House Democrats Looking for a Palatable Tax to Fund Healthcare Reform

Congressional Democrats are mulling a tax on high-cost insurance plans to pay for overhauling the nation’s healthcare delivery system.  Speaker of the House Nancy Pelosi (D-CA) says that such a tax is “under consideration” as Democrats seek consensus before bringing a bill to the House floor this fall.

49095“We just have to see how much money we need for what,” according to Pelosi.  “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.”  A House tax option likely would be a scaled-down version of the one Senate Finance Committee Chairman Max Baucus (D-MT) has proposed.

The Democratic House plan wants to increase taxes on upper-income people to pay for covering the uninsured.  Baucus wants to tax high-cost “Cadillac” insurance plans often valued at more than $8,000 for an individual and $21,000 for a family and which may have no deductibles or co-payments.  Those in favor of the tax, which President Obama supports, believe it will reduce healthcare costs by persuading people to become more cost-conscious consumers.

The insurance tax should reduce the cost of the House’s healthcare reform bill.  How to pay for the plan is just one issue that House leaders are trying to settle as they work to merge three committee-approved bills into one piece of legislation.  The major issue is that the House Democrats’ 10-year bill costs $1 trillion-plus, higher than the $900 billion that President Obama prefers.  Although House Democrats realize that cuts are required, they want to protect the subsidies that will help low-income Americans purchase coverage.  Unfortunately, the subsidies are the most expensive part of the legislation.

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