Friday, Nov. 7, 2008
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ONLINE EXCLUSIVE
Budget Woes May Complicate Health Care Reform
Questions Abound About Potential Legislation And How To Pay For It
The prevailing question in Washington is not whether there will be health care legislation next year, but rather what form it will take, given today's shaky economy and the larger new Democratic presence in Washington. Already, the words "incremental" and "phased-in" have become commonplace.
Today, while there is general consensus that the problems of high health care costs and the uninsured will only get worse in tough economic times, some question whether the federal government can afford to move forward now with expensive reform legislation.
"The hill has gotten higher," said Drew Altman, president of the Henry J. Kaiser Family Foundation. "The focus on other issues will crowd out attention to health and a host of things on the congressional agenda. And it's also because of the decline in revenues and the sluggish economy."
Even before the economy began to weaken, finding the money for health care reform was a challenge. President-elect Obama's proposal would cost the federal government $1.17 trillion over 10 years, according to an Oct. 8 report [PDF] from the Lewin Group, a consulting firm.
Obama has said he would pay for his plan in large part by allowing President Bush's tax breaks to expire for people with annual incomes above $250,000. But John Sheils, senior vice president at Lewin, says that this is not a legitimate source of revenue, since the tax breaks are already scheduled to expire, thereby removing from play the revenues that fund them.
And Congress is unlikely to put a big health care reform package on credit, according to a Senate Republican aide. "Health care reform has to be fully offset from the federal budget perspective," the aide said, also noting that Congress will have to be careful during these tough economic times not to overburden businesses and individuals. "The last thing Congress will want to do is saddle business with a big new expense while the economy is weak."
But doing nothing doesn't seem to be an option. Obama has listed health care as a priority, and congressional Democrats have been waiting not-so-patiently for nearly 15 years for an opportunity to pass meaningful health care legislation. Indeed, 1994 was the last time that Democrats ruled both the executive and legislative branches, and policy differences and political bickering have hindered progress since.
Still, Democrats face challenges beyond the economy. Without a 60-seat majority in the Senate, Democrats will need Republican support to do anything.
And timing is tricky. Obama plans to tackle energy first, although health reform advocates maintain that health care must come early to take advantage of Democrats' new political capital and to avoid pre-2010 election jitters. Key health-minded Democrats already are preparing for quick action.
All of these factors have Democrats strategizing. Possibilities include doing as much as possible when Congress reauthorizes the State Children's Health Insurance Program, which expires in March, or when it moves an economic package.
Then there are those who argue for broader reform, even if it has to be phased in. Karen Davis, president of the Commonwealth Fund, a private foundation, envisions phasing in reforms over six to eight years. Davis wrote on NationalJournal.com's Health Care Expert Blog on Oct. 27 that such an approach would allow Congress to focus first on savings, and then on expensive coverage expansions.
A first phase could promote electronic medical records and systems to compare the effectiveness of medical treatments while expanding health coverage to children and low-income adults through SCHIP. A second phase could compensate doctors and hospitals more for better care in Medicare.
The final two phases could create mechanisms to link individuals to guaranteed insurance, and provide premium assistance to help people afford insurance.
Meanwhile, Stuart Butler, vice president for domestic policy at the conservative Heritage Foundation, says that changing the tax treatment of health care may become more politically palatable. The current system provides a tax break only to people who get health coverage through an employer. The more generous the insurance, the bigger the break.
Even Sen. Hillary Rodham Clinton, D-N.Y., has proposed limiting the tax exclusion for the "high-end" portion of "Cadillac" insurance for workers with incomes above $250,000.
Before the election, Obama attacked McCain for proposing to erase the existing tax exclusion, or effectively taxing health benefits. But without election pressures, Butler argues, Democrats may see changing these tax breaks as fitting Democratic ideals of shifting tax burden from middle- to upper-income people.
In addition, Butler said, tax changes should appeal to Democrats as revenue to pay for coverage expansions. Sheils said that phasing out the tax exclusion for those earning between $250,000 to $500,000 would produce about $108 billion in savings over 10 years.