Like a tractor trailer stuck at a railroad crossing, the House health care reform bill sits on the track waiting for the Senate freight train to come smashing through. Ideologues of both parties want you to believe the big issue is the fate of the public option. But the real battle, as usual, will be where the money comes from.
The latest version of the House bill would raise $460 billion over 10 years with a 5.4 percent surtax on adjusted gross income in excess of $500,000 (on individual returns) and $1,000,000 (for couples). Those caps are not indexed for inflation. That's to ensure the bill's income tax take can offset rising government health costs.
The latest Senate version raises $201 billion from a nondeductible 40-percent excise tax on insurance providers for the portion of employer-provided health insurance coverage that exceeds $8,000 for individuals and $21,000 for families. Those thresholds are increased by $1,850 for individual coverage and $5,000 for family plans when policyholders are over age 55, retired, or engaged in a high-risk profession (like firefighting). From 2013 through 2015 caps would be even higher in 17 high-cost states. Thresholds are indexed by the percentage change in the Consumer Price Index plus one percent ( less than the expected increase in the price of health insurance).
These are truly irreconcilable differences. The Senate will never agree to a bill with rate increases--especially since the Obama administration and congressional Democrats are already counting on allowing the 2001 Bush rate reductions on incomes over $250,000 to expire in 2011. On the other side of the Hill, 157 House Democrats are committed to rejecting the Senate-proposed excise tax. Unions who have negotiated generous health plans for their members are apoplectic at the possibility of any scaling back of the tax benefits for employer provided health care. Democrats beholden to the unions will not concede without a huge fight.
But ultimately they must concede to an excise tax on Cadillac plans if their dream of comprehensive health care reform is to become law.
Tax Analysts Blog
Who Pays for Health Care? The Over-Insured or the Super-Wealthy?
Posted on Nov 2, 2009