Senate Committee Mulls Alternatives to Taxing Health Care Benefits

Senate Finance Committee Chair Max Baucus (D-Mont.) on Thursday presented committee members with more than one dozen funding mechanisms after concerns were raised about paying for reform with a tax on employer-sponsored health benefits, Politico reports.

The tax, which would have raised $320 billion over 10 years, was all but eliminated from consideration following public opinion polls indicating little support for the plan. Since then, Baucus has been scrambling to find other offsets for the bill.

The proposed revenue-raising measures include:

• Expanding the 1.45% Medicare payroll tax on earned income to "passive income," or unearned income, which could raise $100 billion;
• A 5% surtax on individuals who earn more than $500,000 and couples who earn more than $1 million;
• A tax on employer-sponsored health benefits at a level higher than previously considered, with one proposal to tax plans worth more than $20,300 for a family and $8,300 for an individual. The proposal could raise $240 billion. Another option would be to increase the cutoff to plans worth more than $25,000, which could raise $90 billion;
• Capping the tax break on itemized deductions at 28%, which could raise $168 billion, or a freeze on the top deduction rate at 35%, which could raise $90 billion;
• Issuing tax credit bonds to pay for the proposed Medicaid expansion, which could generate $75 billion in new revenue;
• Charging fees to pharmaceutical companies and insurers, which could generate up to $20 billion and $75 billion, respectively;
• Raising taxes on sugary drinks. A three-cent tax increase would generate $30 billion, while a 10-cent tax increase could result in $100 billion in new revenue (Budoff Brown/Rogers, Politico, 7/9); and
• Requiring that not-for-profit hospitals provide a minimum amount of charity care, which would both increase the amount of care provided that the federal government does not fund and force those hospitals not providing enough no-cost care out of tax-exempt status (Martinez, Wall Street Journal, 7/10);

Senator Reaction

Senate Finance Committee ranking member Chuck Grassley (R-Iowa) called the surtax "non-negotiable," with Sen. Olympia Snowe (R-Maine), a member of the committee, saying the surtax was among the "less viable" funding mechanisms under consideration (Herszenhorn, New York Times, 7/10).

Sen. Orrin Hatch (R-Utah) said, "There are a whole bunch of revenue options that they've listed," adding, "There are no good revenue options as far as I'm concerned" (Reichard, CQ HealthBeat, 7/9).

Although senators, including Kent Conrad (D-N.D.), believe that improving care coordination for chronically ill patients could save hundreds of billions of dollars, the Congressional Budget Office does not agree, according to Conrad, and therefore does not consider such savings a possibility for funding reform.

Sen. Charles Schumer (D-N.Y.), a member of the Senate Finance Committee, said, "There are lots of options out there that more than fill the hole," adding, "There is no one option that must be done, so if there is real opposition to it, there are lots of other alternatives. Most of us left the meeting with the view that we will be able to pay for this in a bipartisan way" (Politico, 7/9).

Bipartisanship

After meeting with Senate Finance Committee members on Thursday, Baucus said that discussions on a bipartisan bill remain on track. He said, "We're moving the ball forward," adding, "Everyone wants to find a way to get to 'yes' here. That tone hasn't changed one wit. It's difficult, but there's no discouragement."

According to Roll Call, in an effort to reach a bipartisan agreement, Senate Democratic leaders "might be softening their position" on a public plan option and could be open to the idea of health insurance cooperatives instead of a government-run insurance plan. Senate Majority Leader Harry Reid (D-Nev.) said, "We're going to have some type of public option -- call it co-op, call it whatever you want," adding, "We're trying to work something out and have not drawn any lines in the sand" (Drucker, Roll Call, 7/9).

Timeline

On Thursday, Baucus would not predict when a markup of the bill would occur. He said, "The timeline's always been, we're ready when we're ready. And we're not yet ready. But we're closer" (CQ HealthBeat, 7/9). Democratic Senate leaders on Thursday said that they might delay the Aug. 7 start date of the Senate's recess in order to allow time to complete floor action on health care reform legislation. Reid on Thursday insisted that the Senate would pass its bill before the August recess, saying, "We are keeping our timeline."

Senate Majority Whip Richard Durbin (D-Ill.) would not estimate the new recess start date, saying only that the suggestion of a delay is a dramatic way to focus attention. He said, "As long as you tell people, 'This is going to happen. Focus on it. If you don't get busy and get it done, you could lose part of your August recess,' it's amazing how much you can get done" (Jansen, CQ Today, 7/9).