10 Major Changes to Health Reform in House's Reconciliation Bill

After nearly three months since the passage of the Senate bill, the House Rules Committee issued its 153-page reconciliation proposal on Thursday that makes "legislative fixes" to the Senate measure.

Here's a sample of some the major changes made to the Senate bill:

Cadillac Health Plan Tax. This proposed tax, which was not included in the initial House bill approved in November, had been strongly opposed by many House members. The provision does remain in the new House measure, but with changes.

Now, the tax would apply only to the portion of healthcare plans costing more than $10,200 a year for individuals (up from $8,500 in the Senate bill), and $27,500 for families (up from $23,000). Also, the tax would start in 2018—not 2013. The changes would also reduce the projected revenue to the federal government by 80%.

Closing the Doughnut Hole. While the initial House bill closed the doughnut hole—the gap in Medicare in which beneficiaries must pay their own drug costs—the Senate bill did not. Under the new reconciliation measure, Medicare beneficiaries will receive $250 to cover expenses when they cross into the gap this year.

Next year, the beneficiaries would get a 50% discount on brand name drugs (with the cost being paid for by the pharmaceutical industry). In following years, the discounts would be expanded, with coverage extended to generic drugs. By 2020, the discounts would reach 75%.

Medicare Advantage. The federal government currently pays Medicare Advantage private health plans an average of 14% more than traditional Medicare plans. The House plan would cut those payments even more steeply than the Senate bill: $132 billion over 10 years, compared with $118 billion.

In addition, the new bill would shift the funding with some higher cost areas getting paid 5% below traditional Medicare, while some lower cost areas would be paid 15% more than traditional Medicare. Also, proposals in the Senate's plan that would have shielded various areas of the country—such as South Florida—from major reductions was largely eliminated.

Primary Care Payment Increase. Under the new House reconciliation bill, primary care physicians (internists, family physicians, and pediatricians) would get Medicaid payments starting in 2013 and 2014 that would be on par with Medicare rates, which typically are around 20% higher than Medicaid.

Individual Mandate. Similar to the Senate bill, the new bill would penalize most Americans without insurance. The first annual penalty would be $95 and start in 2014. However, in subsequent years, the penalties in the reconciliation bill are slightly different. Those without insurance would pay the greater of two alternatives: (1) a flat fee of $695, which is down from the Senate's $750; or (2) 2.5% of their income.

Medicaid Expansion: The House reconciliation measure calls for full federal funding to all states for newly eligible Medicaid recipients. The funding would last for three years. The bill also eliminates the controversial provision—nicknamed the "Cornhusker Kickback"—that would have exempted Nebraska from paying the costs of Medicaid expansion included in the Senate bill.

Disproportionate Share Hospital Payments. The House provision lowers the reduction in federal Medicaid Disproportionate Share Hospital payments from $18.1 billion to $14.1 billion over the 10-year period. The reductions would not begin until fiscal 2014.

Fraud and Abuse. Funding for fighting fraud, waste, and abuse is increased by $250 million over the next decade. Funds to fight Medicaid fraud will be indexed based on increases in the Consumer Price Index.

Premiums Tax Credits. The reconciliation bill would provide more generous credits to low and moderate income Americans, up to 400% of the poverty level.

Physician Owner Referrals. The reconciliation bill includes a date (Dec. 31, 2010) for the prohibition of physician-owned hospitals to self-refer.