CBO Chief Criticizes Democrats' Health Reform Measures

Asked what provisions would be needed to slow the growth in federal health spending, Elmendorf urged lawmakers to end or limit the tax-free treatment of employer-provided health benefits, calling it a federal "subsidy" that encourages spending on ever more expensive health packages. Key senators, including Conrad, have been pressing to tax employer-provided benefits, but Senate leaders last week objected, saying the idea does not have enough support among Senate Democrats to win passage.

Elmendorf also suggested changing the way Medicare reimburses providers to create incentives for reducing costs.

"Certain reforms of that sort are included in some of the packages," Elmendorf said. "But the changes that we have looked at so far do not represent the sort of fundamental change, the order of magnitude that would be necessary to offset the direct increase in federal health costs that would result from the insurance coverage proposals."

Senate Majority Leader Harry M. Reid (Nev.) dismissed Elmendorf's push for the benefits tax. "What he should do is maybe run for Congress," Reid said.

But Senate Finance Chairman Max Baucus (D-Mont.) expressed frustration that the tax on employer-funded benefits had fallen out of favor, in part because the White House opposes the idea. Critics of the proposal say it would target police and firefighters who receive generous benefits packages. And if the tax is trimmed to apply only to upper-income beneficiaries, it would lose its effectiveness as a cost-containment measure.

"Basically the president is not helping," Baucus said. "He does not want the exclusion, and that's making it difficult."

But he added, "We are clearly going to find ways to bend the cost curve in the right direction, including provisions that will actually lower the rate of increase in health care costs."

Ideas under consideration include health-care delivery system reform; health insurance market reform; and empowering an independent agency to set Medicare reimbursement rates, an idea the White House is shopping aggressively on Capitol Hill.

But Baucus is not giving up on the benefits tax. "It is not off the table, there's still a lot of interest in it," Baucus said.