In an online article entitled "Can Congress Make Health-Care Reform Pay for Itself?" Karen Tumulty brought up the most difficult issue that will face health care reform advocates. Yes, I know the public option will be a tough battle, but Congress figuring out a way to pay for it will be THE biggest issue IMHO in the healthcare debate.
Here's a little background on the problem. Ezra Klein has been reporting for a while that healthcare reform will cost 1.7 trillion dollars over 10 years, a lot more than President Obama's proposed budget figure over 600 billion.
Given the fact that Congress has already taken President Obama's proposals to pay for healthcare like taxing the charity and mortgage deductions of people making over $250,000 off the table, this is a big problem. It's an even bigger problem b/c Congress has to come up with not the $600 billion which President Obama had budgeted (and paid for in his tax proposals) but $1.7 trillion.
This problem became even more dire when President Obama and Congress came to an agreement last Friday that healthcare had to abide by paygo rules. In other words, healthcare reform has to be budget-neutral and Congress has to find a way to fund healthcare reform without creating a deficit.
Well, as Ezra Klein and now Karen Tumulty are reporting, Congress is looking at taxing employer-provided healthcare benefits:
One of the biggest ways to raise money to pay for health-care reform is also the most politically delicate: taxing employer-provided health benefits. It's an idea that Obama criticized when his opponent John McCain proposed it during last year's presidential campaign, but one that his top White House advisers now say should remain on the table. And it is an approach that Senate Finance Committee chairman Max Baucus says he is considering.
It's easy to see the appeal, if you look at the numbers. The Congressional Budget Office has estimated that fully counting employer-provided health benefits as taxable income could bring as much as $246 billion a year into federal coffers.
Basically, taxing employer health benefits would pay for healthcare reform.
As both Ezra Klein and Karen Tumulty noted, this idea isn't that popular. I remember when I first posted a diary about this very same topic about a month ago, I got a lot of disbelief and downright anger when I even broached the topic:
At that time, the New York Times article had a front page story where the administration announced that they were thinking about it. Ezra Klein and even The New Republic's Jon Cohn were reporting that this idea was floated by Congress on their blogs. But like I said before, people didn't want to listen and/or just couldn't believe that President Obama would consent to a proposal like this.
Congress (and probably the White House on the sly) have been negotiating over this matter for months. Max Baucus and the Senate Finance Committee are writing the healthcare reform bill as we speak. The Finance Committee has already finished writing the healthcare delivery system portion of the bill, which you can find here:
Obviously, if Karen Tumulty, someone in the mainstream press, is writing about how to pay for healthcare reform, then it's obvious that they're still working on that part of the legislation now. It's also quite clear from Tumulty's article that they are weighing different options on how to tax employer provided healthcare benefits:
More likely than a total elimination of the favorable tax treatment is the prospect of putting some kind of limit on that deduction — forcing workers to pay taxes, for instance, if their employer offers a particularly lavish plan. Or lawmakers may come at it another way, curbing the tax deduction that companies can take for offering those benefits.
So, here are the options:
1.) Tax all healthcare benefits AKA McCain campaign plan
2.) Tax healthcare benefits if they go over a certain level. I think I remember Ezra Klein talked about this option a couple of months ago and quoted the figure of taxing benefits that went over $12,500 but I'm not sure about that quoted figure.
3.) End the business deduction for employers providing healthcare benefits.
These are the options for coming up with $1.7 trillion in revenues to pay for healthcare reform. If you don't like these proposals, now is the time to call your Congressman and Senators, particularly if they are members of the Senate Finance Committee.
If you don't like these proposals, then I would humbly suggest that you come up with a solution to pay for the $1.7 trillion that will accrue over 10 years for healthcare reform.
My solution would be to impose a VAT (Value Added Tax) to pay for healthcare reform, replace the AMT (alternative minimum tax) and fill the budget deficit gap.
What's your solution to pay for healthcare reform?