Baucus: Obama Open To Taxing Health Benefits To Pay For Health Reform

On the same day President Obama expressed the urgent need for health care reform, he also met with two dozen Senate Democrats and suggested that he is open to considering taxing employer-provided health benefits to pay for health care reform, The Washington Post reports.

"Senate Finance Committee Chairman Max Baucus, D-Mont., said Obama expressed a willingness to consider changing the existing tax exclusion. The decision would probably anger liberal supporters such as labor unions, but such a tax change would raise enormous sums of money as Congress and the White House are struggling to find the estimated $1.2 trillion needed to pay for health-care reform over the next decade."

White House officials clarified that taxing the benefits — an estimated $518 billion per year spent by employers — isn't Obama's first choice, but that it remains a possibility. He campaigned against a similar proposal during last year's presidential campaign when his opponent, Sen. John McCain, R-Ariz., suggested it. "Obama instead urged senators to reconsider his proposal, which would raise federal revenue by reducing itemized deductions such as charitable contributions and mortgage payments for the wealthiest Americans, according to one adviser in the meeting. Obama included that idea in his budget, reporting that it would raise $317 billion over 10 years, a sizable 'down payment' on the cost of health-care reform. But Congress immediately labeled the proposal a non-starter" (Connolly, 6/3).

Sen. Chris Dodd, D-Conn., told The Wall Street Journal that he didn't think Obama had changed his mind on not taxing the benefits (Adamy, 6/2).

Baucus wants to limit, but not eliminate the tax-free status of employer health benefits, The Associated Press reports.

"At their weekly luncheon Tuesday, Senate Democrats got a first look at Kennedy's proposals, which would include a new public insurance plan to compete with private providers. The Finance Committee is also considering a public plan though some options being reviewed are more limited in scope than (Massachusetts Democratic Sen. Edward) Kennedy's. Obama brought Democrats from both (the Senate Finance and Health, Labor Education and Pensions) committees to Tuesday's meeting, urging them to get a single bill through the Senate by early August despite their differences, and telling them they might not all get everything they want, according to senators who attended. Kennedy, who's been diagnosed with brain cancer, did not attend" (Werner, 6/2).

Politico reports that Republicans were not invited to the meeting, sparking criticism from Sen. Chuck Grassley, the ranking Republican on the Senate Finance Committee. "A White House spokesman said the president has invited Republicans to other meetings and their exclusion Tuesday was not meant as a slight." Meanwhile, to save money, "Obama and his top aides showed interest in a bill from Sen. Jay Rockefeller, D-W.V., to beef up the powers of the Medicare Payment Advisory Commission, which advises Congress on Medicare issues, sources said. Rockefeller wants to make it a new federal agency modeled on the Federal Reserve and staffed by independent experts who have the power to set reimbursement rates for Medicare. By giving it expanded powers, MedPAC could tackle the rising costs of Medicare, which is squeezing the federal budget" (Brown, 6/3).

Also, Obama reaffirmed his support for a government-run public health care insurance plan while acknowledging that the plan may mean the loss of some Republican support, The New York Times reports.

"Senator Sheldon Whitehouse of Rhode Island … said the president 'spoke very enthusiastically about a public plan' that would compete directly with private insurers," the Times reported.

"The president’s words were comforting to Democrats like Senator Sherrod Brown of Ohio. 'The sentiment in the room, with the president and the rest of us, was that a public plan option will keep the insurance industry honest, will give people more choices in their health care and can save significant amounts of money,' Brown said" (Pear and Stolberg, 6/2).

Meantime, Former Senate Majority Leader Tom Daschle said Tuesday that he gives health reform just a 50-50 chance of succeeding, Kaiser Health News reports. "During the Clinton administration, Daschle explained, many of his colleagues on both sides of the aisle made optimistic predictions about a health overhaul, but '15 years later, we know how wrong that was.' Based on his prior experiences in Congress, he said, the chances this year are 'no better than 50-50,' although he'd 'like to think it's better than that.'" Daschle appeared at the National Press Club with former Secretary of the Department of Health and Human Services under President George W. Bush, Michael Leavitt (Gold, 6/2).

This is part of Kaiser Health News' Daily Report - a summary of health policy coverage from major news organizations. The full summary of the day's news can be found here and you can sign up for e-mail subscriptions to the Daily Report here. In addition, our staff of reporters and correspondents file original stories each day, which you can find on our home page.