2nd UPDATE: US Senate Health Proposal Carries Smaller Price Tag

WASHINGTON (Dow Jones)--A Senate health-care proposal released Thursday would keep more people in employer-sponsored health plans and cost far less than an earlier version of the proposal that drew heavy criticism.

WASHINGTON (Dow Jones)--A Senate health-care proposal released Thursday would keep more people in employer-sponsored health plans and cost far less than an earlier version of the proposal that drew heavy criticism.

The new proposal, issued by Senate Health, Education, Labor and Pensions Committee after lengthy consultations with the Congressional Budget Office, would cost $611.4 billion over 10 years. The CBO analysis states that 21 million uninsured people would gain coverage under the proposal, but Sen. Christopher Dodd, D-Conn., who is leading committee Democrats on health-care matters, said the bill combined with Senate Finance Committee legislation would result in coverage of 97% of Americans.


The new analysis comes as welcome news to Democrats on the panel, after a June 15 review showed that an earlier draft of the legislation would cost $1 trillion over the 2010-2019 period and cover only 16 million more people than currently insured. There are an estimated 46 million uninsured in the U.S.

The vast difference in dollar figures results in large part from a section in the proposal that would slap penalties on employers who don't offer employee health benefits. Under the proposal, firms with 25 or more employees that don't offer coverage would face fees of $750-per-year for full-time workers and $375-per-year for part-time workers.

The employer mandate would keep more people in their employer-based coverage, instead of forcing a migration of workers to the individual health insurance market. Such a migration would be costly, because the legislation would provide subsidies for low and middle-income workers to purchase insurance on the individual market.

The penalties assessed to employers that don't provide coverage would be part of the tax code, according to a senior Health, Education, Labor and Pensions Committee staffer.

The price of the bill includes neither the cost of expanding eligibility for the low-income Medicaid program nor potential cost savings from new Medicare payment proposals - both of which fall under the jurisdiction of the Senate Finance Committee. Overall, the cost of the bill is expected to increase when melded with the Finance panel's legislation.

Scott Fidel, a Deutsche Bank managed-care research analyst, said in an investor note that the lower price tag "will likely receive attention in the headlines," but that "it is important to recognize that the costs of health reform using the HELP Committee approach combined with an expansion of Medicaid will likely be much higher."

Still, Dodd heralded the new numbers, which he said put the committee "on the brink of doing something that is absolutely critical."

"Given the numbers of a few weeks ago, people wondered whether or not we would arrive at the numbers that would allow people to stay, literally, in their employer-based plans," Dodd told reporters Thursday.

Dodd, who is leading health-care efforts on the Senate Health panel in replace of the ailing Sen. Edward Kennedy, D-Mass., said he expects the new legislative proposal to be approved in committee by the end of next week or the beginning of the following week.

The Senate Finance Committee is still in negotiations on its version of the bill, which overlaps with the Kennedy-Dodd legislation in many areas. The two panels are expected to meld their bills before the full Senate takes up health-care legislation - which Democrats hope will happen in July.

President Barack Obama in a statement praised the bill, saying it "lowers costs, protects choice of doctors and plans and assures quality and affordable health care for Americans."

A summary of the public plan provided by the committee says the Health and Human Services secretary would negotiate rates for the new plan. The plan could pay doctors and hospitals rates below the average rate paid in local geographic areas, which could prompt protests from physicians' group. But the summary stressed that health care providers would not be forced to accept the public plan.

While Republicans on the Senate Health panel are unlikely to support the proposal unveiled Thursday, negotiators continue to try to hammer out a bipartisan compromise in the Senate Finance Committee.

Republicans and Democrats at the Finance panel have discussed proposals for health cooperatives that wouldn't be government-run - as the public plan in the proposal unveiled Thursday would - but there are concerns that the cooperative plan may not gain traction among liberal Democrats in the Senate.