The health care law tries to control premium costs and insurer profits in the period between now and 2014 in two big ways: 1) it requires insurers to spent a certain percentage of their dollars on medical care and 2) it allows the Department of Health and Human Services to work with the states to disqualify insurers with outrageous rate hikes from participating in the exchanges.

But many health care policy wonks have warned lawmakers that that law does not go far enough in actually enforcing these rules and they argue that insurers will likely game the system. Already, Aetna and Cigna have announced that they plan to jack up rates in the short term and now, Consumer Reports is calling for an investigation into WellPoint in light of an electronic message the company sent “to investors describing how it would simply re-label administrative costs as ‘medical care’ in response to the new health reform law.”

In the March 17th message, WellPoint — the nation’s largest insurance company — announced that it has reclassified some of its administrative costs as medical spending in order to increase its medical loss ratio (MLR, a techinical terms which measures how much insurers spend on administrative spending v claims). The ratio is closely monitored by Wall Street investors and the new health reform law “requires that insurers spend at least 80% of customers’ premiums on medical care in the individual insurance market, and 85% in the employer/group market.” Here is how WellPoint put it:

“WellPoint’s (WLP) medical cost ratio should rise and its overhead-expense ratio decline this year as the insurer reclassifies various types of costs. Disease management, medical management and a nurse hotline, for example, ‘are being reclassified because they represent additional benefits provided to our members,’ representative says. They’ll now be part of the medical cost ratio, the percentage of premium revenue used to pay members’ health-care costs. These are claims-related costs incurred to improve member health and medical outcomes, WLP says. Accounting rules allow the changes, which better align MCR with anticipated health reform guidelines, Stifel Nicolaus says.”

Wellpoint is heavily invested in the individual health insurance market and has been among the most aggressive in opposing reform and skirting state regulations. In fact, the company has paid millions in fines for canceling individual health policies of pregnant women and chronically ill patients, illegally rescinding policies, denying prescription drugs to the elderly, and committing “serious violations that completely undermine the public trust in our healthcare delivery system.” In the fourth quarter of this year, net profits jumped to $2.74 billion from $331.4 million — mostly because the company sold a subsidiary — and CEO Angela Barly admitted that the company dramatically increased rates in the California individual health insurance market to ensure adequate profits. Meanwhile, the percentage of revenue spent on providing medical care, or medical loss ratio, “dropped to 82.6% from last year’s 83.6%.”

So while, WellPoint’s desire to skirt regulations may not come as a surprise, the story highlights just how vulnerable the MLR metric is to manipulation. As I noted here, establishing a medical-loss ratio still allows insurers to shift a disproportionate amount of premium dollars into profits. If anything, plans could pay more for certain services (to meet the benchmark), exclude certain benefits from coverage (benefits which would attract a sicker risk pool), or in the case of WellPoint, reclassify some administrative services as medical care and still meet the mark without necessarily providing more care.

As James C. Robinson points out in this Health Affairs article, “High ratios can be achieved either through a large numerator (high medical expenditures) or through a small denominator (low insurance premiums).” In 2007, for instance, 6 of the 7 largest publicly-traded health insurers reported that their profits increased by 10%, while their medical loss ratios also went up.

All of this suggests that regulators are going to have to be careful in how they define medical expenses and will need to “review the math on insurer medical loss ratios and premium calculations.”

Over at the National Review, Stephen Spruiell takes issue with my claim that providing employers with a subsidy for offering prescription drug benefits to their retirees and allowing them to deduct the credit, amounts to one of the more egregious examples of corporate welfare. He rightly points to this study from the Employee Benefit Research Institute, which finds that “it is cheaper for the government to subsidize a private plan than to pay for a retiree’s prescription drugs through Medicare Part D — even with the tax deduction factored in”:

At least some corporations are now likely to drop their retiree drug benefits and dump their retirees into the public system. So, when someone such as Igor Volsky asks why fiscal conservatives are not outraged by this bit of corporate welfare, the simplest answer is that this bit of corporate welfare actually saves taxpayers’ money.

If you click on that report you’ll see that EBRI does find that “for each retiree who loses drug coverage through an employer and gains it through Medicare Part D, the additional cost to the government would amount to $544.” But the report does not argue that eliminating the deductibility will force employers to drop their coverage.

Remember, the health care law only prohibits employers from deducting the subsidy; they’ll still receive the 28% credit. Companies will be encouraged to continue their prescription drug coverage but they won’t be able to profit from it. And despite all the dramatic pronouncements, it’s unlikely that eliminating the deductibility alone would push employers to dump their retirees into Medicare Part D in significant numbers.

In fact, I suspect that since the Congressional Budget Office scored this as a savings, their models suggest that the subsidy will provide enough incentive for businesses to retain their retiree coverage. Government will be able to avoid the financial burden of covering more seniors in Medicare Part D without allowing businesses to deduct taxpayer dollars.

A growing number of corporations are complaining about a provision in the new health care law that preserves the subsidy employers receive for providing retirees with prescription drug coverage, but prevents companies from deducting it from their taxes. And now, Republicans are taking up their cause.

Framing the news as a harbinger of future tax increases and higher health care costs, Republicans will argue that if corporations aren’t allowed to write off the money they receive from taxpayers, thousands of Americans will lose their jobs. As the Daily Caller’s Jon Ward reports, the GOP is seizing on business opposition to the provision to move its health care message “away from trying to repealing the bill and toward focusing on the law’s impact on businesses and jobs.”

“House Energy and Commerce Committee Chairmen Henry Waxman, California Democrat, has expressed skepticism about the corporations announcements, summoning them to testify April 21 about their complaints. But Republicans have begun to pounce on the announcements, using them with increasing frequency to build a case that the health bill is bad for the economy“:

“The president’s new health care law is already hurting our economy,” read a release from the office of House Minority Leader John Boehner, Ohio Republican.

The release cited “a long list of employers including AT&T, AK Steel, 3M, Caterpillar, Deere and Valero Energy that have felt an immediate squeeze because of ObamaCare’s job-killing tax increases and health-care cost hikes.”

Shocked by the passage of health reform, the party is now throwing its repeal rhetoric at anything that sticks. This provision is the worst kind of waste of taxpayer dollars and the most egregious form of corporate welfare, yet Republicans are seizing on it as an opportunity to paint health care reform as failure. “I think you’ll see Republicans probably get Democratic support to try to repeal this unless they remain immune to the idea that taxing companies into the tune of billions of additional dollars isn’t a job killer,” Rep. John Shadegg (R-AZ) predicted this morning on Fox News.

But this sounds unlikely. After all, lawmakers had ample opportunity to tweak the measure in the Senate Finance Committee and on the Senate floor. They chose not to. Moreover, is disingenuous for companies to suddenly complain about the charges, considering the change was a part of the draft bill that passed the Senate Finance Committee last year and several buisiness groups complained about it in September. Finance Committee aides “were in close talks with employer groups” and it ultimately won approval from many, with the chairman of Business Roundtable saying “it’s very closely aligned to [our] principles.” “They would come to us with a construct and explain how the constraints drove the policy, and we would try to suggest better ways to approach it,” said Neil Trautwein, vice president with the National Retail Federation.

All this is a roundabout way of saying that this provision is just a small example of responsible governance. Democrats chose to finance parts of health care reform by reducing wasteful government spending and eliminating the deductibility of the retiree drug subsidy presented an easy target. Now, the party of fiscal responsibility is outraged.

The health insurance industry announced yesterday that it would accept new HHS regulations clarifying that “children with medical problems can get coverage starting this year.” Insurers had previously said that the new law “does not require them to write insurance for the child and it does not guarantee the ‘availability of coverage’ for all until 2014,” when the majority of law’s provisions come into effect. But a a harshly-worded letter from Secretary Kathleen Sebelius seems to have pushed the industry to publicly accept the change.

This morning, Press Secretary Robert Gibbs announced the industry’s stance in a tweet:

@PressSec: Kids 1, insurance 0 as companies agree to comply with new regs so kids with pre-existing conditions can get health ins http://bit.ly/dBkN48

Now clearly Gibbs didn’t want it to come off this way, but a glib, sarcastic tweet directed at the insurance companies isn’t the best course of action right now. Insurers never opposed the new regulations as long as lawmakers understood that covering children with pre-existing conditions would increase premiums and at least two large insurers — Aetna and Cigna — have already acknowledged that they will raise rates in anticipation of the new reform. The law’s rate review provisions may prevent the most egregious increases, but they won’t make premiums any more affordable.

The reality is, the administration will have to rely on insurers (and state insurance commissioners) to implement reform’s many provisions, including the all-important consumer protections. And while I’m not suggesting that a more conciliatory tone would override the insurers’ profit incentives, purposely antagonizing the industry certainly does not increase the chances that it will work effectively to increase access to coverage and adopt cost containment policies.

As I argued here, the administration was right to criticize insurers in an effort build political momentum for passing health care reform. But now that reform is reality, lawmakers will have to turn to work with the industry to enact the measure. The bill Obama signed isn’t strong enough to allow the administration or anyone else to just blow off the industry; it relies on insurers to make the whole thing work.

If Sen. Harry Reid’s (D-NV) home state of Nevada sued the federal government over the health care bill he helped write and pass, it would make a difficult re-election campaign even more challenging. But thankfully, Nevada’s Attorney General Catherine Cortez Masto has informed Governor Jim Gibbons that the current Florida-led effort to invalidate the health care law clashes sharply with Supreme Court precedent.

I’ve criticized the Florida lawsuit for failing to demonstrate that the Supreme Court actually agrees with their interpretation of the constitution, but Masto doesn’t pull any punches. This, in other words, is probably what an actual discussion of the state of law looks like:

One theory to consider is that Congress lacks authority under the Constitution’s Commerce and Spending Clauses. However, the authority give to Congress is extensive and appears strong enough to support the Act. Health care costs affect our nation’s economy, and the Act is Congress’ answer to alleviating those costs. The United States Supreme Court long ago determined that insurance is commerce and is therefore subject to federal regulation. United States v. South-Eastern Underwriters Ass’n, 322 U.S. 533 (1944). Since the 1930s and the “long-rejected Louchner-era precedents,” MeadWestvaco Corp. ex rel. Mead Corp. v. Illinois Dept. of Revenue, 553 U.S. 16, 128 S.Ct. 1948, 1510 (2008) (Thomas, J. concuring), Congress’ broad authority has been acknowledge to, among other things, uphold mandatory contributions to the Social Security Act system, Helvering v. Davis, 301 U.S. 619 (1937), and legislate many other federal programs.

The letter also notes that the lawsuit “would not come without a cost” — as Florida has hired a pricey Washington DC firm to handle the case — and argues that “it would be disingenuous for our state to make the argument that Congress does not have the authority to regulate health care under the Act” after the state “used the legal tools that Congress gave us under the Sherman Antitrust Act and the McCarran-Ferguson Act” to challenge a proposed acquisition of Sierra Health Services by UnitedHealth Group.

Other attorneys general have also refused to join the frivolous Florida lawsuit. Kentucky Attorney General Jack Conway told the Hotline last week that he will not “waste taxpayer dollars on a political stunt” and Ohio Attorney General Richard Cordray has said that the suit has “no legal merit” and would needlessly tie up the resources of his office. Similarly, Arizona Attorney General Terry Goddard issued a statement arguing that the “lawsuits have little merit and that participating in them would be a waste of scarce taxpayer dollars.”

Mitt Romney must have been squirming as he saw President Barack Obama defending the bipartisan nature of the new health care bill by citing its similarities with the 2006 Massachusetts reform. “I think that’s unfortunate because when you actually look at the bill itself, it incorporates all sorts of Republican ideas,” Obama said this morning on the Today Show:

OBAMA: I mean a lot of commentators have said this is sort of similar to the bill that Mitt Romney, the Republican governor and now presidential candidate, passed in Massachusetts. A lot of the ideas in terms of the exchange, just being able to pool and improve the purchasing power of individuals in the insurance market.”

Watch it:

It was as if Obama had taken a page from Romney’s own ever-evolving health care stump speech. Just yesterday, during an event in Iowa, Romney — who has previously argued that the Massachusetts and the federal health reform are “as different as night and day” — proudly acknowledged that his bill included a set of new insurance regulations that “President Obama always likes to talk about in his health care plan.” “Overall, ours is a model that works,” he said, before noting, “We solved our problem at the state level. Like it or not, it was a state solution. Why is it that President Obama is stepping in and saying ‘one size fits all?”

Romney’s rhetorical question aside — Obama proposed federal legislation because that’s what presidents do — his newest position highlights the awkwardness of his predicament. On one hand, Romney needs to bolster his can do image by arguing that the individual health insurance mandate, affordability credits, standard benefit package requirements, government-run exchanges and Medicaid expansion (elements of his health care reform) have improved the system. But to retain the conservative base, he is also claiming that these successful policies should not be exported to other states. Rather than building on success, lawmakers should implement a completely untested set of policies that would deregulate insurance markets and help states adopt reforms that are completely different from Massachusetts’ large risk pool approach.

This argument simply doesn’t make any sense and I suspect that primary challengers will ultimately force Romney to walk away from his own health care law. He could argue that the legislature changed his original proposal — Romney vetoed 8 sections of the Massachusetts bill — but if he does, he’ll have a hard time explaining why he called the final package “exactly what we’d hoped for’’ at the signing ceremony.

The Medicare Part D legislation gives subsidizes of about $1,300 per retiree per year to businesses that provide prescription drugs to their retirees and permits companies to deduct the value of credit. Lawmakers hoped that the policy would prevent employers from ending their retiree drug plans and moving everyone into Medicare.

The new health care law, however, pays for itself by eliminating waste in the system and it closes this particular double dipping provision. Companies would still receive the tax-free subsidy, but they’ll no longer be able to deduct it. And they’re angry. Proving that it is hard to take away what’s already been given, large corporations are mounting a public relations campaign to preserve the deduction. In a series of — what seem like coordinated — press releases, AT&T, Catepillar and John Deer, among others, have announced that the revision would cost them billions of dollars and an association representing 300 large corporations is is now urging Congress to fix the change:

AT&T announced last week that it was taking a $1 billion charge because of the provision. Deere & Company announced a $150 million charge, Caterpillar a $100 million charge, and 3M a $90 million charge.

Many companies said they were taking these charges now, before the current quarter ended, to comply with accounting rules. But some corporate critics asserted that the companies’ rapid response to the health legislation was aimed at pressing the administration to repeal the provision. James A. Klein, the president of the American Benefits Council, called the provision “a serious mistake that is having negative and unintended consequences.”

The charges, however, are “noncash,” meaning companies don’t have to write a check for a billion dollars. As the WSJ explains, “since companies had created an asset based on the expectation they would be getting these deductions over the lives of their current and future retirees, they say they need to take a charge reflecting the fall in the asset’s value.” The money at stake for each company is not all that much in annual terms, and the change doesn’t kick in until 2013.

In more general terms, conservatives who are trying to use this story as a way to drum up opposition to health care reform or suggest that other tax hikes for businesses are just around the corner, should ask themselves if they would be expressing similar outrage if the law prevented welfare recipients from deducting the cost of their checks. It seems to me that this is precisely the kind of wasteful spending that advocates of responsible use of tax dollars should support. But as always, they’re nowhere to be found.

The Los Angeles Times’ David Savage reports that the 14 states that are suing the federal government over the individual requirement to purchase health care coverage (among other provisions) will have a hard time overcoming the current state of American jurisprudence. In 2005′s Gonzales v. Raich, for instance, the Supreme Court upheld federal restrictions on home-grown marijuana in California and even conservative justice Anthony Scalia “joined a 6-3 ruling that said Congress could regulate marijuana that was neither bought nor sold on the market but rather grown at home legally for sick patients.”

From Scalia’s concurrence:

The regulation of an intrastate activity may be essential to a comprehensive regulation of interstate commerce even though the intrastate activity does not itself “substantially affect” interstate commerce. Moreover, as the passage from Lopez quoted above suggests, Congress may regulate even noneconomic local activity if that regulation is a necessary part of a more general regulation of interstate commerce. See Lopez, supra, at 561. The relevant question is simply whether the means chosen are “reasonably adapted” to the attainment of a legitimate end under the commerce power.

“In my view, there is a less than 1% chance that the courts will invalidate the individual mandate,” said George Washington University law professor Orin Kerr, a former clerk to Justice Kennedy. This less than 1% chance is certainly receiving more than its share of media attention and conservatives across the country are shamelessly exploiting the completely improbable possibility of repeal to win re-election.

The Attorneys General who have filed these cases did so in their capacity as politicians, not lawyers. Any credible lawyer understands that one’s personal opinion about the constitutionality of reform is irrelevant; the only think that matters is how the Supreme Court has interpreted the document. Or, as Matt Yglesias told me the other day, “it’s fun to talk about what the constitution ‘really’ says, but competent lawyers mostly focus on what the actual state of law is.”

And in the case of health care reform and the individual mandate, the Supreme Court has ruled since the 1930s that the federal government has the power to regulate economic activity (like the purchase of health care coverage). The sooner conservative lawmakers come to terms with this reality, the faster they can redirect the money they’re spending on frivolous lawsuits into funding their share of health care reform.

On Sunday, Sen. Lindsey Graham (R-SC) suggested that the Republican effort to repeal health care reform will dominate the 2010 midterm elections, state government and “every statehouse in the nation“:

SEN. GRAHAM: It is good to repeal the cuts in Medicare and to repeal the, the massive tax increases and replace it with opportunities to buy insurance in the private sector without cutting Medicare and raising taxes and using budget–Ponzi schemes like the Class Act. Yes, there’s a way to do that. And 16 million people are dumped into Medicaid. My state is going to get killed by having to serve more Medicaid people; it’s going to hurt state budgets. Finally, this fight won’t wind up being just in Washington; it’s going to spread to every statehouse in the nation, and we’re going to have referendums on this bill through every statehouse in the nation. Can the states afford what Washington did to them?

This kind of rhetoric receives a lot more attention that it deserves, although I’m sure that after the media’s hyper focus on the political process and blow by blow coverage of the repeal theatrics, it’s become difficult to remember why repealing health care reform would be such a bad idea.

So let’s start with the Medicaid expansion complaint. Yes, the federal legislation requires states to expand their Medicaid programs to 133% of the federal poverty line. But states have four years to open up their programs and the federal government will fully fund the expansion for two years. Thereafter, the federal government contribute will decrease every year until 2020, at which point the federal government will fund 90% of the expansion. States will have to pay more to provide the newly eligible population with coverage, but they’re not hung out to dry. To the contrary, they’re saving dollars by insuring Americans that would otherwise end up in emergency rooms and receive far more expensive uncompensated treatment.

Remember, Medicaid is a voluntary program. States do not have to participate at all. (Arizona didn’t join Medicaid until 1982.) The fact that all 50 states do, however, suggests that the allure of federal dollars and the need to alleviate employers and the state form the pressures of shouldering the burden of health care costs — is substantial.

In fact, as one reads through the new law, it’s difficult to see how pulling out of a program that provides state residents with affordability credits and new insurance protections is politically viable. Sure, sates will have to contribute to financing health reform, but on the whole, reform does far more good than harm. Here is Families USA’s very helpful set of reports for how the new health care law will help residents in all 50 states.

Last Tuesday, CIGNA CEO David Cordani told Neil Cavuto that health care premiums will continue to increase despite the new health care law and now, Aetna CEO Ron Williams tells Charlie Rose that his company also plans to jack up rates:

ROSE: Will insurance premiums go up?

WILLIAMS: The answer is yes, and some of the things that will drive those premiums are significant additional taxes the industry will ultimately have to pay in the first year.

ROSE: The President said that this bill would not have any impact on people who already had coverage, that it was about the uninsured, that there would be no change. Will this legislation change the coverage of people who are already paying for it?

WILLIAMS: My perception is, yes, things will change. You might not have a plan that includes the exact same doctors. You might have plans that have richer benefits, and therefore you’re going to pay more for benefits you may or may not want. It would have been a better message to say, we’re going to make certain you maintain your eligibility.

It’s interesting to hear Williams blame any future premium increases on the new taxes on the insurance industry. These guys are always acting like they have no say in how much they increase premiums, no matter how much the increases outpace medical inflation or how well the company is doing in terms of profits and CEO compensation. But Williams’ statement is particularly galling because the health care law does not actually impose any taxes on insurance issuers until 2014 — almost four years after the law goes into effect. Insurers argued that imposing the taxes immediately would lead to higher premiums and Democrats pushed them back to 2014 to avoid any steep rate hikes.

But, CIGNA and Aetna are both suggesting that they will still increase premiums in anticipation of the new insurance regulations and if Democrats don’t pass some serious rate control reforms, it’s unlikely that the health care law will grow in popularity. Peter Harbage has some ideas for how to do that here.

Robert Pear has a good article in today’s New York Times outlining some of the challenges of implementing all of the regulations in the new health care reform law. One of the first shoes to drop, so to speak, is the loophole that would allow insurers to deny coverage to newly insured children with pre-existing conditions. This reality stands in contrast to how Democrats and the President described the provision. Reformer advocates, including yours truly, had argued that the new health law would prohibit insurers from denying coverage to children with pre-existing conditions six months after the law is enacted. The actual text of the legislation, however, only prohibits insurers from denying coverage for pre-existing conditions to kids who are already insured; uninsured children could still be denied coverage until the exchanges and most of the insurance reforms are operational in 2014. From Pear’s write up:

The authors of the law say they meant to ban all forms of discrimination against children with pre-existing conditions like asthma, diabetes, birth defects, orthopedic problems, leukemia, cystic fibrosis and sickle cell disease. The goal, they say, was to provide those youngsters with access to insurance and to a full range of benefits once they are in a health plan. To insurance companies, the language of the law is not so clear.

To clarify their intent, the Department of Health and Human Services will close the loophole by issuing regulations “making it clear that the term ‘pre-existing exclusion’ applies to both a child’s access to a plan and to his or her benefits once he or she is in the plan.” The regulations will depart from the exact language of the law and could be vulnerable to a legal challenges, but most health care experts I’ve spoken to are fairly confident that the new rules would pass the so-called Chevron test — named for a Supreme Court decision which found that federal agencies hold broad authority in interpreting statues as long as that interpretation is found to be reasonable.

Insurers will likely accept the new rules and simply increase premiums as a result. They’ve spent the last year cleaning up their image and certainly don’t want to be caught in a nasty public relations battle in which they’re on the side of denying health care coverage to sick children. After all, they’re for new insurance regulations as long as they’re paid for by the beneficiary.

Thus, parents with children suffering from pre-existing conditions might have to do a bit of cost-comparison shopping to decide if it’s cheaper to purchase a family plan in the individual health insurance market or buy coverage for their children in the new national high risk pool program. That program is scheduled to begin in less than 90 days and is open to individuals who have “not been covered under creditable coverage” “during the 6-month period prior to the date on which such individual is applying for coverage through the high risk pool.” The high risk pool will adopt rate limits that that vary based on geographic location and may prove provide an affordable option for some families.

As I note here, implementing the new health care reform law will provide conservatives with plenty of opportunities to fear monger about health care reform, but this new scandal about Congressional staffers being exempt from enrolling in the exchanges certainly isn’t one of them. Currently, the health care law requires members and their staff to participate in the new health insurance exchanges, but Republicans are claiming that Democrats purposely excluded senior committee staffers from the mandate and will propose legislation to close the loophole:

Rep. Michael Burgess (R-Texas) announced Thursday in a “Dear Colleague” letter that he would be introducing bicameral legislation with Sen. Chuck Grassley (R-Iowa), who tried to attach a similar amendment to the reform act and the reconciliation bill. The legislation would require all Congressional staffers — and top White House officials — to buy their health plans through state-run exchanges created in the act. Currently, the reform act could be interpreted to only require Members and the staffers in their personal offices to enter the exchange, according to a Congressional Research Service memo.

“Many of my colleagues and I believe that the expansion of government control over health care was the wrong approach to take,” Burgess, who is an obstetrician, writes in the letter. “Regardless, if Congress has decided it is the right thing for our constituents, then all Members and staff, as well as the President, Vice President, and political appointees, should be mandated to be covered by plans operating in an exchange.”

I (along with Dr. Mandy Mandy Krauthamer) once debated Burgess about health care reform and for the most part, we decided that he’s a fairly thoughtful individual. So this push to strengthen the requirement (see, Republicans do love mandates!) that staffers enroll in a state-based exchange is really beneath him. First of all, the offending language was drafted by Sen. Tom Coburn (R-OK) and incorporated into the bill during the HELP Committee’s mark up of reform legislation. Democrats accepted the amendment because they thought it would demonstrate how sincere they were about their efforts, but I remember thinking that the whole thing came over as a cheap political stunt. And I still do, particularly since Republicans are now exploiting their own legislative incompetency to manufacture another scandal.

This health care law is incremental and while it provides the insured with greater security, it’s not intended to separate employees from their employer-based coverage. Congressional staffers, like all federal employees, already participate in FEHBP, the exchange that inspired these exchanges and (were it not for this requirement) could enroll in the exchanges once they open to large employers. So this particular loophole scandal is something Republicans manufactured to hold them over until they find something else to sink their teeth into.

Yesterday, Sen. Chuck Grassley (R-IA) admitted that he supported the individual mandate before he realized it was unconstitutional and now, Sen. Orrin Hatch (R-UT) has conceded that he too endorsed a policy that would have allowed the government “to tell you what you have to buy, even if you don’t want to buy it.” In 1993, Hatch, along with 20 other GOP senators — including Grassley, Bennett, and Bond — introduced a health care plan that would have required everyone to buy coverage, capped awards for medical malpractice lawsuits, established minimum benefit packages and invested in comparative effectiveness research. It was, in other words, a plan to “erode liberty.”

Last night, and then again this afternoon, Hatch was pressed on his past support for the 1993 proposal. What’s changed, CNN’s Campbell Brown and MSNBC’s Andrea Mitchell both wanted to know. Like Grassley, Hatch couldn’t come up with a very good answer. In 1993, Republicans hastily proposed the unconstitutional measure to fend off HillaryCare; nobody even understood the implications of the alternative policy, Hatch explained:

HATCH: Well, it really wasn’t. We were fighting Hillarycare at that time. And I don’t think anyone centered on it, I certainly didn’t. That was 17 years ago. But since then, and with the advent of this particular bill, really seeing how much they’re depending on an unconstitutional approach to it, yea, naturally I got into it, got into it on this issue.

Watch it:

Hatch was one of the first lawmakers to argue that the individual mandate was unconstitutional — railing against the provision during the Senate Finance Committee’s mark up of — and his conversion highlights the radicalization of the Republican party and the frivolous nature of the mandate challenges. The point has been made before that the health care law Obama signed on Tuesday resembles the 1993 Republican alternative and is far more conservative than anything Ted Kennedy or even Bill Clinton proposed in the past. The fact that Republicans are willing to embarrass themselves by walking away from ideas they’ve championed reveals everything you need to know about the sincerity of their present campaign.

Last night, in a vote of 220-207, the House of Representatives passed the Reconciliation Package of 2010, officially ending a legislative battle that has engrossed Congress for the better part of the last 17 months. President Obama is expected to sign the amendments to the health care law in the next several days and the work of health care reform now moves to the states and the various federal agencies charged with translating the bill’s 2,000+ pages into enforceable regulations.

I tried to outline what Congress can do to fine tune the bill here, but health reform faces more immediate implementation challenges. As Henry Aarons reminded us in this NEJM piece, the war isn’t over. “Passage of health care reform legislation is a cause for celebration. But supporters must not relax. They should prepare to meet the serious challenges that remain. If those challenges are not recognized and surmounted, health care reform could go the way of the Medicare Catastrophic Coverage Act of 1988“:

That bill, enacted with almost self-congratulatory enthusiasm, provoked vociferous resistance from some observers and was repealed 16 months later. If supporters of the current reform meet the remaining challenges, its course could instead resemble that of the Medicare drug bill, which was widely regarded as a case study in efficient and effective implementation.

Already, lawmakers have identified a loophole in one of the interim benefit provisions. In six months, the new law will prohibit insurers from refusing to cover pre-existing conditions as long as the child is already covered, but could allow insurers to refuse new coverage to children because of a pre-existing medical problem. HHS Secretary Kathleen Sebelius has promised to address the problem with new regulations, but it’s unclear if the protection would be in place once the benefit kicks in. Many other immediate challenges lie on the horizon:

- Establishing high risk pool program: In the next 90 days the government will have to implement a federally funded program to cover people turned down by private insurers because they have a pre-existing medical condition. But as Kaiser Health News points out, many questions remain — How much will the coverage cost? Will enrollees have a choice of plans? What medical services will be covered? What hospitals and doctors and other health care providers will participate in the networks to be created? How will the new entity interact with already established state-run high-risk pools?

- Administering small business tax credits and temporary reinsurance program: The government will provide tax credits to small employers with no more than 25 employees and average annual wages of less than $50,000 that provide health insurance for their employees. It will also have to establish a new program that will provide temporary reinsurance for employers providing health insurance coverage to early retirees between the ages of 55 and 64.

- Preventing insurers from dramatically increasing premiums: The government will have to create a process for reviewing increases in health plan premiums and requiring plans to justify increases. HHS will also have to establish a process for making recommendations to states about whether certain plans should be excluded from the Exchange based on unjustified premium increases.

And those are just some of the challenges for 2010. As we move forward many health policy wonks worry about the effectiveness of the state-based exchanges in regulating insurers and providing guidance to confused customers. Some fear that crafty health insurance executives will lure younger and healthier consumers into the less-well-regulated individual health insurance market, causing the exchanges to become populated with poorer and sicker Americans. Others argue that state-based regulators — many of whom oppose reform — will fail to effectively regulate insurers and render many of the law’s new consumer protections meaningless. There is concern that the individual health insurance mandate won’t bring enough people into the system. Free riders will continue to exploit the guarantee issue provisions to purchase coverage only after they become sick and insurance rates will continue to skyrocket.

So the road ahead will be full of speed bumps and sharp turns, and this blogger will try his best to track the progress of implementation piece by piece. After all, “[f]ar from having ended, the war to make health care reform an enduring success has just begun. Winning that war will require administrative determination and imagination and as much political resolve as was needed to pass the legislation.”

The new health care law prohibits women from using premium affordability tax credits or cost-sharing payments to pay for abortions but also reinforces states’ ability to prohibit insurers from providing any form of abortion coverage within the exchange. On Monday, before President Obama even signed the the Senate health care bill into law, a Missouri Senate committee voted 5-1 to advance a bill that would deny insurers the right to offer abortion coverage in any government exchange.

Missouri is one of only 5 states that already prohibits abortion from being included in private insurance packages and requires women to purchase a separate abortion rider. SB747 would deny women the right to purchase a rider within the exchanges:

Under current law, health insurance policies are barred from providing coverage for elective abortions except through optional riders. This act extends this prohibition to health insurance policies offered through any health insurance exchange established in this state or any federal health insurance exchange administered within this state. In addition, no health insurance exchange operating within this state may offer coverage for elective abortions through the purchase of an optional rider.

If the law passes the Senate and the House and is signed by Governor Jay Nixon (a Democrat with a mixed record on choice) women would only be able to purchase an abortion rider in the unsubsidized (but newly regulated!) individual health insurance market. Planned Parenthood lobbyist Michelle Trupiano tells the AP that it’s rare “for Missouri women to be able to purchase an insurance policy addition for abortion coverage. So they often pay the full cost of an abortion, which she said is about $500 for a first-semester pregnancy.” Should this bill become law, women in the exchanges, (particularly poorer women) would have “no options for abortion coverage.”

Sen. Chuck Grassley (R-IA) — the ranking member of the Senate Finance Committee — supported the individual mandate in 1993, when he, along with Sen. John Chafee (R-RI), proposed an alternative to President Bill Clinton’s health care initiative that required every American to purchase health insurance coverage. He supported the mandate when he co-sponsored the Wyden-Bennet health care plan in 2007. And he endorsed the policy again in June of 2009, when he told Fox News Sunday’s Chris Wallace that there was bipartisan agreement that individuals should take responsibility for their own health care costs. But as the Senate Finance Committee prepared to release its health care bill, Grassley started arguing that the mandate is an “unprecedented” intrusion into the rights of the individual. In September of 2009, Grassley said that he was “very reluctant to go along with an individual mandate” since it would impose “a federal penalty against people who don’t have health insurance.”

Well today, MSNBC’s Andrea Mitchell asked Grassley about his evolving position. The senator admitted that he had supported the mandate in the past, before he knew it was unconstitutional:

GRASSLEY: If it was unconstitutional today, it was unconstitutional in 1993, but I don’t think anybody gave it much thought until three or four months ago when you start looking at what constitutional lawyers say about it because constitutional lawyers wouldn’t have been looking at the mandate for health insurance until it became an issue and it just became a issue lately. And so I think that’s the legitimacy of it being considered unconstitutional.

Watch it:

This is a fairly silly argument, particularly because constitutional lawyers believe that the health care mandate is as constitutional today as it was in 1993. “The mandate is lawful and clearly so,” this American Constitution Society brief argues, “pursuant either to Congress‟ authority to “regulate commerce among the several states,” or to its authority to “lay and collect taxes to provide for the General Welfare.”

In fact, even Mitt Romney (sometimes) agrees. Here he is Tuesday night describing the mandate in his Massachusetts reform plan as the ultimate conservative principle: “[R]ight now in this country, people that don’t have health insurance go to the hospital if they get a serious illness, and they get treated for free by government. My plan says no, they can’t do that. No more free riders. People have to take personal responsibility. I consider it a conservative plan.”

This afternoon, in a vote of 56-43, the Senate passed a package of fixes amending the bill President Obama signed into law on Tuesday. The reconciliation package now goes back to the House for a second vote later tonight, after Senate Republicans succeeded in slightly changing several technical provisions. In fact, a GOP aide acknowledged to Roll Call that the changes are largely inconsequential,” and admitted that Republicans were trying to force Democrats to cast “dozens of difficult votes.” The aide indicated that Minority Leader Mitch McConnell (R-KY) had been confident the parliamentarian “would rule in his favor throughout the vote-a-rama and kept the points of order in his back pocket until late in the evening to ensure Democrats made tough political votes.”

Indeed, during the more than 20 hours of debate, conservative senators proposed a myriad amendments designed to sink the package, some of them not even germane to the actual bill. Sen. David Vitter (R-LA), in a throwback to an earlier effort that was ruled unconstitutional, introduced an amendment that would bar all federal funding for ACORN, which is already set to dissolve due to lack of funds. Sen. Tom Coburn (R-OK) proposed an amendment to deny erectile dysfunction drugs to sex offenders. Sen. Bob Bennett (R-UT) introduced an amendment that would require a public referendum in Washington, DC on same-sex marriage even though the DC government put it into law.

These distractions, however, shouldn’t take away from the importance of the accomplishment. While these fixes pale in comparison to the historic nature of the underlining Senate bill, the package of amendments — collectively known as the Reconciliation Act of 2010 — will make insurance more affordable for middle class families, completely close the Medicare Part D doughnut hole for seniors, strengthen the employer responsibility provisions, and move up the implementation date on the excise tax. It may not be everything progressives had hoped for, but it only strengthens the foundation for future reforms.

And of course, much remains to be done. Majority Leader Harry Reid (D-NV) has promised to hold a vote on the public health care option as a stand alone measure and there could be some interest in implementing Sen. Dianne Fienstein’s (D-CA) national rate review authority to prevent insurers from jacking up rates between now and when the exchanges become operational. Moreover, Congress is going to have to tackle the Sustainable Growth Rate formula (aka doc fix) before the next round of cuts on October 1st and will likely introduce legislation to increase Medicaid reimbursement rates to Medicare levels beyond 2014, to ensure that the newly insured enrolled population has adequate access to doctors.

Lawmakers will have to tweak reform in years to come, but for the millions of Americans without coverage and for those struggling to afford their premiums, things will begin to finally change.

Since the House passed health care reform on Sunday, Democratic lawmakers who voted for the bill have received death threats and been victims of vandalism. Vandals struck the Tuscon office of Rep. Gabrielle Giffords (D-AZ), the Monroe County Democratic Committee headquarters in upstate New York, Rep. Louise Slaughter’s (D-NY) Niagara Falls office, the Knox County Democratic headquarters in Ohio, and the Sedgwick County Democratic Party headquarters in Wichita, KS. Majority Whip James Clyburn (D-SC), the highest-ranking black lawmaker in the House, has said “he received an anonymous fax showing the image of a noose” and authorities in Virginia are investigating “a cut propane line” at the home of a brother of Rep. Tom Perriello (D-VA).

Republican leaders have condemned these incidents, but on Tuesday, Sarah Palin seemed to fan the flames of discontent by labeling a map of vulnerable lawmakers’ districts with crosshairs on her Facebook page and tweeting, “Commonsense Conservatives & lovers of America: “Don’t Retreat, Instead – RELOAD!” This morning, NBC’s Ann Curry asked Sen. John McCain (R-AZ) if he believed his former running mate should use less “incendiary” language. McCain condemned any violence but bristled at the suggestion that her use of such violent imagery was inappropriate in light of the atmosphere of threats against lawmakers. “Those are fine. They’re used all the time,” he said:

MCCAIN: Ann, I have seen the rhetoric of targeted districts as long as I’ve been in politics. Please. This is — any threat of violence is terrible, but to say that there is a targeted district or that we “reload” or go back in to the fight again, please….Those are fine. They’re used all the time… Those words have been used throughout of my political career…That rhetoric and kind of language is just part of the political lexicon. [...]

CURRY: I think it is the “reload” and “crosshairs” that’s caused a lot of people to be concerned, Senator.

MCCAIN: Maybe it has and we condemn any violence, any threats of violence. But I’ve heard all of that language throughout my political career…that anger should be channeled into voter registration and go continue the struggle that we’re in to regain America and stop mortgaging our children’s futures.

Watch it:

The targeted lawmakers, feel differently, however. Asked if he thought Republicans were doing enough to condemn the violence, Perriello criticized the GOP for not drawing a stronger distinction between people who “commit violence” and simply oppose health care reform. “People who are doing these things that are clearly outside the law…these people need to be prosecuted, not simply brought into the campaign room.”

“I think people have to be conscious of the things that they say.” “We should all be able to agree, whether you are a political leader or TV personality or whatever, that simply saying, this is absolutely unacceptable to harm or threaten to harm a member of their family. This isn’t a partisan thing. This is just a basic American value. I hope we will get stronger and clearer statements up here of that to make sure that that signal is very clear,” he said.

Kentucky Attorney General Jack Conway announced yesterday that “he will not file a lawsuit against the federal government in trying to refuse the legislation.” “I do not intend to use my authority as Kentucky Attorney General to sign our Commonwealth onto a health care lawsuit against the federal government, because I will not waste taxpayer dollars on a political stunt,” Conway said. “Trey Grayson’s gimmick may be good ‘tea party’ politics, but it’s based on questionable legal principles,” Conway said, referring to the Secretary of State’s request that he file a lawsuit.

I think this is an important point. The 13 or so attorneys general who are suing the government to exempt their states from the health law’s individual requirement and Medicaid expansion provisions are doing so in their capacity as elected politicians, not lawyers and the sooner we all stop pretending that their lawsuits are grounded in a serious legal interpretation of the constitution, the better. At least 4 of the 13 AGs are running for higher office (either Governor or Senator) and the rest are up for re-election. Their suits are designed to rally political support, not lay down new legal doctrine.

I’m no lawyer, but the fact that the Florida suit doesn’t contain any references to past Supreme Court decisions or legal precedent suggests that it’s frivolous. The 22-page lawsuit reads like a Republican manifesto and doesn’t site examples of when the courts have agreed with the AG’s legal interpretations:

- The Act represents an unprecedented encroachment on the liberty of individuals living in the Plaintiffs’ respective states,

- The Act contains several unfunded mandates that will cost state governments significantly.

- Further, the Act converts what had been a voluntary federal-state partnership into a compulsory top-down federal program in which the discretion of the Plaintiffs and their sister states is removed.

More importantly, as Sen. Ron Wyden (D-OR) points out, the health care law already allows states to “go out and do its own bill, including having no individual mandate” as long as “they can meet the coverage requirements of the bill.” “Why don’t you use the waiver provision to let you go set up your own plan?” the senator asked those who threaten health-care-related lawsuits. “Why would you just say you are going to sue everybody, when this bill gives you the authority and the legal counsel is on record as saying you can do it without an individual mandate?”

Former Massachusetts Governor Mitt Romney had a very uncomfortable interview with Larry King last night, in which he again struggled to explain how the Senate health care bill was different from the legislation he signed into law in 2006. Romney described majority rule as an “unconscionable abuse of power,” referred to insurance regulations as “maraschino cherries on top of a pile of dirt” and failed to come up with a convincing answer about Don’t Ask, Don’t Tell.

In the end, Larry King looked like Tim Russert, while Romney seemed desperate to shore up his conservative credentials and defend his Obama-like accomplishment:

Watch a compilation:

The Washington Posts’ Greg Sargent notes Romney’s strong endorsement of the individual mandate, but it’s also worth pointing out that he still can’t decide if the mandate is constitutional. His position is difficult to define:

1. He signed a law that requires everyone in Massachusetts to purchase health care coverage and regularly cites the states 98% insurance rate during media appearances. In this interview, he describes the approach as “conservative.”

2. He believes that the 13 states suing the federal government over the constitutionality of the individual mandate have a legitimate case and wants to repeal the Senate bill, which includes the mandate.

3. He refuses to say if he thinks the individual mandate in the Senate bill is constitutional and does not mention the policy on his website.

In other words, he believes that requiring all Massachusetts residents to purchase coverage is “conservative” since it tells people they “have to take personal responsibility” for their health rather than “go to the hospital if they get a serious illness, and they get treated for free by government.” But requiring all Americans to purchase coverage, however, is intrusive and probably unconstitutional. Got that?