Senate Mulls Over Health -Bill

Senate Mulls Over Health-Bill

By GREG HITT and LAURA MECKLER
A key Senate committee wrestled Monday with details of a health plan that would allow nonprofit cooperatives to compete with private insurers and would tax health-care benefits for the first time.

The action in the Senate Finance Committee came as President Barack Obama urged the American Medical Association to support sweeping changes to the nation's health-care system.

Top Finance Committee aides are scrubbing financing options in a bid to find more than $1 trillion needed to pay for a 10-year plan, and have settled on many details of how to expand coverage to the uninsured.

Under one financing proposal, health-care benefits worth more than $17,000 would be taxed as regular income, a cap that would be allowed to grow annually, said people familiar with committee discussions. A version of this plan was evaluated by the Congressional Budget Office last year and found to raise some $450 billion over 10 years.

Under another option, the cap would be set at about $20,000, but with a less generous annual adjustment. Also under consideration: limiting the new taxes based on income.



President Barack Obama addressed the AMA Monday in Chicago.
A committee spokeswoman, Erin Shields, cautioned no decisions have been made and called the situation "fluid." Senate Finance Chairman Max Baucus (D., Mont.) hopes to release health-care legislation Friday, setting up formal votes next week.

More
Report Lays Out Plan to Cut Medicare Costs Wash Wire: Obama to Doctors: 'I Need Your Help' Health Blog: AMA's Response to Obama's Speech The committee is close to settling on a plan that would create state-run marketplaces where private health-insurance companies would compete to offer coverage. To answer demands from Democrats including Mr. Obama that a public plan be offered as well, the committee is heavily favoring nonprofit cooperatives that would be governed by their members and would compete inside the new insurance exchanges, people familiar with the matter said.

The plan under consideration would require all Americans to obtain insurance, with penalties eventually reaching 75% of the cost of the least expensive plan, one aide said.

Subsidies would be available for people earning up to four times the federal poverty level, the aide said, though that figure could be slimmed back. The committee is also expected to include an expansion of Medicaid, the federal-state health program for the poor.

On the revenue side, Sen. Baucus is aiming to raise needed money from within the health-care sector, congressional aides said. One idea is to raise the threshold for taking an itemized tax deduction on personal health costs to 10% of adjusted gross income from 7.5% currently. Another proposal under consideration would double the tax penalty—to 20% from 10%—for nonmedical withdrawals from tax-preferred health savings accounts.

Any plan adopted by the Senate Finance Committee would have to be reconciled with other Democratic-led proposals in the House and Senate.

On Monday, the Congressional Budget Office released a preliminary analysis of legislation written by Sen. Edward Kennedy (D., Mass.). The office found that the effort would cost some $1 trillion over a decade but leave 37 million people uninsured. That proposal was missing key details that are likely to significantly change the final numbers.

The final package is likely to provide more help for people near the poverty line and include a requirement that many or most employers offer coverage, which would raise the cost and reduce the number of uninsured.

Still, the numbers provided ammunition for Republicans. "These early reports from CBO show that this bill will cost too much, cover too few and cause too many to lose the coverage they enjoy now," said Sen. Mike Enzi of Wyoming, the top Republican on Mr. Kennedy's Senate committee.

In his Chicago speech, Mr. Obama reiterated his support for a public-insurance option and suggested it shouldn't pay Medicare rates -- a bid to assuage concerns of doctors who consider those rates too low.

The president received a rare round of boos when he told the audience of some 2,200 that he wouldn't advocate caps on medical-malpractice awards. But he later won applause when he said he was willing to work with doctors to scale back "excessive defensive medicine" and ensure that doctors don't feel "like they're constantly looking over their shoulders for fear of lawsuits."

Mr. Obama's approach to the doctors was sympathetic, a striking contrast with his rhetoric toward insurance companies.

"You didn't enter this profession to be bean-counters and paper-pushers. You entered this profession to be healers," he said to applause.

The president said he wouldn't let insurers continue to deny coverage based on pre-existing conditions, without mentioning that the main insurance lobby group has already agreed to stop that practice as part of a comprehensive overhaul.

Mr. Obama said he won't create a system where insurers "suddenly have a whole bunch of more customers on Uncle Sam's dime, but still fail to meet their responsibilities."

Apart from the isolated boos, doctors responded enthusiastically to most of Mr. Obama's speech, with the crowd jumping to its feet for a standing ovation a few times. "What we were very pleased about was that he's open to considering options that would lower the costs of defensive medicine," said AMA President Nancy Nielsen.

For decades, the AMA opposed government efforts at universal health care, famously opposing the creation of Medicare as well as subsequent efforts including President Bill Clinton's attempt in 1993-94. The concern was that such a plan would lead to both too much government interference in the practice of medicine and low reimbursement rates, said Nancy Dickey, former president of the American Medical Association and president of Texas A&M Health Science Center.

But that started to change in the mid-1990s, she said, when medicine became more expensive, and care for the uninsured became more worrisome. Another factor: doctor frustration over restrictions put on them by insurance companies.

— Janet Adamy contributed to this article.
Write to Greg Hitt at greg.hitt@wsj.com and Laura Meckler at laura.meckler@wsj.com

Printed in The Wall Street Journal