The Senate's $849 billion health care overhaul bill, presented here by Majority Leader Harry Reid, D-Nev., would be funded in part by tax increases on both drugmakers and the wealthy. Photo by Win McNamee/Getty Images

Congressional efforts to overhaul the nation’s health care system took a major step forward Wednesday with the introduction of a 2,074-page proposal by Senate Democrats, which will be the basis for the Senate debate now. Passage of the bill, however, is far from certain and weeks away.

The bill, developed by Senate Majority Leader Harry Reid, D-Nev., extends health care coverage to an estimated 31 million Americans who currently lack health insurance. Like the bill passed by the House Nov. 7, the Senate bill has a combination of requirements for both individuals and employers. It also provides subsidies for the poor and authorizes a public option—a government-run insurance plan—for uninsured or underinsured individuals. The Senate bill is largely financed by savings in future Medicare, Medicare Advantage plan and Medicaid spending. Those savings reduce spending by about 3 percent over 10 years, and lawmakers say they would not affect guaranteed Medicare benefits.

Unlike the House bill, the Senate bill imposes a new payroll tax for individuals earning over $200,000 and taxes on insurance companies, drug companies and medical device manufacturers. Over the next decade, the bill would cost $848 billion, slightly less than the $1 trillion House measure. But much of those savings are realized because it would take effect in 2014, a year later than the House bill.

Fewer groups have a bigger stake in this overhaul than Americans ages 50 to 64.  For that group, not yet eligible for Medicare, the health care challenges are daunting. These Americans face the prospect of lost jobs, reduced health benefits and are most often denied health coverage because of preexisting conditions. They also are charged much more for their policies because of their age.

The stakes for Medicare recipients also are significant. To curb Medicare spending, the bills would reduce fraud, waste and inefficiencies in the program.  Both bills also would add free preventive screenings to the Medicare program, provide incentives for more general practitioner doctors as well as strengthen the Medicare Trust Fund for an added five years. 

Both the House and Senate propose adding a new federal insurance program to help with long-term care costs—the Community Living Assistance Services and Supports program. It creates an optional insurance program that workers could purchase through payroll deductions.

The stakes for American businesses, workers and retirees are substantial. Virtually everyone will be touched by the reforms in these proposals. Here’s what they mean to you:

• Insurance for individuals
• If you’re insured by your employer, or you own a business
• If you buy your own insurance
• If you don’t have insurance
• If you’re covered by Medicare
• If you’re insured by Medicaid
• Financing the plan

Insurance for individuals

In both the House bill and the Senate proposal, insurance companies could not deny coverage for preexisting conditions or cancel coverage because of illness. What they could charge older adults for their coverage compared with what they charge younger people would be capped. 

• House bill:

Everyone would be required to have health insurance. Those without coverage would pay a penalty but no more than the national average premium for employer-provided insurance, now $4,824 or $13,375 for a family. Families of four making less than $88,200 a year would receive a subsidy to help pay premiums. A family of four earning less than $33,070 would be eligible for Medicaid. Poor families’ premiums would be subsidized depending on income.

• Senate bill:

This measure has individual mandates and subsidies similar to the other bill. Penalties for those without coverage range from $95 to $750 in 2016. A family of four earning $29,326 would be eligible for Medicaid, adding about 11 million to Medicaid’s roles. A temporary high-risk pool is created to insure those with preexisting conditions before the program would take full effect in 2014.

Back to Top


If you’re insured by your employer, or you own a business

Some 157 million people—52 percent of the population—have health coverage through their employers. They would not lose coverage if they get sick or lose their jobs. But if they drop their coverage, they would face a penalty.

• House bill:

If a company has an overall payroll of more than $500,000, it must cover 65 percent of an employee’s family premiums or pay a fine.

• Senate bill:

If an employer has 50 or more full-time employees, the firm must offer insurance or pay a fee of $750 per employee for employees who receive federal subsidies. A tax would be imposed on “Cadillac” coverage plans provided by employers—plans that cost more than $8,500 annually or $23,000 per family.

Back to Top


If you buy your own insurance

About 15 million people—5 percent of the population—buy their own insurance. If you do, you could not lose it even if you get sick.

• House bill:

You would have the option of purchasing insurance at a health insurance exchange, where choices include private insurance plans and one from the government. Those who don’t purchase coverage would have to pay a penalty. Premiums for low-income families would be subsidized.

• Senate bill:

Those who drop their insurance must pay a penalty ranging from $95 to $750 per person in 2016.


Back to Top


If you don’t have insurance

About 46 million Americans—15 percent of the population—lack health insurance. The number of uninsured people ages 50 to 64 has grown 36 percent since 2000, to 7.1 million. Men and women in this group face higher premiums because they are older and usually have some health issues.

• House bill:

Everyone would be required to be insured. Those who don’t purchase coverage must pay a penalty. People could purchase insurance through a health insurance exchange, where choices include competing private companies and a government option. Poor families’ premiums would be subsidized depending on income. Insurance firms must provide coverage to all eligible people regardless of any preexisting conditions. Premiums for those over 60 could only be twice as high as those under 60. Both the House and Senate bill would cover about 94 percent of Americans.

• Senate bill:

Insurance premiums could not exceed 10 percent of an individual’s income. People could purchase insurance through a health insurance exchange, where choices include private companies and a government option. States would have to choose whether to offer the public option or not. People who don’t purchase coverage must pay a penalty of between $1,500 and $3,800.


Back to Top


If you’re covered by Medicare

Some 44 million people—more than 11 percent of the population—are over age 65 and covered by Medicare.

• House bill:

The HHS Secretary would be authorized to negotiate drug prices. Costs of brand-name prescription drugs in the drug plan’s coverage gap—the doughnut hole—would be cut in half and the gap closes completely by 2019. The life of the Medicare trust fund is extended by five years. The bill aims to eliminate $170 billion in overpayments to Medicare Advantage programs, which make the cost of those plans 14 percent higher than traditional Medicare. It would provide $15 billion in payments to skilled nursing homes and rehabilitation centers; and provide Medicare coverage for doctors giving end-of-life counseling. The House will address a scheduled 21 percent cut in reimbursements for doctors participating in the Medicare program in a separate bill.

• Senate bill:

Prices in the brand-name prescription drug coverage gap—the doughnut hole—are cut in half starting in 2014. Also, starting in 2010, the Medicare doughnut hole would start to be narrowed. The bill would extend the life of the Medicare Trust Fund by at least five years. It also would eliminate the overpayment, or subsidies, to Medicare Advantage programs; cut $15 billion in payments to skilled nursing homes and rehabilitation centers; and provide Medicare coverage for doctors giving end-of-life counseling.


Back to Top


If you’re insured by Medicaid

New plans would expand Medicaid by an estimated 11 million to 15 million people.

• House bill:

Medicaid expands. Families of four with income under $33,000 would be eligible. Families of four earning $88,000 would pay no more than 12 percent of their income for health insurance. Government subsidies would pay the rest.

• Senate bill:

Medicaid expands. Families of four with income under $29,326 (133 percent of poverty) would be eligible.


Back to Top


Financing the plan

• House bill:

Total cost: $1.05 trillion over 10 years. Individuals with income over $500,000 and families with incomes over $1 million would pay a 5.4 percent surtax. Costs would be financed by $400 billion in cuts to Medicare and Medicare Advantage.

• Senate bill:

Total cost: $848 billion over 10 years. Costs would be partially funded by about $420 billion in cuts from the future Medicare and Medicaid spending and $118 billion from Medicare Advantage. In addition, nearly $300 billion would come from new taxes and fees on health care insurers, clinical laboratories and manufacturers of health care devices. The payroll tax for Medicare would rise from 1.45 to 1.95 percent for those earning over $200,000 and a 5 percent excise tax for those getting elective cosmetic surgery. The Senate also proposes an independent Medicare Advisory Committee authorized to impose Medicare cuts directly.

Back to Top 

If you would like to discuss health care reform in AARP’s Online Community, please join the group Health Action Now Mythbusters.

Jim Toedtman is editor of the AARP Bulletin.