How to pay for healthcare reform? - $1 trillion dollar question
07 07 09 - 12:25
Democrats to show how they will find $1 trillion
By Jeffrey Young - The Hill
Democrats on Capitol Hill this month will answer the $1 trillion-plus question: how they plan to pay for comprehensive healthcare reform.
Before the July 4 recess, President Obama and congressional Democrats vowed repeatedly that their bill will be completely paid for, but offered few details on offsetting new benefits that are expected to cost more than $1 trillion over a decade.
On the healthcare policy front, Obama and Democratic leaders are — for the most part — on the same page.
Employers would be required to offer some form of insurance, individuals would be required to buy it, and some people would have access to a nationwide health insurance exchange — which may or may not include a government-run plan — to shop for coverage.
But what none of those bills have spelled out is how Democrats will meet their commitment to fully paying for covering millions of uninsured people and achieving the broad goal of reforming the entire healthcare system.
The matters of who will get taxed more and how much more they would have to pay remain undetermined, or at least unrevealed, with the August recess just five weeks away. Democrats in both the House and Senate are aiming to pass their respective healthcare bills before adjourning in August.
Keeping to those deadlines is important to Obama. In late May, the president said, “If we don’t get [healthcare reform] done this year, we’re not going to get it done.”
There is no shortage of ideas for how to pay for reform — just as there’s no shortage of reasons why those ideas are politically difficult.
Obama has recommended more than $600 billion in Medicare and Medicaid spending cuts, but lawmakers are unlikely to go that far, leaving them with a hole in their budget for healthcare reform that is at least $400 billion short.
Moreover, the Congressional Budget Office (CBO) has not released an official cost estimate on any bill, and the partial estimates available raise nearly as many questions as they answer.
The grim political reality facing Democrats in Congress and the White House is that some Americans, somewhere, somehow are going to have to pay higher taxes if their healthcare bill is going to become a reality.
And if any of those people make less than $250,000 a year, Obama could be forced to break a major campaign promise.
Thus, in pursuit of healthcare reform — an issue on which they are historically strong — Democrats are poised to kick off their first major fight over taxes — an issue where they have been historically weak.
“It is premature to point to any specific provision, but the House is committed to ensure that healthcare reform is paid for,” Nadeam Elshami, spokesman for House Speaker Nancy Pelosi (D-Calif.), wrote in an e-mail.
Holding back on deciding about tax increases has political advantages and disadvantages.
On the plus side for Democrats, the longer they postpone showing their hand, the less time opponents have to mount their attacks. Conversely, Republicans have claimed for weeks that Democrats are proposing more than $1 trillion in new spending without saying how they would pay for it.
No matter what the tax increases are, they are certain to provoke protests. Labor unions oppose taxes on workplace health benefits. Retailers oppose taxes on consumer goods. Nearly everyone opposes taxes on themselves.
Democrats are eyeing a cornucopia of new taxes — some of which would violate Obama’s $250,000 vow.
House Democrats are expected to offer their answers by the end of this week. Ways and Means Committee Chairman Charles Rangel (D-N.Y.), whose panel has responsibility over the tax increases and many of the spending cuts, will address a House Democratic Caucus meeting Friday.
House Democrats are considering numerous tax hikes ranging from a national “value-add tax” on consumer goods, higher income taxes on people making more than $250,000 a year, an increase in the Medicare payroll tax and new taxes on sugary soft drinks and alcohol. Any broad-based tax on consumer goods would apply to people below Obama’s $250,000 threshold.
The Senate Finance Committee is also thought to be close to unveiling its bill. Chairman Max Baucus (D-Mont.) is likely to include new taxes on some workers’ health insurance benefits. This proposal not only angers unions but could affect people earning less than $250,000 a year, though it would raise a substantial amount of revenue.
Obama has proposed a $317.6 billion tax increase of his own: limits on itemized deductions by higher-income workers. Though this suggestion has fallen on deaf ears in Congress, Obama continues to promote it as the right way to finance healthcare reform.
The lack of clarity is not limited to the tax side. Democrats have also not fully spelled out where they will make spending cuts that mostly, or entirely, will come from the healthcare system.
Obama’s $622 billion in Medicare and Medicaid cuts may be politically unrealistic, but Baucus and House Democrats are looking at payment reductions for health insurance companies, hospitals, drug companies, specialty physicians, nursing homes, home health aides and practically every other player in the healthcare system.
Using the argument that medical providers and health plans stand to get windfalls when tens of millions of new people gain health coverage, Baucus and the White House have been pressuring interest groups to agree to substantial cuts.
Obama himself trumpeted an agreement with the drug industry to identify $50 billion in savings for healthcare reform. The House bill, written without the cooperation of Big Pharma, would dig even deeper. The White House is expected to make an announcement soon about a deal with the hospital industry worth upwards of $150 billion, and others may follow.
But even efforts to pay for their healthcare reform bill are meeting with resistance from Republicans.
Senate Minority Leader Mitch McConnell (R-Ky.) condemned the proposed Medicare cuts on Monday. “Not only is this aimed at concealing the cost of the new government plan; it’s also a reckless misuse of funds that should be used to stabilize Medicare instead,” he said.
Mike Soraghan contributed to this article.