Obama offers new health-care reform proposal

Just days before his bipartisan health-care summit, President Barack Obama unveiled the details of his own proposal. AP correspondent Julie Pace reports. (Feb. 22)
By Alec MacGillis and Amy Goldstein
Washington Post Staff Writer
Tuesday, February 23, 2010

President Obama signaled his determination to forge ahead with a Democratic vision of comprehensive health-care reform as he unveiled on Monday an ambitious proposal that would extend coverage to 31 million people, raise taxes on the wealthy and ratchet up regulations on insurers.

The proposal is a carefully calibrated attempt to relaunch a nearly year-long effort that has stalled: It tries to combine the separate bills that narrowly passed the House and Senate into a final version that could pass muster in both chambers.

Like the Senate and House bills, the proposal would require almost everyone to obtain insurance or pay a fine and provide income-based subsidies to those who cannot afford it. It would expand Medicaid for the working poor and impose new requirements on insurers that sell policies in a new "exchange," or marketplace, where those without employer-based benefits could buy coverage.

Obama's proposal takes the more modest Senate bill as his basic framework. But, in what is perhaps his proposal's most notable feature, he scales back the Senate bill's main revenue source, a tax on high-cost insurance that he has strongly supported. Instead, he would impose a new tax on the unearned income of the wealthy.

He would expand subsidies to help working-class and middle-class families afford coverage. To win over some of the bill's strongest skeptics -- seniors and state officials -- he would expand the Medicare drug benefit for seniors and Medicaid assistance for budget-strapped states.

There is no independent cost estimate yet, but the proposal's additions drive its price tag higher than the Senate bill's $871 billion. White House health-care czar Nancy-Ann DeParle estimated the increase at $75 billion over 10 years, which she said would be offset by bigger cuts in subsidies for private insurers that offer Medicare Advantage plans and higher fees on drug companies, among other sources. By reining in Medicare, the proposal would still reduce the deficit by $100 billion over 10 years, the White House said.

The proposal arrives in advance of Obama's bipartisan health-care summit on Thursday. But his formal adoption of an approach so aligned with the efforts of congressional Democrats acknowledges that the overhaul will draw little to no Republican support, and that the main challenge lies in retaining the support of Democratic lawmakers.

"It doesn't strike you as a scaled- down thing that's not supposed to have enemies," said John Holahan of the Urban Institute, who is a proponent of comprehensive legislation. "They just went all out."

Because of the Democrats' loss of their 60th Senate seat, the overhaul's likeliest route is for the House to pass the Senate bill with the understanding that the Senate would pass agreed revisions using a maneuver that requires only 51 votes. But for that to work, House Speaker Nancy Pelosi (D-Calif.) would need to retain the Democrats who voted for the House bill, as well as replace those who are opposed to the abortion language in the Senate bill.

The imperative of corralling House Democrats is apparent in the president's decision to scale back the tax on high-cost insurance plans. The White House had championed the "Cadillac tax" as a cost-containment tool, but House Democrats and labor unions had opposed it, saying it would hit middle-class families and would be an easy political target for Republicans. Instead, the House bill raised income taxes on couples earning $1 million.

The president's proposal scales back the tax on high-cost plans by raising the threshold of plans that would be taxed from $23,000 to $27,500 for family plans, and by delaying the tax until 2018, an exemption previously given only to unions. The proposal makes up the revenue by extending the Medicare tax so that it applies, at a 2.9 percent rate, to wealthy taxpayers' income from sources other than wages, such as interest and dividends.

Reducing the tax on high-cost plans "is going to make it much easier to pass the bill in the House a second time," said Ron Pollack, director of Families USA, which advocates universal health care.

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