KHN Morning Briefing

Summaries of health policy coverage from major news organizations

Taxing Health Benefits Lacking Hill Support

The idea of taxing health care benefits is proving to be a divisive issue for Democrats as they continue to press forward in health overhaul negotiations. "One day after lawmakers returned from a weeklong vacation, the White House and Democratic leadership made a conspicuous effort to assert control over the effort to push health insurance legislation through committees and both houses of Congress over the next five weeks," the Associated Press reports. "While Obama has called for a bipartisan measure, a partisan bill written by and for Democrats is also a possibility, given the size of the party's majorities in the House and Senate. … Nowhere were the challenges of passing legislation more evident than in the Senate. There, several Democratic officials said the party's leadership told (Sen. Max) Baucus, D-Mont., that they were unhappy with any tax on health care benefits - a key component of bipartisan negotiations - and expressed fears it could lose more votes on their side of the aisle than it gained among Republicans."

"Additionally, there was general sentiment among Democratic leaders that health care legislation must contain an option for the government to sell insurance in competition with private companies, according to these officials. They spoke on condition of anonymity, saying they were not authorized to disclose details of private talks."

Baucus has been working for weeks to draft legislation that would have broad support from Republicans and Democrats, and "has long signaled that he intends to include a tax on higher-cost health care benefits that workers receive on the job."

"Separately, numerous officials said moderate to conservative Democrats were unhappy that the legislation was likely to include an option for the government to sell insurance in direct competition with private companies" (Espo, 7/7).

In the meantime, Senators continue to look for new ways to pay for their reform bills, due to lack of public support for an employer benefits tax, CNN reports: "A recent New York Times/CBS News poll showed only 20 percent of respondents support the tax and a Washington Post/ABC News poll found 70 percent opposed it. A Kaiser Family Foundation poll found 54 percent of respondents oppose the new tax" (7/7).

Instead, Democrats are focusing on taxing the wealthy to pay for reform, The Wall Street Journal reports: "Senate negotiators are considering a wider range of ways to pay for expanding health coverage, including President Barack Obama's proposal to limit tax deductions for the wealthy and another proposal to impose an income surtax on the wealthy, people familiar with the matter said" (Hitt and Adamy, 7/8). 

"A surtax [on the wealthy] may hold more appeal for House Democrats than a Senate proposal to tax some employer-provided health benefits," Bloomberg reports: "The tax would be similar to, yet much smaller than, a surtax proposed in 2007 by Ways and Means Committee Chairman Charles Rangel, a person familiar with the committee's talks said. That plan would have added at least a 4 percent levy on incomes exceeding $200,000, and was projected to reap as much as $832 billion over 10 years.

"Two people familiar with closed-door talks by committee Democrats said a House bill probably will include a surtax on incomes exceeding $250,000, as Congress seeks ways to pay for changes to a health-care system that accounts for almost 18 percent of the U.S. economy" (Donmoyer, 7/7).

Baucus, meanwhile, was told by Senate Majority Leader Harry Reid Tuesday to reconsider taxing employer benefits, Bloomberg reports in a separate story: "Some Democrats at the meeting also voiced misgivings that Baucus is working too hard to attract Republican support in a bid to forge bipartisan legislation that can meet President Barack Obama's goal of lowering health costs and providing coverage to 46 million uninsured Americans, (an) aide said (Litvan, 7/8).

Reid's meeting could dash hopes for passing a reform bill before the August recess, Politico reports: "On the Senate side, Reid's move could dash Baucus's hopes of producing a bill this week that would have levied a tax on some employer-based insurance and created a nonprofit insurance cooperative to compete with private insurers. If altering the tax-free status of health benefits is considered politically dead, it could also severely complicate efforts to reach the senators' goal of finding $1 trillion in cuts, savings and taxes to pay for the bill (Brown and Frates, 7/7).

Reid also told Baucus his try at a bipartisan bill could cost 10-15 Democratic votes, Roll Call reports: "Reid told Baucus it wasn't worth securing the support of Grassley and at best a few additional Republicans." Roll Call also reports: "Finance may not begin marking up its bill until next week or the week after that. Meanwhile, the Senate Health, Education, Labor and Pensions Committee is set to complete the markup of its health care reform legislation this week or next. One senior Democratic Senate aide warned Tuesday that further delays by the Finance Committee could result in the planned merger of the two panels' bills being scrapped in favor of allowing each one to move to the floor on its own" (Drucker and Pierce, 7/7).

NPR reports that the self-imposed deadline in Congress on reform doesn't necessarily mean that Congress doesn't move at its own pace. "The House actually seems well on its way to getting its bill to the floor by the end of the month, but if the Senate doesn't pick up the pace soon, chances for a final bill by the end of the year will start to dim considerably" (Rovner, 7/7).

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