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Democrats Closer to Health Bill With Tax Issue Solved (Update1)

January 15, 2010, 09:53 AM EST (Adds Hoyer quote in second paragraph.)

By Holly Rosenkrantz

Jan. 15 (Bloomberg) -- Congressional Democrats are close to agreeing on legislation to overhaul the U.S. health-care system after labor unions and the White House struck a deal over a tax dispute standing in the way of a bill.

“I think we’re getting very close” to reaching a deal, House Majority Leader Steny Hoyer, a Maryland Democrat, said today on CNBC. “I certainly hope within the next 24, 48, 72 hours that we have a general agreement between the Senate and the House.”

The accord between the unions and President Barack Obama’s administration, easing the impact of a Senate plan to tax the most-generous health benefits, cleared one of the biggest hurdles to passing the most sweeping revamp of the medical system in 45 years.

The administration and Democratic-controlled Congress are “very, very close,” White House spokesman Robert Gibbs said yesterday.

Other barriers remain, though, especially how to pay for the bill, which may cost $1 trillion over 10 years. Congress also must consider how to make up the $60 billion that union leaders say the tax deal will cost.

Lawmakers are pressing drugmakers to contribute more toward the legislation than the $80 billion they pledged in June. Hospitals, which promised $155 billion in July, are also being asked to give more, White House aides said last night.

The legislation is intended to extend health coverage to tens of millions of uninsured Americans by expanding the Medicaid program for the poor and setting up online insurance- purchasing exchanges, while at the same time curbing costs.

Republican Opposition

House and Senate Democrats seeking to merge their two versions of the legislation have clashed over issues such as whether to establish a single national insurance exchange and how much aid to provide low-income people to buy coverage. Republicans are almost universally opposed to both bills, so the Democrats have little room for defections.

The Senate’s proposed 40 percent excise tax on the most generous employer-provided health benefits -- known as Cadillac plans -- has been a stumbling block to passing the legislation, Obama’s top legislative priority.

Proponents, including those in the administration, say the levy will help curb spending by discouraging costly insurance. Labor unions argued that the tax would hurt many union members and middle-class workers more than the corporate executives it was aimed at.

Threshold Raised

The deal reached yesterday raises the threshold at which the tax would be applied to the employer-provided health plans to $8,900 for individuals and $24,000 for families, so it will affect fewer people.

Union members’ health benefits that were collectively bargained would be exempt from the tax until 2018, as would the benefits of state and local municipal workers.

The legislation passed by the Senate on Dec. 24 calls for the 40 percent levy on health-insurance premiums that exceed $8,500 for individuals or $23,000 for families. There are higher thresholds for retirees 55 years of age and older and workers in high-risk professions such as firefighting.

Under yesterday’s agreement, dental and vision-care costs beginning in 2015 are exempt from the tax, and the threshold is raised for plans that have a significant number of women and older workers. The level would also be increased for workers in high-risk professions.

‘Middle-Class America’

“We’ve made some changes for middle-class America out there that will be very beneficial,” Richard Trumka, president of the 11 million-member AFL-CIO labor federation, said on a conference call with reporters.

Labor unions, which spent a record $450 million helping elect Democrats to the White House and Congress in 2008, had said the tax would hurt older workers and employees of small companies, as well as many union workers who traded wage increases over the years for generous health plans.

“We’re trying to protect working families who may have high-cost plans, but not high-end plans,” said Randi Weingarten, president of the American Federation of Teachers.

Labor leaders warned this week that union members may not support Democrats in the November elections if they get hit by the tax.

Unions had sought to do away with the tax entirely as a way of paying for the health-care legislation.

“Politically, that is not achievable” Trumka said.

Meetings at White House

Congressional leaders met with Obama and White House aides for eight hours on Wednesday to settle remaining differences, and returned again yesterday, and last night, for more talks.

More . . .

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