First obstacle to health-care plan: cost

Tax also could be a deal-breaker

The Associated PressJuly 6, 2009 

— Four divisive issues could dash President Barack Obama's hopes of overhauling health care: cost, creating a government-run plan, taxing workers' benefits and penalizing employers that don't offer coverage.

These are potential deal-breakers as the Democratic-controlled Congress returns to work today and takes up Obama's goal to revamp the system to cover the nearly 50 million uninsured Americans and try to check rising medical costs.

Here's a look at each issue, and how key players line up:

COST

Covering nearly 50 million Americans won't come cheap. The government would have to subsidize premiums even for some middle-class families.

Senate Finance Committee Chairman Max Baucus, D-Mont., says he's pared down the cost of his bill to under $1 trillion over 10 years. But across the Capitol, the House Democrats' version may cost a lot closer to $2 trillion.

Either way, that's a stunning amount of money.

Obama says the legislation will be fully paid for, and must not add to the deficit. But check the fine print: The cost estimates only cover the first 10 years after the bill is signed. After that, the warranty expires. Costs could explode, particularly if the government is helping middle-class households pay for coverage, which already costs about $13,000 a year for a family plan.

The bigger the price tag, the more likely that trimming fat in the health care system won't cover costs and that higher taxes will be needed sooner or later.

Republicans say the overhaul should be financed mainly with savings, even if it means delays in covering the uninsured, or helping fewer people.

EMPLOYERS

Businesses provide coverage to more than 160 million people, although no law says they must.

The health-care legislation working its way through Congress is likely to include a requirement for individuals to get insurance. Should it also spell out obligations for employers?

Both the House and Senate are considering new employer obligations. Businesses are strongly opposed to them.

Under the House Democrats' plan, employers would be required to provide coverage or pay a penalty.

The Senate Finance Committee is taking another approach. There wouldn't be any requirement that employers provide health insurance. But if a company's workers wind up getting taxpayer-subsidized insurance, the employer would have to pay part of the cost.

Republicans want to offer tax credits to help small companies buy coverage, and they oppose a requirement.

Employer opposition to health insurance requirements helped bring down President Bill Clinton's health plan in the 1990s, and business groups are already preparing for another fight.

GOVERNMENT PLAN

Of all the divisive issues, Democrats' idea for a new government health plan to compete with private insurers has generated the most political passion.

It would mark the first time government gets into the business of providing medical insurance for middle-class workers and their families -- a major expansion of its role.

The public plan would be available through a new kind of insurance purchasing pool called an exchange, which would also offer private plans. The purchasing pools would be open to individuals and small businesses.

Insurers, employers and congressional Republicans are adamantly opposed, saying the government would drive out private coverage. Democrats are just as strongly in favor of the idea, saying the insurance industry needs competition. Attempts to find compromises, including setting up nonprofit co-ops, haven't defused the situation.

BENEFITS TAX

During last year's presidential campaign, Obama criticized Republican rival Sen. John McCain for proposing to tax workers who receive employer-provided health insurance to raise money for covering the uninsured.

Now the president may have to take back his words and break a campaign promise not to raise taxes on Americans making less than $250,000.

Key senators are now saying it won't be possible to pay for expanded coverage without taxing some health benefits.

The Senate Finance Committee is eyeing plans with a total premium cost above $17,000 for family coverage. The theory is that taxing such coverage will encourage people to be thriftier consumers of medical services, and that can help bring down costs.

Labor unions are flabbergasted that Obama hasn't slammed the door on the idea.

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