How to pay the bill is last major hurdle to healthcare reform

Organized labor pressed Congress and the White House to ease the 'Cadillac tax' on expensive healthcare insurance policies. This means other ways to pay for a healthcare reform bill will have to be considered – including hospitals, the pharmaceutical industry, and Medicare.

By , Staff writer

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    AFL-CIO president Richard Trumka. Unions pressed the White House and Congress to ease the 'Cadillac tax' on expensive healthcare insurance policies. But this means other ways to keep the legislation revenue-neutral will have to be found.
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President Obama and Democratic congressional leaders are close – oh so close – to a final deal on healthcare reform. But even at this late hour they must still figure out how they are going to pay for the legislation.

That is because they blew a $60 billion hole in their budget Thursday by paring back a tax on high-cost insurance plans due to pressure from unions.

Negotiators must replace that lost revenue if the healthcare effort is to remain deficit-neutral. Among the sources of cash they may turn to are more fees on hospitals and the pharmaceutical industry – and, possibly, higher Medicare payroll taxes.

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Decisions could be made, and the bill sent to the Congressional Budget Office for a cost estimate, as early as Friday. House and Senate Democratic leaders were set to join Mr. Obama for another session on the subject Friday afternoon.

'Nothing's finished until everything is finished'

“I feel pretty comfortable for where we are at this point,” said House Speaker Nancy Pelosi on Friday. But “nothing’s finished until everything is finished.”

The so-called Cadillac tax on expensive health insurance policies was the largest source of revenue in the Senate’s version of healthcare reform legislation.

Given that the bill in essence cleared the Senate by just one vote, most observers say the House will acquiesce to the inclusion of the Cadillac tax in the final version of legislation.

Unions, however, have objected strenuously to this provision. Many have negotiated relatively generous health packages for their members over the years. By some estimates, the Cadillac tax would have affected 1 in 4 union members.

Unions were among Obama’s biggest supporters in the 2008 election. On Thursday the White House agreed to tweak this tax, raising the level at which it kicks in.

Previously, employer-sponsored family plans worth $23,000 would have been subject to the levy. Under Thursday’s deal, that figure has been raised to $24,000 for a family.

Perhaps more important, the tax would be delayed until 2018 for policies covering workers in collective bargaining agreements.

“We’ve seen tremendous progress over the last several days,” said AFL-CIO president Richard Trumka.

GOP criticizes 'special deals' to get a bill

Republicans criticized the move as another in a line of special deals made in order to push healthcare legislation through the Congress.

“Taxing Americans differently based solely on a ‘special’ affiliation goes against everything we stand for in this country,” said Republican Study Committee chairman Rep. Tom Price (R) of Georgia in a statement.

Now negotiators must find somebody else to pay the money foregone by tweaking the Cadillac tax.

The hospital industry has been asked to contribute an additional $15 billion over 10 years, according to news reports. The pharmaceutical industry may pony up an extra $10 billion.

More money may come from adjusting the Medicare payroll tax rate, by applying the tax to investment earnings.

Currently, income from capital gains and other “passive” sources is exempt from the payroll tax that pays for Medicare.

“Finding common ground. That’s what we’re in the process of doing,” said Speaker Pelosi on Friday about the ongoing negotiations. “So it’s just making some decisions in that regard.”

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