bills).

Stymied by the opaque nature of the oft-quoted congressional health-care coverage projections (part of the problem is that the CBO's mandate is to estimate costs not people),

I turned to MIT economics professor Jonathan Gruber, who uses his own widely acclaimed health-care model. (Gruber is also a consultant to the Department of Health and Human Services). At the request of Politics Daily, Gruber agreed to find out more about the characteristics of the estimated 5 million Americans who would get health coverage under the House but not the Senate bill.

The results of Gruber's projections were startling – and run against the grain of almost all glib assumptions about the health-care debate.

More than half (55 percent) of the 5 million who would go without health-care coverage under the Senate bill but would be protected by the House bill have family incomes greater than $88,000 (the benchmark is 400 percent of the poverty line).

The short-changed, according to Gruber's model, would mostly be card-carrying members of the hard-pressed middle class – and not necessarily the near-poor. Moreover, 40 percent of these Americans who would fall short under the Senate bill would be between the ages of 45 and 65. To put these numbers in context, only 10 percent of those currently uninsured have incomes that cross 400 percent of the poverty line and only 25 percent are older than 45.

What Gruber's projections suggest is that the legislative system has worked in its stumbling, frustrating fashion – at least, in terms of providing health-care coverage to those who otherwise have few economic options. As Karen Davis, an economist and the president of the Commonwealth Fund, a foundation deeply involved in the health-care debate, put it, "I just don't stay up at night worrying about those people whose income is four times the poverty level. But I do worry about health care for those people who are at two times poverty."

Gruber points to two primary reasons why the pool of those short-changed by the Senate bill turns out to be more middle class than anyone would have expected. Part of it is the stiff penalty that the House bill levies on employers who do not offer health insurance (that 8 percent payroll tax) versus the far milder $750-per-worker charge in most cases under the Senate version.

Another factor is the legal mandate that individuals must purchase health-insurance coverage. While the fines for non-compliance are roughly analogous in both the Senate and House bills, the Senate version comes with an explicit escape clause waiving the penalties if health-insurance costs are greater than 8 percent of family income, as would be the case for many families with incomes just above the level that would quality them for subsidies. .

To be sure, more than 2 million Americans, with family incomes below 400 percent of the poverty line, would also be protected under the House bill but not under the Senate version. While Gruber did not estimate their economic makeup, it seems likely that significant portion of these people fall in the gap between 133 percent of the poverty line (the cut off for Medicaid under the Senate bill) and 250 percent of poverty (the income at which Senate subsidy levels for purchasing private health insurance are greater than in the House bill).

"You have an interesting situation where you want the best of both bills," said Kathleen Stoll, the director of health policy at Families USA, a leading health-care advocacy group. "The House bill is better under 250 percent of poverty. And the Senate bill is better above 250 percent."

Gruber's projections implicitly underscore the reality that government subsidy levels matter. The largest category of those who would be forced to go without health insurance if the Senate bill passes are families whose incomes are clustered just above the individual subsidy threshold, which ends at 400 percent of the poverty line. They are not charity cases and they may not deserve government subsidies in an era of trillion-dollar-deficit federal budgets. They are merely the kind of middle-class families whom Bill Clinton once described as "working hard and playing by the rules."