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Panel Discusses Options to Pay for Changing the U.S. Health Care System

By Whitney Blair Wyckoff, CQ Staff

June 27, 2008 -- None of the options to finance an overhaul of the nation's health care system will please Americans, analysts said at a recent forum on ways to control rising health care costs.

"You look at Americans' willingness to raise revenues and, to put it mildly, they aren't eager to do this," said panelist Robert D. Reischauer, president of the Urban Institute, at the forum sponsored by the Better Health Care Together labor and business coalition.

Panelists discussed evaluations conducted by a trio of health care experts on several proposals to finance health care change that have been suggested by presidential candidates and politicians.

Reischauer added during Wednesday's forum, "Virtually anything we put on the table doesn't seem to be very realistic."

The evaluations appear in a paper issued by The Bipartisan Policy Center titled "Financing the U.S. Health System: Issues and Options for Change." It focuses on the implications of five health financing options: continuing current financing and redirecting health spending, rolling back high-income tax cuts, limiting the exclusion of employer-paid health benefits in employee taxable income, "play or pay" mandates, and a value-added tax. All three of the paper's authors were present the discussion.

"A huge amount of the work needs to be done involving specific details," said Congressional Budget Office Director Peter R. Orszag of the proposals. For example, he said if the government gets rid of the employer exclusion, it matters what its replacement would be.

The paper does not draw any conclusions about which financing plan is best.

"We don't answer these questions because the reality is that the job of the next president—that is the job of the next Congress," said co-author Jeanne Lambrew, senior fellow at Center for American Progress.

While panelists said the paper "clearly" lays out the plans and implications of proposed changes in health care financing, they criticized some of the proposals considered.

"Many of the proposals that are discussed here are shams, quite frankly," Reischauer said. He said the reworking of existing programs to make them more cost efficient will not provide the short-term resources to get a revamped health care strategy off the launching pad.

He added, "I think we should move forward with those, but not expect much."

However, Reischauer said that the 2010 expiration of the 2001–03 tax cuts is "a very significant opportunity."

"It's a tremendous opportunity to think creatively, as the authors of this paper have suggested, about transformations that could both raise revenue and incentivize some of the other reforms that we want to be part of this overall effort," he said, adding that it will force politicians to confront some tough issues.

Stuart M. Butler, vice president of domestic and economic policy studies at the conservative Heritage Foundation, said value-added tax options would be a more honest initiative because it would be overt about what a new financing plan would cost. And he said it would be valuable to rearrange current health care expenditures.

Reischauer cautioned that with next year's agenda crowded with issues like Iraq, climate change and the economy, health care could fall to the bottom of the list.

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