CBO Director Elmendorf Wednesday told senators negotiating a bipartisan healthcare overhaul bill that an employer mandate of some sort would be necessary to keep costs down.
"We just had the director of CBO on the phone talking about how you structure this -- even with an individual mandate, if there's not some requirement for employers, you'll see a drifting of people to the exchange and the government subsidies and that will increase the cost," Senate Budget Chairman Kent Conrad said.
Conrad called a "free rider" alternative to the employer mandate a "live option." The free rider alternative does not require employers to provide healthcare coverage for their employees but would force businesses to contribute the cost of tax credits for eligible workers in an exchange. Employers also would have to contribute 50 percent of the national average Medicaid costs for workers enrolled in the low-income federal healthcare program.
The free rider option raises $300 billion, but that number is already worked into the latest $1.2 trillion CBO estimate on the Senate Finance Committee's proposal.
Conrad also said raising revenue from outside the healthcare arena is a possibility, a departure from recent comments by Senate Finance Chairman Max Baucus that senators were not comfortable with raising revenue from sources outside of health care.
In that vein, Senate staffers have discussed doing a scaled-back version of President Obama's plan to limit the value of itemized deductions for charitable giving, mortgage interest and property taxes, among other things, to 28 percent.
The tentative proposal would basically keep current law in place when taxes snap back up in 2011 for everyone making more than $200,000. The plan would keep the cap at 35 percent, for example, even for people whose income tax rate will jump to 39.6 percent.
The Center on Budget and Policy Priorities endorsed the idea earlier this month and said it would raise $68 billion over 10 years.
Obama's version of the limit on itemized deductions would raise $318 billion over 10 years, raising the question of whether senators would be willing to risk political backlash for so much less money.
Baucus also said Tuesday that senators were coalescing around the idea of capping the tax exclusion for employer-based health benefits, though he would not elaborate.
"It's hard for me to see how you have a package that is paid for that doesn't include reducing the tax subsidy for health care," Conrad said, referring to the exclusion.
Conrad added that he does not foresee sin taxes, such as those on alcohol or sugary drinks, "crossing the finish line."
Conrad also told reporters that talks around his co-op style health plan are "intensifying." He was awaiting a list of changes some senators want to see in the co-op plan to gain his support. He did not say which senators were offering the suggestions. The negotiations around the co-op have centered on how much money the government will provide up front, how long a government-appointed board would be in place and whether the structure should be centered nationally, regionally or statewide.
Conrad revealed that after much discussion, he supports a national structure with state affiliates that would have the ability to regionalize their efforts.
This article appears in the June 27, 2009, edition of National Journal Daily.