By Greg Hitt and Janet Adamy
The Wall Street Journal
Wednesday, July 8, 2009
WASHINGTON -- Senators are cooling to a proposal that would impose a first-ever tax on employer-provided health insurance and are giving renewed attention to taxes on the wealthy to pay for a sweeping health-care overhaul.
Sen. Kent Conrad (D., N.D.) and others involved in talks on a health bill said Tuesday that the idea of taxing health benefits is unpopular with voters, though they stressed that it hasn't been completely swept off the bargaining table.
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.
Concerns about the cost of the package and the difficulty of paying for it were running high as senators returned from the weeklong Fourth of July break and plunged back into negotiations. The overhaul is expected to cost at least $1 trillion over a decade.
"The big challenge -- and I actually heard this at home during the recess -- is the sticker shock," said Sen. Ron Wyden (D., Ore.).
Lawmakers made some progress Tuesday as the hospital industry announced it has agreed to receive $155 billion less in government payments over the next decade than it would receive under current rules. The industry said it intends the savings to go toward covering the nation's uninsured.
Those cuts hinge on reducing the number of uninsured. They are also at least $75 billion less over that time period than the hospital industry estimated it would give up under an earlier cost-reduction plan outlined by the White House.
Underscoring the spending concerns, the Congressional Budget Office late Tuesday estimated that expanding Medicaid to help cover the uninsured could cost about $500 billion over a decade. Pairing that with a health overhaul moving through the Senate Health, Education, Labor and Pensions Committee, which on its own will cost an estimated $611 billion over 10 years, would still leave 15 million to 20 million nonelderly Americans without health insurance, according to the CBO.
Senate Finance Chairman Max Baucus (D., Mont.) is vowing to stick close to the $1 trillion price tag.
In an effort to woo Sen. Chuck Grassley (R., Iowa) and other Republicans, Mr. Baucus has focused on raising money for a health bill through tax increases in the health area. The committee has given close consideration to a proposal to tax a portion of some people's health-care benefits for the first time. Sen. John McCain promoted a more sweeping version of the same thing during his 2008 presidential campaign.
Currently, people don't pay taxes on their health benefits, which some critics say acts as an incentive for employers to provide overly generous plans.
But Sen. Conrad suggested Tuesday that the benefits-tax proposal is losing favor. He noted that recent polls show the idea is unpopular and "very hard to explain" to voters. Such concerns dominated a morning meeting Tuesday of Senate Democratic leaders and were passed along later to Mr. Baucus. He said Senate tax writers are broadening the search for revenue beyond the health area.
The hospital deal came after weeks of negotiations among the industry, Sen. Baucus and the White House, said Rick Pollack, executive vice president of the American Hospital Association. Last month, the group said it opposed a plan by President Obama to make similar cuts that it estimated would have cost hospitals between $224 billion and $254 billion over a decade
The group agreed to the cuts announced Tuesday in part because the givebacks are "substantially lower" than the White House's previous request, Mr. Pollack said. "Everybody has to contribute to this process," he said. "Others will have to do it as well."
Under the deal, the government will slightly reduce a scheduled annual inflation increase it pays hospitals for treating senior citizens under the Medicare program, Mr. Pollack said. That is projected to save about $103 billion over a decade.
Starting in 2015, the government would begin paying certain hospitals less money through Medicare and Medicaid for treating uninsured people and government-insured Americans who are particularly costly, Mr. Pollack said. That is estimated to save about $50 billion over a decade. In theory, such payments can be reduced once more Americans have insurance coverage.
Also Tuesday, the chief lobbyist for brand-name drug makers said that he has heard reassuring words from White House officials about reimporting lower-priced drugs from other countries. As a presidential candidate, Mr. Obama endorsed the idea, which the industry opposes.
Billy Tauzin, president of the Pharmaceutical Research and Manufacturers of America, said after a White House meeting Tuesday that officials have told the industry if the larger health-care bill passes, the cost savings will be big enough to make reimportation unnecessary.
A White House official confirmed the meeting took place and said, "As a political matter there may be less pressure" to pursue reimportation after a health bill passes.
—Alicia Mundy and Laura Meckler contributed to this article.
Write to Greg Hitt at firstname.lastname@example.org and Janet Adamy at email@example.com