Graham-Cassidy needs to pass this final test before it can come to a vote

In the mad dash to put the latest Obamacare repeal plan on the Senate floor for a vote, the bill will have to pass a critical test to make sure its provisions are actually permissible under the Senate’s arcane and complex rules.

It’s a test that some parts of every repeal plan so far have failed, reshaping the legislation in ways its authors didn’t intend. The new bill from Sens. Bill Cassidy (R-LA) and Lindsey Graham (R-SC) could fail the test too, as a core provision of their plan faces a murky future.

This test is known as the Byrd Rule — a condition of the “budget reconciliation” process that allows legislation to advance with just 51 votes, rather than the usual 60. Because Republicans only control 52 Senate seats, this is the only realistic way for them to pass Obamacare repeal legislation.

The Byrd Rule requires that any provision included in a bill that is being considered under reconciliation must directly affect federal spending or revenue.

Graham-Cassidy is about to endure that test before it comes up for a vote next week. The bill creates a block grant program, taking much of Obamacare’s funding and sending it to the states so they can set up their own health care systems.

As part of that program, states would be allowed to waive the law’s insurance regulations — a concept that has run afoul of the Byrd Rule in earlier repeal bills. Without the waivers, Graham-Cassidy could be in trouble. As a matter of politics, conservatives might balk if Obamacare’s regulations stay in place. As a matter of policy, keeping the law’s regulations while repealing its individual mandate, as Graham-Cassidy does, could send the individual insurance market into chaos.

Conservatives have previously made the regulations a deal-breaking issue for them on any Obamacare repeal plan. And losing the waivers would undercut the bill’s foundation of state flexibility.

Graham-Cassidy’s viability under the Byrd Rule is murkier than that of its predecessors, experts told me. The senators have designed their program in a way that might be more feasible under the Byrd Rule, by tying the waivers to the federal funding in the block grants.

“Is the parliamentarian likely to judge the heart of [Graham-Cassidy] a big fat Byrd Rule violation? That I don't know,” Sarah Binder, who studies congressional procedure at George Washington University, told me. She had been dubious about the compliance of previous iterations of the waiver concept.

With Graham-Cassidy, she acknowledged that the structure of the bill’s waivers could succeed where others failed — even if the intent is the same.

“The [Graham-Cassidy] approach reminds me of the old cellar doors at my parents' house,” she said. “It's like someone's trying to disguise the entry to the basement, but you know exactly where the stairs will take you.”

Reconciliation was designed to make sure the Senate could more easily pass bills dealing with the federal budget, particularly if Congress wanted to reduce the deficit, without the threat of a filibuster from the minority party.(The process begins with a congressional resolution instructing committees in the House and the Senate to draw up legislation that saves the federal government a set amount of money.) To help keep the process focused on those goals, using reconciliation come with conditions.

Those restrictions, meant to make sure reconciliation is actually used for bills that affect the budget, are one of the final obstacles the GOP’s repeal-and-replace effort will have to overcome. They has shaped every Obamacare repeal bill that has come forward so far because overhauling Obamacare — which would in theory include provisions like changing the law’s insurance regulations — touches parts of federal law that appear to have nothing to do with federal spending or revenue.

The mother of all conditions is known as the Byrd Rule. The rule came about in the 1980s, after Sen. Robert Byrd of West Virginia, a Democrat, grew frustrated with reconciliation. His colleagues were using it to advance all sorts of policies, not just those related to spending and revenue. So he introduced his standard for what can be included in a reconciliation bill, which has since been enshrined in federal law.

A bill being considered under reconciliation has to check every box of the six-part Byrd Rule. If it fails any one of those tests, it must be stripped out.

1. The provision must change federal spending or revenue.
2. If the bill does not meet the budget resolution’s instructions to reduce the federal deficit, any provision that results in either increased spending or decreased revenue is removed until it does meet those targets.
3. The provision must only affect policies that fall under the jurisdiction of the specific committees that were instructed in the budget resolution.
4. The provision’s effect on spending or revenues must be more than incidental to its policy impact.
5. The provision cannot increase the federal deficit at some point in the future, beyond the typical 10-year “budget window” that is used to evaluate legislation.
6. The provision cannot change Social Security.

Most of the time, if part of a bill fails that six-part test, that provision is removed and the rest of the legislation is allowed to advance.

There has been one sticking point throughout the Obamacare repeal debate: Can Republicans change Obamacare’s insurance regulations under the Byrd Rule? Experts have long said they could not, and the Senate parliamentarian has ruled in at least one instance that the Republican efforts to unwind the bill’s insurance rules violated the Byrd standard.

Graham-Cassidy’s fate could hinge on the Byrd Rule

The foundation of the last-ditch Obamacare repeal bill is block grants sent to states to establish their own health care programs. As part of the block grant program, states would be allowed to waive some of the health care law’s insurance regulations, such as the prohibition on insurers charging people higher premiums because of their medical history and the requirement that they cover certain essential health benefits.

Other provisions, related to Planned Parenthood and abortion coverage, could be stripped out under the Byrd Rule. But they are less central to the bill’s internal policy, and its politics within the Republican conference, than Graham-Cassidy’s state waivers.

The waivers are core to the “state flexibility” argument that the bill’s authors are making. They are also likely to be essential to winning conservative support for a bill that keeps much (but not all) of Obamacare’s taxes and spending to finance the block grants. A number of conservative senators, like Sen. Ted Cruz (R-TX), have conditioned their support for any repeal bill on loosening the law’s insurance rules.

On their face, the waiver provisions could be in trouble. The Senate parliamentarian said, while reviewing a different repeal bill, that waiving the essential health benefits requirement would violate the Byrd Rule, according to Senate Democrats.

But because of the way Graham-Cassidy is designed, the waivers might actually comply this time, according to several experts.

The trick is that the waivers are authorized as part of the block grant program, which obviously has a direct effect on federal spending. By tying the waivers to the block grants, rather than creating them in isolation where they seem to have no effect except for changing federal regulations, Graham-Cassidy might succeed whether other plans failed.

“Difficult for me to see any specific Byrd rule type issues,” Bill Hoagland, a former Senate Budget staffer who is now with the Bipartisan Policy Center, told me in an email. “Would assume that almost all the provisions that set up the state flexibility, etc. would score with reduced federal expenditures and therefore not trigger.”

That’s not a universally shared opinion, but more experts I spoke to seemed at least open to the idea that Graham-Cassidy’s waivers would be permissible when previous iterations had not been. That certainly seems to be the intent, given the way the legislation has been written.

“It’s a narrower approach — more directly tied to the new block grant mechanism —which I read as, at least in part, to be motivated by Byrd,” Molly Reynolds, who studies the congressional process at the Brookings Institution, told me. “Whether it works or not as part of an argument to the parliamentarian, I don’t know.”

But Democrats are sure to argue that these waivers, like those before them, violate the Byrd Rule. At least some outside experts don’t see a meaningful difference between Graham-Cassidy’s provisions and the waivers the parliamentarian has already struck down.

“My own prediction is that the parliamentarian is likely to strike the waiver provision,” Daniel Hemel, a University of Chicago law professor, wrote on Medium. “This prediction is based on her rulings regarding the abortion restrictions and the state innovation waivers in the Better Care Act.”

If Democrats succeed in that argument, they could deal a fatal blow to Graham-Cassidy. The bill could falter if conservatives aren’t able to latch onto the rollback of Obamacare’s insurance regulations as a reason to support it. It would undercut a core argument in favor of the block grant approach.

But if not, the bill will likely have survived its most important procedural hurdle — aside from, of course, winning 50 Republican votes.