by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
Can the Biden Administration and Congressional Democrats Enact the $3.5 Trillion “Reconciliation” Bill?
- At the end of August, I asked this very question. And it continues to be a relevant question to ask. Why?
- Analysis: Because over the past 2 weeks, we have heard from moderate Democrats in the Senate – and also in the House – publicly exclaiming that either (1) they CANNOT support a bill that will spend $3.5 trillion or (2) they CANNOT support specific proposals that a majority of Congressional Democrats want to include in the package. As a result, we are seeing some cracks in the overall plans that the Biden Administration and Congressional Democratic Leadership laid out on how they wanted this “reconciliation” exercise to be orchestrated. With a 50-50 Senate, and in the House – where Speaker Pelosi cannot lose 4 or more Democrats – even the smallest crack in Democratic support spells T-R-O-U-B-L-E for President Biden and Congressional Democratic Leaders.
What are these moderate Democrats saying? Importantly, 3 moderate House Democrats have indicated that they CANNOT support the Democrats’ drug pricing reforms, namely, allowing HHS to negotiate the prices Medicare will pay for prescription drugs. This is a REALLY REALLY big deal because the drug pricing reforms are not only a BIG policy priority for Congressional Democrats – along with President Biden – but the drug pricing reforms raise close to $500 billion. AND, Congressional Democratic Leadership needs ALL of the money they can get to “offset” the proposed $3.5 trillion in spending. More specifically, any changes to the drug pricing reforms (to get these 3 Democrats back on board), would produce a domino effect. What I mean is: Senate Democrats – namely Sens. Manchin (D-WV) and Sinema (D-AZ) – have made numerous public statements that (1) they CANNOT support a bill that spends $3.5 trillion and (2) if they did support a $3.5 trillion bill, this bill would have to be fully paid for with increased revenue or spending reductions. WELL, if Congressional Democrats CANNOT raise the close to $500 billion from drug pricing reforms, the bill will either NOT be paid for (which would lose Sens. Manchin’s and Sinema’s vote) – OR – Democratic Leaders would have to look to other reductions in spending or tax increases (which could result in losing support from other un-named Democratic House members or Senators). So you see, it’s like a game of Jenga (I credit Axios for the analogy). If you mess with one aspect of this $3.5 trillion “reconciliation” bill to get certain House members and/or Senators to YES, you might lose other un-named House members and/or Senators and topple the entire “reconciliation” exercise. AND, I didn’t even talk about where progressive Democrats might land on all of this. For example, if the drug pricing reforms get pared back, this would reduce this much-needed “offset,” which would then require Democratic Leaders to pare back the overall $3.5 trillion package. Progressive Democrats will GO NUTS if the overall package is pared back. Progressive Democrats have already been going NUTS in response to Sens. Manchin’s and Sinema’s continued comments that they won’t support the $3.5 trillion bill (and these comments were made even BEFORE we knew that the drug pricing reforms – in their current form – did NOT have unanimous support in the House). I told you that this “reconciliation” exercise was going to be a mess. It’s already starting to be a mess, and we are only in the 1st inning of a long-and-involved 9 inning game. Keep eating that popcorn…
- As I told you before, we all had to wait until the “reconciliation” bill was first drafted to finally get a sense of the specific details associated with what the Biden Administration and Congressional Democrats wanted to include the $3.5 trillion package.
- Analysis: For example, we knew that there would be tax increases, but we didn’t exactly know where the tax rates could land, and which taxpayers would be required to fund the Democrats’ spending proposals. BUT NOW, we at least have a base-line for what tax increases House and Senate Democratic tax-writers will continue to dial up and down over the next 8 innings of the process. They include, among other things:
- Increasing the top individual income tax rate from 37% to 39.6% for households earning $435,000 or more; Increasing the corporate tax rate from 21% to 26.5% for corporations with profits of $5 million or more; Increasing the capital gains tax rate from 20% to 25% for households earning more than $400,000; Imposing a 3% sur-tax on households earning $5 million or more; Changes to the Estate Tax, and more… In addition – and of significant import to us health policy geeks – House Democrats propose to make PERMANENT the enhanced ACA premium subsidies that came in through the American Rescue Plan. As you know, I have talked A LOT about these enhanced premium subsidies, and – while I could be wrong in the end – I do NOT believe that the enhanced premium subsidies will be made PERMANENT. Why? Because I believe Democratic Leaders are going to run into a “spending problem” (as discussed above). BUT, I do believe that IF the Biden Administration and Congressional Democrats can get this Soft Infrastructure “reconciliation” bill across the finish line, I do expect that the enhanced premium subsidies will be EXTENDED for a number of years (possibly 10, or 8, or even 5 years). Also, although back in August Congressional Democrats suggested that this $3.5 trillion “reconciliation” bill would include lowering the Medicare eligibility age, I believe this proposal is all but dead, without even much discussion – pro or con. However, a Medicare change that IS being discussed in earnest – namely, adding vision, hearing, and dental coverage to traditional Medicare – is running into some problems. Here, Senate Democrats want to include this proposal in the $3.5 trillion “reconciliation” bill, while House Democrats would prefer to spend the money that would otherwise be spent on these new benefits on (1) making the enhanced premium subsidies PERMANENT, and also, (2) creating a Federal Medicaid program in States that have NOT yet expanded Medicaid as called for under the ACA. On this latter idea – creating a Federal Medicaid program for hold-out States – again, this is something that House Democrats would like to see in the $3.5 trillion “reconciliation” bill, but it does NOT look like the Senate is on-the-same-page. Note, if this “expanded Medicaid proposal” does get legs, the proposal calls for allowing individuals below 100% of the Federal Poverty Level (FPL) to be eligible for the enhanced premium subsidies that are available through the ACA Exchanges until the Federal Medicaid program is stood-up and implemented in these hold-out States (which means there will be increased ACA Exchange enrollment for a temporary period of time, serving as a bridge to the Medicaid coverage).
- There are other proposals that the Biden Administration and Congressional Democrats would like to add to the $3.5 trillion “reconciliation” bill, including Climate Change Provisions and Immigration Reforms.
- Analysis: Regarding the Climate Change Provisions, Sen. Manchin (D-WV) has publicly raised some concerns about the need for the Federal government to subsidize the transition from fossil fuels to renewable/clean energy. While Sen. Manchin’s concerns will NOT bring down the House of Cards here, addressing Sen. Manchin’s concerns is certainly something that Democratic Leaders will have to address. Regarding Immigration Reforms, I have indicated to you before that based on my understanding of the “reconciliation” rules, and based on my understanding of the proposed Immigration Reforms, I am skeptical that these Reforms will be allowed to be included in the $3.5 trillion “reconciliation” bill. However, it really comes down to how the legislative language is drafted. If the legislative language is drafted properly, and the language can be shown to have a “direct” impact on government spending (for, for example, the proposed immigration-related programs) and a “direct” impact on tax revenue (because, for example, newly naturalized individuals will be paying taxes), then the Parliamentarian will be more inclined to green-light these provisions. However – as I have also explained to you in the past – there is a “reconciliation” rule that says: Even if a provision impacts spending or revenue, if the policy change is so significant that it outweighs the budgetary impact, this provision CANNOT be included in a “reconciliation” bill. It feels to me that the proposed Immigration Reforms will trigger the above stated rule, and I could very well see the Parliamentarian prohibiting the inclusion of the proposed Immigration Reforms based on this particular rule. Only time will tell whether I am right or am I wrong. BUT, irrespective of whether I end up being right, NOT including the Immigration Reforms in the underlying $3.5 trillion “reconciliation” bill will NOT bring down the House of Cards here either. What could crater the bill are any one of – or all of – the issues I discussed above, namely (1) The $3.5 trillion price tag; (2) The drug pricing reforms, or lackthereof; (3) The proposed tax increases; (4) The disagreement over a Federal Medicaid program vs. adding vision, hearing, and dental to traditional Medicare vs. making PERMANENT (or at least EXTENDING) the ACA’s enhanced premium subsidies. Sorry for saying it again, but I hope you now understand why I keep saying that this “reconciliation” exercise is going to be a mess. All “reconciliation” exercises are a mess. It’s not just this exercise.
President Biden Issues an Executive Order on COVID and Vaccinations
- As you know by now, on Thursday Sept. 9th, President Biden issued an Executive Order (EO) that spoke directly to the COVID pandemic and vaccine shots. The EO was met with surprise, glee, scorn…you had it all!
- Analysis: Mostly everyone is referring to the EO as “vaccine mandate.” From my perspective, it kind of is a mandate, but it also kind of isn’t. Here’s what I mean: First, I have said it before, and I will say it again, we all have to understand that an EO (issued by any President regardless of political party) does not have the force of law. Instead, an EO is a pronouncement of the Administration’s policy priorities. In many cases an EO is pure “messaging.” In other cases, the EO directs the Federal Departments to issue regulations/guidance (or to undertake enforcement actions) to effectuate the policy priorities articulated in the EO. In most cases, it’s a lot of both (1) “messaging” and (2) directing the Federal Departments “to do something” the effectuate what the President wants. Second, because an EO does NOT have the force of law, when the EO first comes out, there is a time-lag between (1) the pronouncement of the policy priorities/“messaging” and (2) the Federal Departments actually issuing tangible regulations/guidance effectuating the policy. So, for example, in the case of this EO and its so-called “vaccine mandate,” the Federal Departments have to issue regulations/guidance detailing how these suggested requirements will actually work in practice. That’s going to take some time. Even the White House acknowledged that regulations/guidance implementing the suggested requirements in the EO will NOT be issued “for a couple of weeks.”
Which leads me to my third point:
Is This a “Mandate”?
- I attempt to answer this question by breaking things down this way:
- The Federal Government as the Employer: As you know, the Federal government is itself an employer. As a result, the Federal government is permitted to tell its Federal government employees what they must do as a condition of employment. So in the case of this EO and this so-called “vaccine mandate,” the President is indeed “mandating” that every Federal government employee (and Federal contractors) MUST get a vaccine shot or disciplinary actions will be taken (like getting fired). Note, however, religious and disability-related exceptions to getting the vaccine will continue to apply.
- Private-Sector Employers that Receive Federal Funds: The Federal government is permitted to compel private-sector employers that receive some form of “funds” from the Federal government “to do something” as a condition of “contracting” with the Federal government to receive these funds. For example, a hospital contracts with Medicare and therefore receives government funds. Also, an education institution contracts with the Department of Education to receive government funds in the form of grants. In these cases, the Federal government is permitted to add a new condition to the contracts for receiving funds (e.g., the condition can say that employees must (1) get vaccinated or (2) get weekly COVID tests). If the private-sector employer here chooses NOT to abide by this new condition, then this private-sector employer will LOSE the government funds that they have been receiving. This is NOT a “mandate.” It is a financial “stick.” That is because in virtually all cases where a private-sector employer is receiving government funds, these private-sector employers are always going to agree to this new condition because they do NOT want to LOSE their government funds, and therefore, these private-sector employers will – like the Federal Government as an employer – require their employees to get vaccinated or face disciplinary actions. Unlike the Federal employees, however, these private-sector employers that receive government funds can allow those employees who still refuse the vaccine to get weekly COVID tests. Note, the religious and disability-related exceptions to getting the vaccine will continue to apply here.
- Private-Sector Employers NOT Receiving Federal Funds: In general, the Federal government CANNOT tell private-sector employers what they can and cannot do without some statutory requirement added to the law by Congress. Private-sector employers can, however, VOLUNTARILY comply with, for example, this so-called mandate and require their employees to (1) get vaccinated or (2) get weekly COVID tests. But again, unless there is some sort of statutory authority that the Administration can look to, the President does NOT have the authority to require private-sector employers that receive NO Federal funds “to do something.”
Having said all of that, there is an existing statute that governs OSHA, which gives OSHA broad authority to develop “emergency safety standards” in cases where a workplace possesses “recognized hazards that are causing or are likely to cause death or serious physical harm to employees.” In this case, the existing statute allows OSHA to issue an “Emergency Temporary Standard” in the form of formal guidance if OSHA determines that “employees are exposed to grave danger from exposure to substances or agents determined to be toxic or physically harmful…and that such emergency standards are necessary to protect employees from such dangers.” In this “Emergency Temporary Standard” guidance, OSHA is permitted to impose civil penalties (e.g., the $14,000 per violation that is being reported) on those employers that do NOT remedy their workplace that OSHA has determined possesses “recognized hazards that are causing or are likely to cause death or serious physical harm to employees.” Even if OSHA does have the statutory authority to develop and issue this type of “Emergency Temporary Standard,” this too is NOT so much of a “mandate.” Instead, it is a financial “stick.” I know, I know, you are probably saying, Chris, a financial “stick” is essentially a “mandate.” And, I won’t necessarily argue with you because ALL of us – including me – always referred to the ACA’s “individual mandate” penalty tax as a “mandate,” when actually – at-the-end-of-the-day – the “individual mandate” penalty was also a “financial” stick (i.e., you had to pay a penalty tax if you did NOT obtain some form of health coverage).
Will This So-Called “Mandate” on Private-Sector Employers NOT Receiving Federal Funds Ever Go Into Effect?
- That’s $14,000+ question.
- Analysis: I prefer to frame the question this way: Does the existing statute that governs OSHA give OSHA the proper authority to effectuate this so-called vaccine mandate outlined in President Biden’s EO? Based on my read of the statutory authority that OSHA will be relying on to “implement” (and put teeth to) the President’s suggested requirements, I am skeptical that a court of law green-lights OSHA’s guidance. In other words, I believe this OSHA guidance will NOT be allowed to apply to ALL private-sector employers NOT receiving Federal funds (that employ 100 or more employees). But again, you can never-say-never because the Supreme Court – where this is likely headed – might say that this so-called vaccine mandate on these private-sector employers NOT receiving Federal funds is OKAY. So where does that leave us? Again, an EO does NOT have the force of law. Sooooooo, for all of those employers and/or their service providers who are freaking out over this so-called vaccine mandate, you should take a deep breath. None of us know how OSHA is going to implement these suggested requirements (and if someone tells you that they do know, they’re lying). Also, OSHA’s “Emergency Temporary Standard” is NOT going to be coming out next week. I would be shocked if we saw something before Oct. 1st (but again, you can never-say-never). And lastly, if and when OSHA’s guidance comes out, I expect that it will be swiftly challenged in a court of law, and we would likely see some sort of preliminary injunction placed on the rules (meaning, private-sector employers NOT receiving Federal funds will NOT have to comply immediately) – OR – a District Court may invalidate the guidance, and even if a Circuit Court or the Supreme Court upholds OSHA’s guidance, it will take time to for that final decision to be rendered (again, meaning that private-sector employers NOT receiving Federal funds will NOT have to comply until they are told otherwise).