The Senate’s top tax writer said Tuesday that taxing employer-provided health benefits is a possibility as lawmakers search for ways to pay for overhauling the nation’s health care system and to insure 50 million Americans who lack coverage - a stance that riles both business and union leaders and is at odds with some leading Democrats.
At the last in a series of public forums on health care reform, Sen. Max Baucus, Montana Democrat and chairman of the Senate Finance Committee, said scaling back the tax-free status of employer-provided health care benefits must be considered.
“There are ways to enact health care reform that can bend the cost curve in a very significant way that provides health insurance reform, which this country desperately needs, and also covers all Americans,” Mr. Baucus said before a panel of senators, health care and tax specialists, and others representing outside groups in the health-care-reform debate.
Business and labor groups said they won’t go along with the idea thrown on the table.
It’s “a step in the wrong direction,” said Gerald Shea of the AFL-CIO labor federation, who was a participant in the panel discussion.
“We cannot ask people who traded wages for health benefits to pay more for their coverage without undertaking a serious effort to lower costs,” said Mr. Shea, who serves as the AFL-CIO’s health care policy specialist.
Many business groups say the employer-based model is the best way to go in health care reform.
“People have expressed that those who have health care coverage they like should be able to keep it and they should be able to keep their choice of doctor if they like their doctor,” said Robert Zirkelbach, spokesman for America’s Health Insurance Plans, which supports “building on what is working.”
The idea of employer-based health care has splintered the debate over health care reform. During the presidential campaign, Barack Obama supported preserving the employer-based model and ridiculed his Republican rival, Sen. John McCain, for calling to tax employer-based health care, and the White House said his stance hasn’t changed.
As president, Mr. Obama has already called for taxing wealthier Americans to help fund an overhaul that could cost more than $1.5 trillion.
“The reform contemplated by the president during the campaign and what I think is largely being discussed on Capitol Hill is a preservation of the employer-based health care system, but done in a way that … envisions significant reform in how we’re spending money,” White House spokesman Robert Gibbs said Tuesday.
At the roundtable, Mr. Baucus said revenue could be generated by taxing portions of the benefit based on income levels or on based on the value of the plan. More comprehensive, costlier plans would be taxed at a higher rate.
He said he’s open to new ideas but was cautious about proposing to eliminate the tax break that employers get on their employees’ health care plans.
“We’re not going to repeal it, we’re going to modify it,” Mr. Baucus said.
Mr. Baucus has repeatedly advocated changing tax laws to include employer benefits, saying that it makes sense to pay for health care reforms by siphoning cash out of the existing system.
Taxing the benefit would bring in less than 10 percent of the cost of $1.5 trillion, according to the U.S. Chamber of Commerce. About 160 million people are covered by employer-provided health care plans.
Rep. Charles B. Rangel, New York Democrat and chairman of the powerful House Ways and Means Committee, has said in the past doesn’t like the idea, either.
“I think [Mr. Baucus] is going to have a tough time doing that,” said James Gelfand, senior manager of health policy at the U.S. Chamber of Commerce, pointing to Mr. Obama and Mr. Rangel’s statements.
“Employee groups and union groups are extremely opposed to that idea.”
Mr. Gelfand said he doesn’t expect such an idea to get into legislation.
Others, including the National Federation of Independent Business, support considering all options.
Minutes after Mr. Baucus opened the roundtable discussion, five protesters supporting universal medical coverage disrupted the hearing with shouts before being thrown out by police.
About 25 nurses wearing red hospital scrubs attached with signs advocating a so called “single-payer” government-run health care system also conducted a silent protest. After a few minutes with their backs turned to the chairman, the demonstrators walked out of the room while several in the audience applauded.
Mr. Baucus said that although he disagreed with the protesters tactics, he sympathized with their frustrations.
“Believe me, we hear you,” he said. “I will meet with anyone who wants to meet.”
The chairman, as well as the Obama administration, have said that replacing the current private health insurance system with a Canadian-style government-run single-payer model is not practical or politically feasible. But both support creating a government-run health insurance plan that would compete with private insurers.
“We’ve got to work with what we’ve got,” Mr. Baucus said. “We cannot go to a single-payer system. … That’s not going to work in this country.”
Eight protesters supporting a single-payer system were arrested last week at a Baucus-led health care roundtable workshop.