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Senate Finance Committee Democrats Eye Spending Controls

By John Reichard, CQ HealthBeat Editor

July 28, 2009 -- Senate Finance Committee negotiators spent much of their time Monday discussing ways to cut the growth in national health care spending and narrow the gap in revenues they need to cover most of the uninsured—but didn't sound close to an agreement on a health overhaul package.

Committee Chairman Max Baucus, D-Mont., said that much of a morning meeting of committee Democrats focused on giving authority to an independent agency to determine Medicare payment rates while still retaining some congressional authority to intervene. Baucus said the sense among his fellow Democrats was that "the more authority given to an independent agency, the better," while "still allowing congressional involvement in some sense so we're not delegating all of that to an independent agency."

Baucus noted that another idea that's "gaining a lot more currency is imposing of fees on the insurance industry to the degree to which they have high-value policies." The idea of taxing insurers for such policies is gaining support "partly because it raises some revenue," but also because "it does bend the growth curve."

Finance Committee Democrat John Kerry of Massachusetts also sounded upbeat about prospects for such a tax, which he has proposed to fellow panel members. "There's a consensus building now that it's fair to ask the plans in America to contribute something so that we begin to drive the costs down," Kerry told reporters.

Michigan Democrat Debbie Stabenow said Kerry is looking at taxing insurers on the amount of premiums they charge above $25,000 per enrollee. Stabenow said taxation at that level would raise $90 billion over ten years. The idea is to prod insurers to offer lower-cost plans less likely to fuel spending growth.

The premium tax on employers may mean that employees are off the hook tax-wise on their health care benefits. Kerry indicated that the idea of taxing workers on a portion of the health insurance premiums that employers pay on their behalf is off the table.

Oregon Democrat Ron Wyden, whose Healthy Americans Act would end the exclusion of employer-paid premiums from taxable employee income, called the Kerry proposal "an attractive idea. It's not all that different from what we have in the Healthy Americans Act with respect to creating incentives, making sure that you're not subsidizing the deluxe Cadillac packages."

Baucus said that while 84 percent of the cost of the package he is developing would pay for coverage of lower-income uninsured Americans, people with coverage now would also benefit by paying lower premiums. Baucus said that according to the Congressional Budget Office, premiums for individual policies would fall 7 to 8 percent under the package he is crafting. Americans who buy insurance in the small group market will see their premiums go down by a lesser amount—"but at least they'll go down," Baucus said.

Democratic lawmakers emerging from the morning meeting fielded a number of questions from reporters that assumed the committee, in order to woo moderates and some Republicans, is moving toward dropping the idea of offering a government-run insurance plan in favor of only offering consumer-run health insurance cooperatives as an alternative to private coverage.

Democrat Kent Conrad of North Dakota wouldn't confirm that the government-run option was off the table but said the co-op idea is alive and well. Asked whether the public option is now looking less likely, Conrad said, "I always hesitate to say any conclusion because we have this rule, 'nothing is agreed to until everything is,' but certainly the co-operative is a live option."

Participants in the morning meeting also wouldn't confirm that a mandate that employers pay for coverage is off the table. Kerry said no decision has been made on whether to include such an employer mandate or to instead take a "free rider" approach that would require employers to pay subsidy and Medicaid costs if they don't offer health coverage to their lower-wage workers.

Baucus said he is talking to President Obama every day about the progress he is making in the negotiations but shied away from predicting when he would offer a proposal to be marked up. Kerry was willing to make a prediction on timing, but still hedged his bets.

"I feel relatively confident that we're going to be able to come together around some kind of a bill before we leave here," Kerry said, referring to the Senate's August recess that begins Aug. 8. "Ultimately whether we get through the markup or don't I can't tell you today, but I'm confident we're going to have a concept on which we will agree," he said.

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