HEALTH CARE UPDATE: Paying for health care reform proves to be daunting task for Obama

The task of reforming health care has created quite a bit of media buzz lately, but one HUGE question remains (a rather important question that Ted Kennedy's initial bill did not try to answer, the New York Times calls it "the trillion-dollar question"): how does our government intend on paying for this rather monolithic task of covering all uninsured Americans?  However,  a recent article from the New York Times points out that Barack Obama is tackling the issue and has already confronted many politicians for their input.

The article puts the question this way:

"...can President Obama find that much in spending cuts and tax increases to keep his campaign promise to overhaul the health care system, without adding to already huge deficits?"

Reforming health care has been one of Obama's many campaign promises but the debate over how it will be paid for is still going on. As a matter of fact,  Obama is not only having major disagreements with the most conservative Republicans but he is also having disagreements and is experiencing a split within Democratic Party members running Congress.

Obama has vowed in a meeting with Vice President Joe Biden and the nation's governors that borrowing more money and adding to the deficit was not on the table. He added that any health care bill that he signs "must and will be paid for." 

Leadership in both the House and Senate also believe that the deficit should not be increased but they disagree with Obama on how it should be done. Obama has proposed some ideas while Congress has not brought up any alternatives. According to the New York Times, "other proposals that could reduce health care spending would take too long to show savings for purposes of Congress' budget scorekeeping, and many would require big investments initially, such as for research into cost-effective treatments."

Meanwhile, insurance companies, employers, and, the New York Times has even mentioned "sugar beet and corn growers," are ready to pounce and kill any idea that may hurt them.

Conservative Republicans are still labeling Democrats as "tax and spend liberals." However, the New York Times has pointed out that the Republicans have not yet proposed any way to pay for their own more modest proposals. 

Republican Senator Lindsey Graham, who has been rather vocal on some other issues, has told the media that the federal government should not spend any money to reform health care. Instead, the government should take the money that they already have in the budget for health care and allocate it more wisely.

Searching for a way to pay for health care reform became even more frustrating after the Congressional Budget Office stated that the government will not be able to fund health care for all uninsured Americans.

The New York Times even puts Robert Greenstein, the executive director of the liberal Center on Budget and Policy Priorities, on the record as saying that a "big health care bill that was heavily deficit-financed" could "deepen the recession". Greenstein explains that the "financial market could react negatively, with higher interest rates" if this kind of bill is passed.

The New York Times article also lists some of the major proposals that are being considered. For a more details on these proposals in addition to what I have provided below, check out the New York Times article provided above. 

1. Limit income-tax deductions for high earners: Obama has proposed this idea to raise revenue, but according to the New York Times, Congress is not expected to pass it unless it is in "a greatly scaled down form." Obama wants to collect "a projected $267 billion over 10 years by making taxpayers in the top income bracket, now 33 percent and 35 percent, deduct their mortgage interest, state and local taxes and charitable donations at the 28 percent income tax rate." Democrats in Congress, however, do not like this idea as they think that it would hurt charities, universities, and other non-profit organizations that depend on tax-deductible donations. Democrats in Congress have also stated that it would hurt "taxpayers in high-tax cities and states, including New York City and other places home to Democratic leaders." However, Obama disagrees with Congressional leaders in his own party. He even compares his idea to former President Reagan. For more on this, check out the article. The New York Times article brings up many issues with Obama's proposal. The articles states that "any compromises would raise less revenue than Mr. Obama proposed. One alternative would exempt charitable contributions from the 28 percent limit. That, however, would provoke governors from high-tax states or Realtors and bankers protective of the mortgage tax break to press for exempting the other categories as well." The article brings up another idea: "maintain the 33 percent and 35 percent rates for itemized deductions after the Bush tax cuts for the rich expire in 2011, when the top two income tax rates revert to 36 percent and 39.6 percent. That would leave the current break for deductions unchanged, but prevent it from becoming relatively more generous when income taxes rise for affluent taxpayers." This idea has also been shot down by the Senate Finance Committee. Senator Charles E. Grassley, a senior Republican member of the committee, agrees with the committee chair, Democrat Max Baucus. The New York Times writes that both Senators believe that "any tax increases or cost savings should come from the health sector. Their preference is to make the value of workers’ employer-provided health benefits subject to income taxes." Whatever is decided, Senator Baucus wants the bill to be a bipartisan effort, something that this Congress has been lacking lately. 2. Tax Employee Health Benefits: House Democrats are opposed to this proposal while the idea of taxing benefits is getting support from many influential Senators. According to the New York Times, "...the huge sums to be raised ensures that this option will be part of the debate. And Mr. Obama does not rule it out, though he opposed such a tax as a presidential candidate and promised that only the top 5 percent of Americans would see an income tax increase under his administration." John McCain supported such a tax on the campaign trail while Barack Obama blasted him for it. Fox News has reported recently that Barack Obama will consider it as a possibility and Republicans have stated that they will support such a tax despite their ideological belief of lowering taxes on the federal level. However, the New York Times explains that "The numbers underscore why this is both the most lucrative and the most controversial among the financing options. Taxing all employer-provided health benefits as income would raise more than $2.5 trillion over a decade — more than twice Mr. Obama’s goal. And employer-provided insurance is the largest source of coverage for Americans, benefiting about 160 million employees and their dependents under age 65." See the New York Times article for more on this proposal. 3. Spend less on Medicare: According to the article, "roughly two-thirds of the $948 billion in savings that Mr. Obama has proposed over 10 years would come from a range of reductions in projected Medicare spending." This means that there would be "lower payments to hospitals and other health care providers as well as insurance companies, inviting opposition from some of the country’s most formidable lobbies." Obama's proposal includes a savings of $177 billion, the biggest savings according to the New York Times, which "would come from having insurance companies bid for government reimbursements for offering private plans, known as Medicare Advantage, to senior citizens. The administration also has proposed to cut $106 billion in subsidies to hospitals that serve many uninsured patients, arguing that fewer Americans would lack coverage after overhauling health care. And it says $110 billion could be cut by reducing payments to hospitals and doctors generally to reflect productivity gains." Meanwhile, the Senate Finance Committee "is working to reduce Medicare and Medicaid payments over time to a range of industries." These industries include insurance companies, hospitals, doctors, drug makers, nursing homes, home health care companies and medical device makers. The committee argues that all of these industries will benefit from reforming health care since it would create more paying customers. 4. Increase behavior-changing “sin taxes": Another proposal that is on the table is to tax sodas and other soft drinks that contain a lot of sugar, tobacco products, and alcoholic beverages. According to the New York Times, "Congressional analyses show that more than $200 billion over 10 years could be collected from new or increased taxes" on these products. Congress is hoping that in taxing these products they are giving an incentive to healthy living. In addition, the Joint Committee on Taxation has calculated that a 3 cent tax on a 12 ounce soda would raise $51.6 billion over one decade. However, this tax is meeting a lot of opposition and it is not only from the bottling industry. Republican Senator Grassley and and Democratic Senator Baucus both represent states that produce sweeteners-- Montana has a large sugar beet industry while Iowa produces a lot of high fructose corn syrup. The New York Times reports that the government can make $61.5 billion with this new tax on alcoholic beverages. The new tax would mean "about 40 cents more for a fifth of liquor, 48 cents for a six-pack of beer and 49 cents on a bottle of wine. Advocates point out that federal alcohol taxes were last raised in 1991; adjusted for inflation, they are 37 percent lower now. But local wineries and microbreweries now operate in nearly every state, suggesting that major distillers will not be the only opposition." These proposals are only some of the ideas that are on the able for this extremely massive healthcare reform bill. However, promises have been made that the final draft of the bill will be a bipartisan one. As you may have noticed, some Senators are putting businesses and constituents from their own states before partisan ideology and bickering-- a good step in the right direction I would say. However, the big problem is that a bill this large for such an important issue has to be examined piece by piece but if this is done, it will not be up for a vote on the Senate floor anytime soon, never mind being on the president's desk before the end of the summer. As far as I can tell, a number has not yet been assigned to the bill yet. The reason for this is not clear, but with the bill in multiple committees, it seems as if there is going to be multiple versions of the initial bill Ted Kennedy had drafted the week after Memorial Day Break. Each committee will be looking at the bill through the eyes of what the committee has been created for. However, it seems as if the media has been focusing more on the Senate Finance Committee to address one of the most important issues of the bill-- how to pay for it--something, as a mentioned before, Senator Kennedy's bill lacks. Until a number is assigned to this specific Senate bill, it will not be included in our database so the only advice I can give is to call or email your Senator with concerns. More radical bills (ones calling for a 100% government run universal health care system which would take away your current health care even if your happy with it and put everybody under a government plan-- similar to Canada and Europe) have been introduced in the House in January or February but have not seen any action whatsoever. This may be because House Speaker Nancy Pelosi is waiting for a more decent Senate bill that will pass through the House easily-- one with a public option rather than the current House one which would take away the right to choose your health care (despite comments on the contrary from hard lined conservatives, Barack Obama does not want to take away your right to choose your own doctors and health care plan. He has repeated several times that a public option is key to health care reform). The Congressional Budget Committee has already said the money may not be there to fund health care reform so it is obviously not realistic to create a universal health care program which would force Obama to pretty much raise everyone's taxes unless the government increases the deficit. They are having enough difficulties finding a way to pay for a public option to cover just uninsured Americans as it is. More to come on the health care bill as soon as news becomes available.

Posted by Anthony Kraljic on 06/30

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