Senate Finance Committee releases a report outlining option to pay for health care reform
19 05 09 - 22:41
Senators offer options to finance health reform
By Jeffrey Young - The Hill
If the route to healthcare reform will be determined by how much it costs and how to pay for it, the Senate Finance Committee may have issued the roadmap Monday.
Finance Committee Chairman Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa) posted a 41-page document on the panel’s website detailing the policy options on the table for financing healthcare reform.
Among other things, the document lays out the case for a variety of tax reforms that will give opponents of Democratic healthcare reform plenty of fodder.
Raising revenue by eliminating or reducing the favored tax status of healthcare expenses might prove irresistible to Congress, which values the revenue “lost” to current policy at $194.2 billion a year.
One of the key tax proposals, limiting the current tax-free treatment of workplace health benefits, also conflicts with the campaign position of President Obama, who lambasted Sen. John McCain (R-Ariz.) for advocating changes to the tax code in this area.
The panel also will weigh whether to levy new “sin taxes” on products such as alcohol and sugary soft drinks. Proposed cuts in Medicare payments to certain practitioners likely will provoke outcries from their lobbyists.
The Finance Committee report will serve as the basis for a closed-door meeting of senators on Wednesday, when they will debate how to pay for healthcare reform legislation that could carry a price tag upwards of $1 trillion. The Finance and Health, Education, Labor and Pensions committees plan to mark up legislation next month, as do their House counterparts.
“Reforming the system will likely require an upfront investment, but I’m confident it will pay dividends in the future for our health, our economic competitiveness and our federal budget,” Baucus said in a statement. According to this year’s congressional budget and Obama’s wishes, the healthcare bill must pay for itself over an 11-year period.
The document is the product of public and private meetings of members of the committee. The financing policy options paper is the third such report the committee has issued; the first examined healthcare delivery system reform and the second looked at health insurance regulation and covering the uninsured.
The financing report includes a plethora of tax reforms and increases designed to raise revenue as well as options for cutting spending on Medicare and Medicaid.
Whether the government should create a public plan that would compete with private health insurance has driven much of the political debate so far this year, but issues such as Medicare payment rates for medical providers and tax reforms that affect the middle class are sure to drive to the fore as health reform moves ahead.
By far the most controversial area is the tax exclusion for health insurance premiums. Eliminating that cap and subjecting premiums to taxes would raise $132.7 billion a year, according to the report, though Baucus insists he will not go that route.
Under current law, neither employers nor workers pay tax on the value of health benefits. The Finance Committee is eyeing several options to tap into this rich vein of funding, such as capping the exclusion at a certain amount based on the value of the insurance plan, the worker’s wages or both. The committee also will consider converting the exclusion to a deduction or tax credit, similar to McCain’s plan and legislation sponsored by Sens. Ron Wyden (D-Ore.) and Bob Bennett (R-Utah.).
Large employers and labor unions are very wary of making any changes to the tax treatment of health insurance, arguing that these policies could disrupt the system that provides coverage to the majority of middle-class Americans.
The report also details ways to raise revenue by reducing the tax advantages of health savings accounts, flexible spending accounts and itemized deductions of medical expenses.
Obama proposed several tax increases in his budget request that would be pegged to pay for healthcare reform that lawmakers did not warmly receive, such as capping itemized deductions. A statement from the Finance Committee states, “In deference to the president, all of the administration’s proposals are presented in the policy options.”
The Finance Committee also will wade into the treacherous area of why healthcare spending varies greatly from region to region with no correlation to the quality of the medical care. Though lawmakers agree in principle that spending variations must be addressed, those who represent high-cost areas are reluctant to see that money leave their states.
In addition, the report details ways the federal government can save money by reducing Medicare spending on home healthcare, durable medical equipment, medical imaging and prescription drugs.