What is Reconciliation?

Perhaps you recall hearing the term “reconciliation” earlier this year when Congress was fired up to repeal the ACA. Well, reconciliation is making a comeback as GOP leadership attempts to pass the 2018 federal budget and then ram through a partisan tax code overhaul.

Together, these measures would benefit the wealthy and profitable corporations, while cutting trillions of dollars in investments made in the states through a broad range of basic public services, assistance for low- and moderate-income Americans, and health care.

While both the House and Senate budget resolutions include deep cuts to SNAP, Medicare and Medicaid, the budget is a non-binding resolution and still requires appropriation bills and other measures to put in place these cuts. However, the budget resolution does set up the mechanism for reconciliation as a way for Congress to “fast track” legislation.

Created by the Congressional Budget Act of 1974, reconciliation allows for faster-than-usual consideration of certain tax, spending, and debt limit legislation. In the Senate, reconciliation bills can’t be held up by filibuster and the scope of amendments is limited under a 20 hour cap, which gives this process serious advantages for enacting controversial budget and tax measures. The Senate can pass a reconciliation bill with just 51 votes.

This reconciliation process permits Congress to enact the federal budget resolution’s program cuts with only a simple majority in the Senate — i.e., without any Democratic votes — and is the same process that GOP leaders had been using to repeal the ACA.

US Capitol Building in Washington, D.C., the seat of the United States Congress.

US Capitol Building in Washington, D.C., the seat of the United States Congress.

The House budget passed on October 5th calls for congressional committees to produce at least $203 billion in savings over ten years through cuts to Medicaid, Medicare, and other entitlement funds to be enacted in the months ahead.  The Senate budget is expected to pass later this week and would add $1.5 trillion to the deficit.

Although the two resolutions have some important differences, they have the same basic architecture: They both establish the reconciliation process with the aim at making massive tax cuts that will primarily benefit the wealthiest and corporations, while paying for them through massive cuts to public services for the vast majority of Americans. Read our initial analysis of the Trump tax plan’s impact on Montana’s working families.

After the Senate vote later this week, House and Senate Republican leaders will create a conference committee to resolve the differences between their two resolutions and agree on one budget resolution that can be used to create the filibuster-proof reconciliation process for the tax package.

When the House and Senate go to conference committee, the final conference agreement will likely include reconciliation instructions that would require Congress to take immediate steps to cut SNAP, Medicaid, and other programs that support moderate- and low-income Montanans.

We’ll continue to track the federal budget development and the next steps for tax legislation in Congress.

Wonky Word: Essential Health Benefits 

During recent weeks, you have probably heard the term Essential Health Benefits repeatedly as Congress continue efforts to repeal and replace the Affordable Care Act (ACA). Right now, the Senate GOP leadership is cooking up their version of a health care bill behind closed doors and could take a vote before the July 4th recess.

The House-passed GOP plan eliminates Medicaid expansion and dramatically cuts Medicaid funding. Congress is also considering measures to allow states to waive the essential health benefit rules within the ACA. What are “Essential Health Benefits” and why have they become so central in the debate around health insurance coverage in America?

Essential Health Benefits (EHBs), also called federal minimum benefit standards, are at heart of the ACA. EHBs outline a set of ten categories of services that health insurance plans must cover at minimum. States must also provide EHB to beneficiaries eligible under the ACA’s Medicaid expansion, and plans may offer additional benefits such as dental and vision coverage.

Prior to the ACA, it was up to each respective state to determine what benefits (called insurance mandates) had to be included in insurance plans. Not surprisingly, states differed widely in terms comprehensiveness required, and no specific benefit was deemed essential in all 50 states and Washington, D.C.

EHBs provide coverage that offers viable protection against some of the most basic health care costs Americans experience and were designed to provide marketplace consumers with insurance coverage similar to the coverage of employer-sponsored insurance and Medicaid.

So, every health plan must cover the following services1: 

  • Ambulatory patient services (outpatient care you get without being admitted to a hospital)
  • Emergency services
  • Hospitalization (like surgery and overnight stays)
  • Pregnancy, maternity, and newborn care (both before and after birth)
  • Mental health and substance use disorder services, including behavioral health treatment (this includes counseling and psychotherapy)
  • Prescription drugs
  • Rehabilitative and habilitative services and devices (services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills)
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care (but adult dental and vision coverage aren’t essential health benefits)
  • And these two additional benefits:
    • Birth control coverage (contraceptive methods and counseling for all women)
    • Breastfeeding coverage (breastfeeding equipment and counseling for pregnant and nursing women)

Before the ACA, most health insurance frequently did not cover these basic services. For example, in 2011, among people in the individual market:

  • 62 percent had plans that didn’t cover maternity care;
  • 34 percent had plans that didn’t cover substance use treatment;
  • 18 percent had plans that didn’t cover mental health; and
  • 9 percent had plans that didn’t cover prescription drugs.

Under the GOP’s replacement plan, comprehensive insurance, with benefits like maternity or mental-health coverage, could become unaffordable—if not unavailable.

If the Essential Health Benefit standards were eliminated, individual and small-group market plans would quickly revert to the pre-ACA status quo and would likely:

  • Leave people who have pre-existing conditions without the coverage they need. People with pre-existing conditions — who need services like substance abuse treatment,mental health services, or comprehensive prescription drug coverage — often wouldn’t be able to find the coverage they need at any price, much less an affordable one.
  • Charge women more than men for coverage. In practice, eliminating Essential Health Benefit requirements means that women would once again be charged more than men, since they’d have to pay more for plans with maternity coverage — if they could even find a plan.
  • Burden even insured people with unaffordable bills and medical bankruptcies. Before the ACA, millions of people had health insurance that wouldn’t actually cover them if they got sick. Plans often had annual and lifetime limits on coverage and no limits on individuals’ out-of-pocket costs, and they omitted key services.The ACA fixed this by prohibiting annual and lifetime limits and setting an annual limit on what enrollees can be required to pay out-of-pocket for deductibles and other cost-sharing. Eliminating the Essential Health Benefit standards would make these rules meaningless.

Wonky Word: Healthy Montana Kids & CHIP

This week is Children’s Mental Health Week and today is National School Nurse Day. So we thought today would be a great day to recap CHIP and the Healthy Montana Kids (HMK) for our wonky words this week.

In 1997, the federal government established the Children’s Health Insurance Program (CHIP). The program was designed to cover uninsured children in families with incomes that are modest but too high to qualify for Medicaid. CHIP provides health coverage to eligible children, through both Medicaid and separate CHIP programs. It is administered by states and funded jointly by states and the federal government. Since states have flexibility to design their own program within Federal guidelines, benefits vary by state. Unfortunately, in the late ‘90s, there was a waiting list for children who were eligible but not enough funding.

Then in 2008, a group submitted a ballot initiative – Healthy Montana Kids I-155 – to the voters. The idea was to expand CHIP by using premium taxes paid by insurance companies to make health insurance available to more children. It raised the ceiling of eligibility to families earning up to 250% of the federal poverty level (FPL) (what is now approximately $51,000 for a family of three) with the goal of covering an additional 30,000 children. The initiative passed in all 56 counties and received 70% of the statewide vote.

Shortly thereafter, the 2009 Montana Legislature enacted the Healthy Montana Kids program. It brings CHIP and Children’s Medicaid under one umbrella with only one application process. Children below 143% of the FPL qualify for Medicaid and children between 143%-261% qualify for CHIP.

What makes HMK so unique – and what makes the Healthy Montana Plan unique – is that it competitively contracts with an insurer to administer healthcare through a private provider network at negotiated rates. This kind of contract is known as a “third party administrator,” or TPA. The TPA for HMK is Blue Cross Blue Shield of Montana and this contract grants access to care through the contractor’s extensive provider network. The contractor processes the claims and issues fee payments to providers on behalf of the state. Montana reimburses the contractor for those claims on a fee-for-service basis.

Healthy Montana Kids covers more than 120,000 children in our state. This means regular check ups, dental care, vision, and help when there is an emergency. The Medicaid Access and CHIP Reauthorization Act (MACRA) extended CHIP funding with no programmatic changes through September 30, 2017. That means legislative action will be required to extend federal funding past September, which is just 4 months away. When we talk about health care, we need to make sure we talk about CHIP reauthorization too. Kids with coverage help keep medical costs down for all of us, and kids with coverage are healthier. Healthier kids mean they do better in school, which will lead to a more educated work force.

Wonky Words: OBPP vs. LFD

Now that the elections are over, talk around the state will focus on the upcoming legislative session. Things are already heating up with the Governor’s budget release, and the Revenue and Transportation Interim Committee (RTIC) is meeting today to decide on the revenue estimate.

But before we get to what RTIC will decide on the revenue estimate, we thought we’d do a quick “brush up” on the agencies who are providing recommendations to legislators.

These are two agencies that folks should be familiar with as we discuss the budget –the Office of Budget and Program Planning and the Legislative Fiscal Division. The difference between OBPP and LFD can get very confusing, but both are very important when talking about the state budget.

Here is where they are similar.

Both are government agencies housed in the State Capitol. They both provide fiscal analysis on the state budget and provide feedback to Legislators and other interested parties.

Here is where they are different.

The head of the OBPP is the budget director who is appointed by and reports to the governor. The director of the LFD reports to the legislature and does not change when legislative leadership changes. Each is responsible to a different government entity, which can lead to different analysis and conclusions based on the information requested by their respective employers.

Throughout the year, both OBPP and LFD monitor the budget and make note of any changes in revenue or expenses. The LFD reports findings to the appropriate legislative committee and OBPP makes recommendations to the governor on any necessary changes.

 

Today, both agencies will present their estimates for where revenue will be for the next two years (the 2019 Biennium). Below is a chart that LFD has prepared, which shows where each agency is at in the amount of revenue for the next two years. The differences in their estimates this biennium are not nearly as significant in past sessions. OBPP projects revenue slightly below what LFD is projecting.

 

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Each November in even years (because the legislature always meets in odd numbered years), RTIC prepares a revenue estimate “projected to be available for legislative appropriation.” This initial estimate is considered the official estimate for the legislative session until it is amended or adopted by both legislative chambers. In general, this estimate is introduced as House Joint Resolution 2 (HJR 2). After the session begins, the initial revenue estimate can be debated, amendments can be made, and both the House and Senate can approve the final revenue estimate.

While the process and the details can get pretty complicated, the revenue estimate is a critical component for how Montana will invest in our state. The estimate has real implications on families and communities across Montana. Stay tuned as we see how things play out today.

 

Wonky Word Wednesdays: Two-Generation (2Gen)

For today’s Wonky Word Wednesday, we’ll examine an approach aimed to support families experiencing poverty, called a two-generation method. And tomorrow, we’ll then talk about some of these approaches and how policymakers can support them.

Too often, policies aimed to reduce poverty focus on either children or their parents, not the whole family. Solutions miss the mark when they focus just on children, without addressing issues like work support for their parents.

A two-generation (often referred to as 2Gen) approach creates policy or programmatic solutions that move the entire family toward economic security. The Aspen Institute’s project on 2Gen has identified four core components that individuals should focus on in order to create impacts that will pass from one generation to the next:2gen

Education – When parents have access to quality and affordable education and workforce development programs for themselves, they earn more – and in turn – can better provide for their children. Likewise, children need access to quality early childhood education programs, like pre-kindergarten. When they do, they perform better in school, are less likely to commit crimes as adults, and have higher earnings later in life. These two components can often be provided simultaneously. For example, Flathead Valley Community College provides a state-of-the-art pre-kindergarten program on campus for students, faculty and the community.

Social Capital – Social capital refers to the networks of relationships that individuals have in their communities, which provide them with information, resources, and support. Families rely on these trusted networks among their friends, family members, neighbors, work colleagues, and local organizations in order to get what they need to thrive. For example, parents with access to affordable and quality child care providers are able to remain working and have the piece of mind that their children are in a safe environment.

Economic Supports – Access to financial education and asset building opportunities, like savings accounts, increase parents’ earnings and put them on a path toward a stable financial future. For example, efforts to provide parents with the ability to save for a child’s college education provides the direct benefit of making post-secondary education more feasible for the child, but it also helps build the parents’ skills and understanding in the importance of saving.

Additionally, research shows that children who move out of poverty early in life benefit as adults. For example, children of parents who receive the federal earned income tax credit are more likely to attend college and have higher earnings later in life.

Health and Well-Being – families need access to programs that enable them to remain healthy and ensure their well-being, including mental health services and addressing negative childhood experiences. While Montana has provided access to health care for hundreds of thousands of children in Montana, it is also important to provide affordable access to health care for their parents as well. With Medicaid expansion in Montana, low-income parents can afford health care and take preventative measures for themselves and their children. Healthy parents remain working and providing for their families and healthy children remain in school and learning.

Applying these core principals to programs, policies, and research – at both the state and federal level – will help families build economic security that extends from one generation to the next. Stay tuned to learn how President Obama used 2Gen in his 2017 budget.

 

Wonky Word Wednesdays: Volunteer Income Tax Assistance (VITA)

It’s that time again, another Wonky Word Wednesday. With many Montanans receiving their W2s and free tax prep sites opening their doors this week across the state, tax season is officially off and running.

Let’s delve into a service that makes it easier for you to get more of what you earn back and invest in your community. Today’s wonky word is VITA (Volunteer Income Tax Assistance).

VITA is an IRS program that was created in 1971 to help low-and moderate-income taxpayers receive free tax filing assistance. Visiting a local VITA site enables individuals to file taxes without errors, receive their refunds sooner, and claim credits that can be overlooked, like the federal earned income tax credit (EITC), or deductions for students paying for college.

Every year, fellow Montanans around the state volunteer their time – usually from January through April – first becoming IRS-certified volunteers and then helping individuals in their community file electronic income tax returns free of charge.

Individuals with yearly incomes of $54,000 or less and with fairly straightforward returns qualify for free services through VITA sites and can pick from many site locations. This year, organizations focused on improving Montanans’ financial security, like Montana Credit Unions for Community Development and Rural Dynamics, Inc., are operating over 60 VITA sites located from Missoula to Glendive and in between.

Additionally, 25 free tax assistance sites through AARP are also located throughout Montana, geared toward providing individualized tax preparation for low-and middle-income seniors. However, non-AARP members can also receive free tax filing support through these Tax-Aide sites too.

Learn more here to see if a free tax site is located near you and what materials you may need.

 

Wonky Word Wednesdays: The Census Bureau

This week, the U.S. Census Bureau will release statistics highlighting poverty, income, and health insurance coverage from 2014. But before we dive into the specifics of what this data means for Montana’s economy and working families, let’s take a moment to learn about the U.S. Census Bureau and what it does. So here is today’s wonky word – Census Bureau.

The Census Bureau was created in 1903 and is constitutionally mandated to count the entire U.S population every ten years. This count is used to determine the number of members of each state that are elected to the U.S. House of Representatives. Remember in 1993 when Montana went from two house seats to one? Well, you can thank the census for that.

Since its creation, the role of the Census Bureau has extended and now, many different censuses and surveys are conducted to provide economic, education, employment, health, poverty, and family make-up data at the state and national level. (Note: a survey collects data on a sample of the population and a census collects data about every member of the population).

The Census Bureau conducts some of the following censuses:

  1. The Decennial Census of Population and Housing is conducted every ten years and counts every U.S resident in order to determine the House of Representatives.
  1. The Economic Census is conducted every five years and measures outcomes related to business and the economy nationwide.
  1. The Census of Governments is conducted every five years and is a comprehensive measure of state and local government operations and activities.

Two key surveys from the Census Bureau tell us about income and poverty in our state.

  1. The American Community Survey (ACS) is an ongoing survey that samples a small population of the U.S and releases information about ancestry, educational attainment, income, employment, housing etc. The survey provides detailed characteristics at state and local levels and allows you to compare data between states.
  • The Small Area Income and Poverty Estimates (SAIPE) measures the population of individuals living in poverty by age and income at state and local levels. These estimates are built from ACS data.
  1. The Current Population Survey (CPS) is a joint effort between the Census Bureau and the Bureau of Labor Statistics (BLS). Like the ACS, this is also an ongoing survey that collects information about income, family relationships, and labor force estimates. The BLS uses these estimates to release monthly reports on the employment situation across the U.S. The CPS also provides long-term trends in state poverty.
  • The Annual Social and Economic Supplement (ASEC or March CPS) is based off of the CPS. In March, the CPS includes supplemental questions on income, work experience, poverty, and health insurance coverage. This data is used to create the official source of poverty nationwide, the Official Poverty Measure.

Stay tuned Thursday as the Montana Budget and Policy Center digs into the newly released data and highlights what ACS, CPS, and ASEC figures mean for the economy, those living in poverty, and health coverage in Montana.

Wonky Word Wednesdays: Tribal Consultation

Today, the state of Montana is holding a tribal consultation, an important requirement in the process to submit its Medicaid expansion waiver to the federal Center on Medicare and Medicaid Services (CMS). But what is a tribal consultation, and why is it important? That brings us to today’s Wonky Word – tribal consultation.

According to CMS, tribal consultation between state Medicaid administrators and tribal leaders and tribal health programs is to “provide an enhanced form of communication that emphasizes trust, respect, and shared responsibility. It is an open and free exchange of information and opinion among parties, which leads to mutual understanding and comprehension. Consultation is integral to a deliberative process that results in effective collaboration and informed decision-making with the ultimate goal of reaching consensus on issues and better outcomes.”

Under federal law, states must engage in tribal consultations when applying for a 1115 waiver. According CMS, tribal consultation requirements are in place to recognize the sovereignty of tribal governments and ensure that any changes to a state’s Medicaid program will not inadvertently create problems for Indian health services. Apart from being required by federal law, this type of discussion is an indication of a state’s effort to support positive and genuine state-tribal relations.

Today, Montana is conducting its tribal consultation in Helena to discuss the soon-to-be-submitted waiver to give tens of thousands of Montanans access to affordable health care. You can view the Department of Health & Human Services invitation to the tribal consultation here.

In the past, states that have failed to properly follow the tribal consultation requirements have been met with disapproval either from CMS or from tribal leaders and their advocates. It is important for states to know that inadequate consultation could potentially hinder a state’s waiver approval. An example of this consequence include a letter from the New Mexico Center on Law and Poverty about the lack of tribal consultation resulting in the CMS rejection of New Mexico’s waiver application. Similar circumstances have occurred in Kansas and Oklahoma.

In 2013, CMS released a report on tribal consultation best practices, which included formal tribal health consultation policy examples from Washington, Oregon, and Minnesota. Here is the report summary of successes and challenges:

Respondents noted various attributes that contribute to the success of these interactions, including: Involvement and support of tribal and state leadership, an established state-tribe relationship, and genuine, meaningful, and open communication. In contrast, barriers to effective consultation reflected issues such as: obstacles created by consultation requirements, state or tribal staff turnover, and resource limitations preventing participation in consultations.

You can view the entire CMS Tribal Consultation Best Practices report here.

Tribal consultations are important government-to-government discussions that help ensure the proposed state policy takes into account tribal sovereignty and the strengths and needs of Indian Country. We look forward to hearing from the tribes and the state on how today’s consultation will make Montana’s waiver even better.

Wonky Word Wednesdays: Social Security

Friday marks the 80th anniversary of the signing of the Social Security Act in to law and to celebrate, we’re dedicating today’s wonky word to Social Security. (Friday we will learn why it is one of the most effective government programs to date.)

In 1935, President Roosevelt signed the Social Security Act as a part of his New Deal plan to lift America out of the Great Depression. Social Security is a federal program that provides benefits and insurance to older and disabled Americans. Those who qualify to receive benefits include:

  • Starting at the age of 62, individuals receive social security as retirement income
  • Disabled individuals
  • Children under the age of 18 or spouses who receive survivor benefits after the death of a primary breadwinner

The program is funded through payroll taxes collected from employees and employers. But there’s a cap on how much businesses and workers pay into the program.

In 2015, a worker pays into Social Security up to the first $118,500 in annual earnings. Because of this cap, an individual earning more than $118,500 per year will not contribute payroll taxes on income above this threshold and this individual will also not receive benefits based on income above the threshold. The reason is this. Individuals earning above $118,500 per year are more likely to have the financial resources to make ends meet after they retire or if they become disabled. Therefore, higher-income individuals do not need Social Security benefits at the same rate as low-to-moderate-income individuals do. In fact, the majority of Social Security recipients have few if any other income sources. For two-thirds of elderly recipients, Social Security comprises half of their total income.

Payroll taxes used to fund Social Security are collected by the IRS and placed in to separate funds used to cover the processing and administration of benefits for those receiving retirement, disability, death, or survivor benefits. Collectively, these separate funds are referred to as Social Security Trust Funds.

On Friday, we’ll explain why Social Security is not only a program for retirees and how its broad impact lifts millions of Americans out of poverty each year.

Wonky Word Wednesdays: Supplemental Poverty Measure

A few weeks ago, we discussed how the Official Poverty Measure has been the standard statistic used to measure poverty in America for the last 50 years. Today, we’ll introduce our second wonky word related to the topic of poverty measurement, the Supplemental Poverty Measure, and discuss why it’s a more comprehensive tool.

The Supplemental Poverty Measure (SPM) was created in 2011 as a complimentary statistic to be used along with the Official Poverty Measure in order to provide a better picture about poverty rates in America. Unlike the OPM, which only looks at a family’s pre-tax cash income, the SPM paints a clearer picture about the actual cash on hand a family has. The SPM assesses a family’s income, excluding expenditures on necessities like food, clothing, shelter, and utilities and expenses like federal and state taxes, transportation, child care, and out-of-pocket health care costs. In effect, the SPM shows what cash a family actually has on hand to make ends meet.

Further, the SPM factors in federal in-kind benefits (like SNAP and TANF cash benefits) and tax credits like the earned income tax credit, all of which help increase a family’s net income and allow them to rise above poverty levels.

So why is the SPM a more comprehensive and appropriate tool to measure poverty today? Statistics are most useful when they can tell a story over time. However, using the OPM alone to understand poverty rates between the 1960s and today is misleading.

The OPM does not take into account any of today’s poverty relief efforts and does not account for different costs of living across the country in the same way that the SPM does. For example, when estimating how many individuals are lifted out of poverty in 2011, the SPM captured about 12,500 more people than the OPM because it accounted for non-cash benefits and tax credits like SNAP and the earned income tax credit, which boost income levels. Therefore, the SPM indicates slightly higher poverty rates in any given year compared to the OPM, but shows greater reduction in poverty rates over time (graph below).

So far, the SPM will not be used to determine eligibility for government programs like SNAP or TANF in the same way that the OPM is. Instead, the SPM will be an additional measure to compliment the longstanding OPM. So the OPM tells us about work and before-tax earnings among low-income families, and the SPM allows us to see whether policies and government programs help families over time. Together they provide a richer insight and hopefully aid in our efforts to alleviate poverty in our communities.

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