Efforts to remake the American health care system took a major step forward in the Senate on Wednesday. The Health, Education, Labor and Pensions Committee completed work on its health overhaul bill, which it passed 13-10 on a party-line vote.
Also on Wednesday, Democrats in the House of Representatives pushed forward their version of health reform, holding the first hearing on the details of a plan that would spend $1 trillion over 10 years and cover 97 percent of citizens by 2015, according to a preliminary analysis by the Congressional Budget Office.
Meanwhile, President Obama’s campaign organization released its first television ads to build support for the health overhaul.
The bill approved by the Senate HELP committee would cost $600 billion and provide subsidies to make it easier for many people to get health insurance. Individuals and families making up to four times the federal poverty level, or about $88,000 a year for a family four, would qualify.
“This bill, because of what we’ve done, we think is going to increase access,” said Sen. Christopher Dodd (D-CT), who led nearly a month of hearings on the bill. “It’s going to reduce costs to individuals, and it’s going to improve the quality of health care in our country.”
But the party-line vote highlighted some of the fights ahead.
“This supposed health care fix is a health care failure and a disaster for the American people,” Sen. Judd Gregg (R-NH) said.
In a Rose Garden event aimed at keeping health care on the daily political agenda, Obama said the HELP committee vote “should make us hopeful, but it can’t make us complacent.” He said he hoped the passage would provide new “urgency” for both the House and the Senate to finish work by the August recess. He has asked Congress to give him a bill to sign by October.
Much remains to be done in the Senate, however, despite the passage of the bill out of the HELP committee. Left out of the bill is one of the toughest parts – how to pay for the insurance subsidies. That’s because it’s the Senate Finance Committee that has jurisdiction over taxation and the federal Medicare and Medicaid programs. And it’s these areas where the biggest revenues and savings are to be found.
The finance committee has yet to release a bill, due weeks ago, though committee members say they’re optimistic one will emerge soon.
“We’re just not quite there,” the committee’s chairman, Max Baucus (D-MT), said.
Employer Mandate Stirs Opponents
Meanwhile on Wednesday, the House Education and Labor Committee opened its first drafting session amid strong reactions from business leaders and Republicans who objected to a proposal that all companies provide health insurance or pay a penalty.
The penalty would be equal to 8 percent of wages for companies that don’t provide a certain level of coverage. Small businesses would pay lesser penalties, on a sliding scale based on their annual payroll.
Those with a payroll under $250,000 would be exempt from the penalty, while those with payrolls between $250,000 and $300,000 would pay 2 percent of wages. Businesses with payrolls between $350,000 and $450,000 would pay 6 percent. Democrats say 96 percent of small businesses would see no tax increases under the proposal.
Democrats emphasized that some small businesses would get help buying insurance. The law would give tax credits to companies with relatively few employees and relatively low average wages. The CBO estimates that the tax credits would cover up to half the firms’ contributions toward health insurance premiums. Still, the CBO said the penalties could reduce the hiring of low-wage workers.
Republicans lashed out at the penalties as “a new small-business tax.” House Republican leader John Boehner (R-OH) said that “during a time of economic recession, the last thing Congress should be doing is punishing small businesses that create a majority of the jobs in this country.”
The House bill would also mandate that all legal residents have health insurance or pay a penalty. The penalty would amount to 2.5 percent of the difference between adjusted gross income and a certain threshold for paying taxes. There would be an upper limit on the penalty roughly equal to the average price of a health insurance policy.
‘Wealth’ Tax On Top Earners
Another controversial provision is what Democrats are calling a “surcharge” or “surtax” on wealthy Americans. It would raise approximately half of the $1 trillion needed over the next 10 years to expand insurance coverage. The other half would be achieved by “significant efficiencies and savings in Medicare and Medicaid.”
About 1.2 percent of households would be affected by the surtax, according to Democrats.
The surtax would be phased in beginning in 2011 and would rise to a maximum in 2013 of 2 percent for individuals making $280,000 or more each year, 3 percent for those above $400,000 and 5.4 percent for those above $800,000. The corresponding thresholds for couples filing jointly are $350,000, $500,000 and $1 million, respectively.
For example, a family earning $400,000 in 2011 would pay an additional $500 in taxes.
The $1 trillion over 10 years raised by the surtax and the cuts in federal health programs would go mainly to fund the tax credits for small businesses and subsidies for people who need assistance buying health insurance.
The latter group would be able to buy insurance through newly formed “insurance exchanges,” which Democrats say will allow consumers and small businesses with fewer than 20 employees to comparison shop for policies, encouraging competition. One of the policies to be offered would be a government-run health insurance plan designed to keep costs low.
“Affordability credits” would be offered to people buying insurance through the exchanges. The maximum income would be $88,000 for a family of four ($43,000 for individuals) and would phase out on a sliding-scale basis.
Critics say that the government-run plan will undermine the current employer-based private insurance system and cause businesses to abandon current coverage, but Democrats refute those charges.
“Contrary to opponents’ claims that employer-based coverage will drop,” said Rep. George Miller (D-CA), “CBO estimates that our bill will actually increase the employer-provided care.”
All three House committees overseeing the bill will continue work on Thursday.