The Health Care Summit: (from left) Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi, Vice President Joe Biden, President Barack Obama, HHS Secretary Kathleen Sebelius, Senate Republican Leader Mitch McConnell.

President Obama spent yesterday with key members of Congress from both parties in an all-day televised meeting ostensibly designed to bridge differences over healthcare reform. Unsurprisingly, Congressional Republicans had no interest in reaching a compromise. The real objective of the event, however, was to create momentum for Democrats in Congress to push ahead with legislation, using the reconciliation process to bypass a Republican filibuster in the Senate.

The Obama Plan

Leading up to yesterday’s meeting, President Obama started the week by releasing his own proposal for healthcare reform. In essence, it is an attempt to bridge the differences in the House and Senate versions of the healthcare reform bill, basically by tweaking the Senate bill in order to make it more palatable to House Democrats.

For example, compared to the Senate bill, the President’s proposal increases subsidies for beneficiaries, particularly lower-income beneficiaries, who purchase health insurance in the insurance exchanges that will be created. Both the House and Senate bills impose penalties on individuals who choose not to purchase health insurance even when they have affordable insurance options available to them, with exemptions for people who cannot afford any insurance. The President’s proposal would lower the penalties on lower-income individuals while increasing the penalties for higher-income individuals. Like the Senate bill, the President’s proposal does not impose a mandate on employers to provide insurance to their employees, but it does require employers to help cover the cost of insurance if their employees get subsidized coverage in the exchanges. Compared to the both the House and Senate bills, however, the President’s proposal lowers the assessment that employers would have to pay.

The President’s proposal also gradually eliminates the “doughnut hole” in the Part D prescription drug benefit for Medicare beneficiaries, making it so that, by 2020, beneficiaries would only pay 25% coinsurance once they reach the doughnut hole threshold.

One somewhat controversial provision in the President’s proposal would ban settlement agreements between branded and generic pharmaceutical companies in which the generic company receives anything of value in return for an agreement to limit or delay sales of the generic drug. The Federal Trade Commission has long sought to restrict such “pay for delay” settlement agreements, but the courts consistently have upheld them. The President’s proposal would make them illegal.

Like both the House and Senate bills, the President’s proposal reduces overpayments to Medicare Advantage plans, with greater reductions compared to the Senate bill. Like the Senate bill, the President’s proposal imposes excise taxes on high-premium health insurance policies, but it exempts plans whose annual premiums for families are under $27,500, up from $23,000 in the Senate bill, and delays implementation of the tax for all plans until 2018.

The Senate bill imposed $23 billion of fees over 10 years on pharmaceutical companies. The President’s proposal increases the fees to $33 billion over 10 years, but delays in the implementation of the fees by one year, to 2011. The Senate bill also imposed $67 billion in fees over 10 years on all health insurance plans. The President’s proposal delays implementation of these fees until 2014. The President’s proposal also replaces a fee on the medical device industry with an excise tax starting in 2013 that would raise the equivalent amount, $20 billion over 10 years.

In addition, the President’s proposal provides additional federal payments to states to cover a portion of the additional costs states will face as a result of an expansion in the Medicaid program.

The Road Ahead

Even with these changes, however, it is still not clear whether the Obama administration will succeed in attracting sufficient Democratic votes in Congress to push through legislation. It appears that the administration is hopeful that the House will pass the Senate bill along with a reconciliation bill that incorporates the President’s proposed changes to the Senate bill, and then get 51 Democrats to approve the reconciliation bill in the Senate. Still, while a number of difficult challenges remain, including the issue of covering abortions in the exchanges, the Obama administration is doing its best to revive momentum for major healthcare reform legislation.