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Health reform would tax the rich, near-rich

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Americans would face new requirements to obtain health insurance or face hefty tax penalties as part of a $1.5 trillion health care reform plan introduced by House Democrats on Tuesday that will be paid for, in part, by a new 5.4 percent tax on the wealthiest Americans.

Employers would have to provide coverage to employees or face penalties of their own under the 1,018-page bill, released by Democratic leaders and chairmen of three committees that share jurisdiction over health care. It would also create a public health insurance program and impose a series of new regulations on the insurance industry, including a ban on denying coverage of pre-existing conditions.

"This is a defining moment for our country," said Rep. Henry A. Waxman, California Democrat and chairman of the House Energy and Commerce Committee. "We are about to undertake what has eluded so many presidents and Congresses for far too long and that is the objective of getting good quality, affordable health care insurance to every American."

The health care reform bill, which was praised by President Obama for creating new competition for insurance companies, would reshape the country's focus on health care coverage as a right of all Americans and a responsibility of the government.

The bill's release was met with enthusiasm by health care advocates but slammed by the industry and other business groups.

A "pay or play" mandate on businesses drew condemnation as a job killer from a group of more than 30 trade associations, including the U.S. Chamber of Commerce, the Business Roundtable and the National Retail Federation.

"We believe that some of the approaches under consideration in the House legislation would not improve the system, but in fact would jeopardize the parts of the system that currently work," the groups said in a letter to members of the House.

The Pharmaceutical Research and Manufacturers of America (PhRMA), the trade group of the pharmaceutical industry, said it won't support the bill because of changes in the Medicare Part D benefit, which it said would constitute a tax increase on seniors.

The bill was praised by various health care advocacy groups such as AARP. Families USA Executive Director Ron Pollack said the bill would "ensure that virtually all Americans have access to high-quality, affordable health coverage and care."

The bill still faces opposition from factions of the Democrat caucus and has already prompted widespread criticism from Republicans. A group of fiscally conservative "Blue Dog" Democrats stalled the release of the bill last week over concerns that it be deficit neutral, control costs and include stronger protections for small businesses and rural patients. The group said it plans to incorporate more cost cutting measures into the bill.

"The Blue Dogs are committed to passing health care reform," said Rep. Mike Ross, Arkansas Democrat and chairman of the Blue Dog Health Care Task Force. "However, reform that does not meet the president's goal of substantially bringing down costs is not an option."

The group of 52 Democrats have a substantial number of members on the Energy and Commerce and Ways and Means committees, meaning they could hold up passage of the bill.

But House leaders, who released the bill Tuesday to keep on Mr. Obama's aggressive timetable aimed at passage before the August recess, expressed optimism that it would pass in time. Mr. Obama met Monday with Rep. Charles B. Rangel, chairman of the Ways and Means Committee, and Sen. Max Baucus, chairman of the Finance Committee, to prod the process along.

House leaders released the bill with no official cost estimate from the Congressional Budget Office (CBO) and declined to estimate the final price tag. A Democratic House aide told the Associated Press that the bill would likely cost $1.5 trillion over 10 years.

Mr. Waxman and Mr. Rangel chided the CBO for not potential savings from the prevention and wellness measures in the package. The chairmen expect the measures to save money in the long run, but will likely make the bill look more expensive than they'd like.

The bill includes the creation of a public health insurance plan designed to create an alternative to private insurance and expands Medicaid eligibility. The idea is that if more individuals are insured and receive preventive care, they will be more healthy and out of hospitals and doctors offices for more series conditions.

Consumers will no longer have to pay co-pays on preventive care, and there will be caps set up on out-of-pocket expenses to prevent health care-related bankruptcies, said Rep. George Miller, California Democrat and chairman of the Education and Labor Committee.

The bill would be paid for with a combination of cuts to Medicare and Medicaid reimbursements as well as a $540 billion surtax on wealthy Americans over the next decade. Earlier proposals to tax employer benefits have been scrapped.

Couples making more than $350,000 and $500,000 would face an additional 1 percent or 1.5 percent tax, respectively, starting in 2011. That figure could jump to 2 percent and 3 percent two years later. People with modified adjusted gross incomes over $1 million would face a new 5.4 percent tax.

Individuals would be required to buy health care coverage or face a penalty of 2.5 percent of their modified adjusted gross income. Credits to purchase health insurance would be provided to individuals making less than $43,000 - or $88,000 for a family of four - and would be graduated based on income.

Employers would be required to provide health insurance to their employees or face a penalty. Companies with payroll costs under $250,000 would be exempt and could receive a tax credit to buy insurance. Beyond that, companies would face a 2 percent to 8 percent penalty that would gradually increase with payroll up to $400,000.

The nonpartisan Joint Committee on Taxation determined that the surtax would apply to the top 1.2 percent of U.S. households and the top 4 percent of small businesses. A study by the Tax Foundation, a fiscal watchdog group, found that the surtax would push top tax rates over 50 percent in 39 states.

The bill will now face debate in the Ways and Means, Energy and Commerce, and Education and Labor committees. House Majority Leader Steny H. Hoyer, Maryland Democrat, who said the bill would become "the hallmark issue of this Congress," said he expects the mark-up process to be completed this week or early next week - an ambitious plan.

If it passes the House floor, it would have to be merged with a Senate bill that is expected to look drastically different. Two Senate committees are working on separate plans. One of them, the Finance Committee, has not determined which payment method or methods they plan to use and is now considering a broader series of less controversial payment options instead of focusing on one or two more controversial measures, such as taxing employer provided benefits.

The Health, Education, Labor and Pensions Committee is expected to pass its bill out of committee Wednesday morning.

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