By Shailagh Murray and Lori Montgomery
Washington Post Staff Writer
Thursday, November 19, 2009

Senate Majority Leader Harry M. Reid presented an $848 billion health-care overhaul package on Wednesday that would extend coverage to 31 million Americans and reform insurance practices while adding an array of tax increases, including a rise in payroll taxes for high earners.

Democratic leaders were jubilant that the nonpartisan Congressional Budget Office determined that the Senate bill would cut federal deficits by $130 billion over the next decade. That projection, released shortly before midnight Wednesday, represents the biggest cost savings of any legislation to come before the House or Senate this year, but the measure's effective date also was pushed back by one year, to 2014. Democrats said the savings could prove more significant in the long run, though the CBO said they "would probably be small," amounting to around 0.25 percent of the overall economy, or no more than $650 billion between 2019 and 2029.

Those projected reductions could prove critical in winning the support of three wavering moderate Democrats whose votes Reid (D-Nev.) must secure to bring the legislation to the floor before the Senate breaks for Thanksgiving. But Reid also stacked the bill with provisions sought by liberals, including a public insurance option, albeit a version with an opt-out clause for states.

The legislation received a positive response from across the Democratic spectrum. "This is the bill that we've been fighting for," said Sen. Sherrod Brown (Ohio), a liberal who pressed Reid to revive the public option. Sen. Kent Conrad (N.D.), the budget chairman and a leading Democratic fiscal hawk, said after a briefing on the bill, "I was very impressed by what Senator Reid has done."

But Republicans dismissed it as "another trillion-dollar experiment," in the words of Senate Minority Leader Mitch McConnell (Ky.). Sen. Judd Gregg (N.H.) said the bill "may claim to be deficit-neutral, [but] it uses sleight-of-hand budgetary tricks by assuming unrealistic tax increases and Medicare cuts that members of Congress will not be willing to follow through on."

The Senate measure is similar in scope to legislation the House approved earlier this month. It would require most people to buy insurance, and if their employers did not offer affordable coverage, they would be able to shop for policies on new state-based "exchanges" that would function as marketplaces for individual coverage. Insurance companies would have to abide by broad new rules that would ban practices such as denying coverage based on preexisting conditions.

But the bills diverge on other key provisions. The House version would require all but the smallest businesses to offer insurance, while the Senate measure would merely fine companies for not offering affordable coverage. The Senate bill would bar illegal immigrants from buying insurance through the exchanges, while the House would restrict access only to subsidies and federal programs such as Medicaid, which would be vastly expanded under both bills.

Another potential flashpoint is abortion coverage. The issue sparked a major battle in the House, forcing Speaker Nancy Pelosi (D-Calif.) to agree to an amendment that would bar people who receive federal subsidies for insurance coverage from using that money to purchase policies that pay for abortion.

Reid took a different approach that may or may not pass muster with abortion opponents, proposing to establish a "firewall" that would segregate private premiums from federal funding if abortion coverage were offered in the public insurance plan.

Few details were available Wednesday, but Sen. Barbara Boxer (D-Calif.), an abortion rights advocate who was working to forge a compromise on the issue, said, "I couldn't be happier. For those who want to keep abortion out of this bill, Senator Reid did it the right way."

The National Right to Life Committee, however, called the firewall "completely unacceptable" and said it utilizes "layers of contrived definitions and hollow bookkeeping requirements" to permit federal funding of abortion.

Like the House bill, Reid's proposal would be financed through billions of dollars in Medicare cuts, as well as new taxes. But while the House would impose a 5.4 percent surtax on income over $500,000 for individuals and $1 million for families, the Senate would rely primarily on a new tax on high-cost insurance policies that has been hugely unpopular among House members.

To blunt opposition, Reid would impose the 40 percent tax on fewer policies, raising the threshold to $8,500 for individuals and $23,000 for family coverage. That change required him to come up with about $60 billion in additional revenue, most of which would come from raising the Medicare payroll tax from 1.45 percent to 1.95 percent on individual income over $200,000 and household income over $250,000. Reid is also proposing a new 5 percent tax on elective cosmetic surgery.

The bill's first test is expected on Friday or Saturday, with a procedural vote required to start debate. Republicans are expected to rally all 40 of their senators to block the legislation from advancing, requiring Reid to keep all 60 members of his Democratic caucus in line.

GOP leaders pledged to use all their parliamentary powers to delay a final vote. "This will not be a short debate," McConnell said.

But Reid said Wednesday night that he was "cautiously optimistic" that he could move the bill to the floor, and one of the three undecided Democrats -- Sen. Ben Nelson (Neb.) -- suggested in a statement that he would support Reid's effort.

"It is a motion to start debate on a bill and to try to improve it," Nelson said of the upcoming vote. "If you don't like the bill, then why would you block your own opportunity to amend it?"

The package the House approved on Nov. 7 would spend $1.05 trillion to extend coverage to about 36 million Americans and reduce deficits by about $109 billion by 2019, according to the most recent Congressional Budget Office estimate. Pelosi called the Senate bill "an encouraging development" in a quest that started decades ago and that probably will extend at least into January if Reid can meet his goal of a Senate vote before Christmas.

Said Pelosi: "House Democrats look forward to a constructive debate in the Senate and to working together to achieve historic reforms that will make health care more affordable and strengthen our economy."