Senate's Health-Care Draft Calls for Most to Buy Insurance, Nixes Obama's 'Public Option'

By Lori Montgomery and Shailagh Murray
Washington Post Staff Writers
Friday, June 19, 2009

A draft proposal in the Senate to overhaul the nation's health-care system would require most people to buy health insurance, authorize an expansion of Medicaid coverage and create consumer-owned cooperative plans instead of the government coverage that President Obama is seeking.

The document, distributed among members of the Senate Finance Committee yesterday afternoon, addressed none of the funding questions that have consumed House and Senate negotiators in recent days. But it included an array of coverage provisions that were drastically scaled back from earlier versions, as lawmakers seek to shrink the bill's overall cost. The proposal, for instance, would reduce the pool of middle-class beneficiaries eligible for a new tax credit meant to make insurance more affordable.

The absence of a "public option" marks perhaps the most significant omission. Obama and many Democrats had sought a public option to ensure affordable, universal coverage, but as many as 10 Senate Democrats have protested the idea as unfair to private insurers. In its place, the draft circulated yesterday outlines a co-op approach modeled after rural electricity and telecom providers, subject to government oversight and funded with federal seed money.

Yesterday, Senate Finance Committee Chairman Max Baucus (D-Mont.) met with four Republicans, including Sen. Charles Grassley (Iowa), the ranking GOP member on the panel, along with two Democratic colleagues in an attempt to find bipartisan consensus. Baucus dubbed the group "the coalition of the willing."

Meanwhile, in the House, Democrats are exploring a range of funding options, including a surtax on the rich and an increase in the payroll tax imposed on all U.S. workers. The list also includes new taxes on sugary drinks and alcohol, along with broader levies, such as a national value-added tax of up to 3 percent.

The Senate's preferred option -- taxing the health benefits that millions of Americans receive through their employers -- is also on the House list. So is Obama's favorite idea: limiting the value of itemized deductions for the nation's wealthiest 3 million taxpayers.

Rep. Richard Neal (D-Mass.), chairman of the Ways and Means subcommittee charged with developing a financing plan, said lawmakers have not "embraced any particular source of revenue." But he confirmed that big, broad-based taxes like the payroll tax and a value-added tax are under discussion, mainly because they have the potential to raise "a lot of money" for an expansion of health coverage expected to cost more than $1 trillion over the next decade.

The House will not unveil a financing plan until after the July 4 recess, Neal said, though House leaders were expected to release an outline of the rest of their plan today, with a goal of putting a bill to vote later this summer. The Senate is aiming to debate its legislation in July as well, and is seeking a bill that would cost less than $1 trillion.

Maintaining that tight schedule could prove difficult, though, because daunting issues remain in both chambers. One area of contention is the extent to which private employers must subsidize public coverage for their workers if the companies don't offer their own plan or if the premiums are unaffordable. The Congressional Budget Office has warned that if lawmakers don't find the right formula, employees may flee their company plans for federal coverage, sending government costs soaring.

The draft in the Senate committee spells out one possible solution: It would require employers to pay 50 percent of Medicaid costs for workers enrolled in the low-income program and 100 percent of the cost of health-insurance tax credits for eligible employees. Workers could forfeit employer coverage only if the cost exceeds 12.5 percent of their income.

The draft, earlier reported on by blogger Ezra Klein, spells out four options for requiring employers to provide coverage, with exemptions for firms with up to 200 employees. It would fine individuals who do not purchase coverage, though certain groups, including Native Americans and undocumented workers, would be exempted.

It also would loosen eligibility requirements for Medicaid, a proposal certain to alarm many governors who are grappling with budget crises.

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