Democrats Look To Insurance Tax To Pay For Health Care

House Democrats are seeking an insurance tax to pay for the health care overhaul plan, even though labor unions among the party’s most loyal constituencies oppose this type of funding.

House Speaker Nancy Pelosi, D-Calif., said Friday that taxing health insurance plans is "under consideration" as Democrats try and find consensus within their reach before taking a bill to the House floor later this year.

"We just have to see how much money we need for what," Pelosi said. "And if we’re taking the bill down in cost, there are other provisions in the Senate bill that bend the (costs) curve that might be more palatable. We’ll see."

Pelosi did not say any specifics on what other provisions she finds more acceptable.  An aide said that if the House incorporates an insurance tax in its plan then it would end up being more modest than the one Senate Finance Chairman Max Baucus, D-Mont., has proposed.

The House Democratic plan calls for raising income taxes on upper-income people, paying for people that are uninsured.  Baucus proposed a tax on high-cost insurance plans that are worth over $8,000 per individual and $21,000 per family.

President Barack Obama has endorsed the proponents of the insurance tax.  This says it would help lower health care costs by encouraging people to become more cost-conscious health care customers.

Most high-cost health care plans cover co-payments and deductibles so there is no dollar spent for health care. 

Unions argue that they are giving up higher pay to secure better health care benefits.  It is likely that insurers will pass on the cost of the tax through higher premiums.

If House Democrats adopt the insurance tax, then it might reduce the income tax increase they have proposed.

House leaders have several plans to try and pay for their plan as they struggle to merge three committee-approved bills into a single piece of legislation.  They hope to finish that process next week.

House Democrats are struggling to get their 10-year $1 trillion price tag that Obama prefers.  They want to protect the subsidies in their plan, which gives low-income Americans a chance to buy coverage.  Those subsidies are the most costly part of the bill.

On Friday, Baucus’ Finance Committee adjourned without coming close to finishing its health care bill, even though that was the primary goal when he convened the session on Tuesday.  Hundreds of amendments and contentious debates slowed the progress.

The core of the discussion is the health overhaul bills, which are designed to expand health insurance coverage to millions of people that do not have it.

It has not been determined whether or not the final legislation would contain any version of a new public plan to compete with private insurers and sign up middle-class workers and their families.

The Senate panel’s bill does not include a government-run option and the conservative-leaning committee is preparing for a showdown on the issue next week.

There is no final decision on how the bill will be structured.  House liberals are hoping to provide payment rates tied to Medicare rates, but 5 percent higher.  Moderates say those rates are too low and would hurt struggling hospitals and other providers.

Energy and Commerce Chairman Henry Waxman, D-Calif., said Friday that the Medicare rate structures saves about $85 billion over 10 years than the negotiated rate structure.

"That means we have to come up with the money to do that," Waxman said.