Healthcare’s Next Big Fight: Tax the Rich or Slam Workers?

Art Levine

The unveiling this week of new health reform bills by House and Senate leaders has focused most public and media attention on the scope of the public option. But, in truth, neither the House nor Senate versions of that measure could offer the scope of coverage that reformers are hoping for or that Democrats have been promoting. 

Labor unions, joined with other progressive organizations like Health Care for America Now, will be pushing to strengthen the legislation when the bills come to floor votes, but they’re also focusing their efforts on ensuring that midde-class families and union members aren’t slammed by a whopping 40% tax on insurers offering so-called Cadillac plans.

That’s what the Senate bill does, in essence, by passing along the costs to workers, while the House version seeks to impose a surtax on America’s wealthiest families, the top 0.3%: taxing a portion of $500,000 for individuals and $1 million for couples. Already, Republicans are gearing up anti-tax rhetoric that could spook moderate Senate Democrats facing re-election. 

The biggest gulf between the House and Senate versions are the financing pieces: how to pay for it,” observes Alan Charney, the program director of USAction, the lead grassroots organization in the Health Care for America Now (HCAN) coalition, with its 1,000 local and national groups, including labor organizations.

The House and Senate are closer on a public option,” he notes. The House is fair and progressive on financing,” but the Senate far less so, he argues. Indeed, even the Congressional Joint Committee on Taxation noted that the plan would end up taxing nearly half of all employer-based plans.

So, Charney notes, We’re going to have weigh in,” as they’ve already begun doing joined with advertising and grassroots support slamming the Senate version, but he concedes that in the Senate, adding a tax-the-rich provision faces rougher sledding.”

AP described some of the differences between the House ad Senate versions:


HOW IT’S PAID FOR: $460 billion over the next decade from new income taxes on single people making more than $500,000 a year and couples making $1 million. (The original House bill taxed individuals making $280,000 a year and couples making more than $350,000, but the threshold was increased in response to lawmakers’ concerns that the taxes would hit too many people and small businesses).

There’s also more than $400 billion in cuts to Medicare and Medicaid; a new $20 billion fee on medical device makers; $13 billion from limiting contributions to flexible spending accounts; sizable penalties paid by individuals and employers who don’t obtain coverage; and a mix of other corporate taxes and fees.

REQUIREMENTS FOR INDIVIDUALS: Individuals must have insurance, enforced through a tax penalty of 2.5 percent of income. People can apply for hardship waivers if coverage is unaffordable.


HOW IT’S PAID FOR: Fees on insurance companies, drug makers, medical device manufacturers. Tax levied on insurance companies, equal to 40 percent of total premiums paid on insurance plans costing more than $8,000 annually for individuals and $21,000 for families (that number may rise to $23,000); retirees over age 55 and people in high-risk professions may be allowed to have somewhat more valuable plans before they’re taxed. Cuts to Medicare and Medicaid. A fee on employers whose workers receive government subsidies to help them pay premiums. Fines on people who fail to purchase coverage.

REQUIREMENTS FOR INDIVIDUALS: Almost everyone must get coverage through an employer, on their own or through a government plan. Exemptions for economic hardship. The Senate Finance Committee version required individuals and families to buy coverage as long as it cost no more than 8 percent of their income. Those who are obligated to buy coverage and refuse would face a fine of perhaps $100 in the first year of the program, likely increasing over time.

And now there’s a growing realization that the public option may not do all that it’s supposed to do. But most reformers are still backing the legislation, hoping to improve it on the floor.

As the nonpartisan Kaiser Daily News reported:

For all the controversy over a government-run insurance option, the program outlined in health overhaul legislation likely would play a minuscule role in efforts to expand health care coverage, according to many health care experts and lawmakers.

Of the 45 million uninsured Americans that congressional Democrats and President Barack Obama want to help over the next decade, only six million, or 13 percent, would obtain coverage by enrolling in a public option, the Congressional Budget Office concluded in an analysis of the House Democratic bill.

And that number could shrink because states may decide to opt out of a public insurance plan, an escape clause that’s likely to be included in the Senate plan.

The politics of this issue is totally disproportionate to its likely impact one way or another,” said Bruce Vladeck, a former administrator of the federal agency now called the Centers for Medicare and Medicaid Services.

Senate Majority Leader Harry Reid, D-Nev., has said the Senate overhaul bill would allow states to opt out of the public plan – a step political experts say at least some would likely take. Congressional Republicans are united in opposition to a government-backed insurance plan, and political leaders in heavily GOP states may also be opposed. Insurers, which fiercely oppose a public plan, would also be expected to lobby against it.

No matter what the states do, the government-run plan is not likely to attract a large membership, at least according to the CBO. The CBO reasoned that the plan may not be able to offer a price advantage – in part because the House bill requires a government-backed insurer to negotiate payment rates rather than dictate them to hospitals and doctors.

And while unions, among others, are backing the reform legislation, pitfalls in both the Senate and House bills could undermine genuine healthcare reform. As reported by Roger Bybee here, new legislation could potentially resucitate the right wing if it falls flat in practice – while enraging working families penalized for not buying coverage.

There’s still plenty of conflicts to be resolved, with labor groups and progressives playing a key role, in both chambers of Congress. The left wing of the party, especially the netroots, are also stepping up attacks on wayward Senators and Senator Lieberman in the Democratic caucus, who might back a GOP filibuster.

The fight has only really just begun.

Art Levine, a contributing editor of The Washington Monthly, has written for Mother Jones, The American Prospect, The New Republic, The Atlantic, Slate​.com, Salon​.com and numerous other publications.
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