Options Considered for Health Care Reform

WASHINGTON (AP) - A federal soda pop tax. Higher levies on beer,
wine and hard liquor. Taxing some health insurance benefits. Those
are among the options the Senate is considering to pay for
revamping health care.

How to pay for expanding coverage to nearly 50 million uninsured
people is the toughest question in the health care debate. Cutting
costs is a popular idea, but few experts think enough savings can
be wrung from the system to expand coverage to so many - despite
pledges from medical providers.

The Senate Finance Committee, acknowledged the dilemma Monday as
it released 40 pages of revenue raising options. They include cuts
to providers and new taxes. Senators will meet behind closed doors
Wednesday to debate the options.

"Many proposals expected to reduce health spending in the long
run may not produce sufficient savings in the short run to finance
reform," said the Finance Committee report. "Other proposals to
generate revenue for health care reform could include taxes that
affect lifestyle choices and taxes that generally target

The reason Finance is important is that the committee has the
best chance of coming up with a bill that can win Republican votes,
a goal for President Barack Obama, even if the odds are long.

No figures were included on how much the proposals would raise.
All face determined opposition from the industries affected.
Lawmakers haven't made any decisions yet, but the menu of options
gives a peek at the hit list.

The soda pop tax would apply to drinks sweetened with sugar,
high-fructose corn syrup or other high-calorie sweeteners. That
includes iced tea and noncarbonated drinks like punch. But diet
drinks would escape the tax man.

The tax increase on alcoholic drinks would hit beer and wine
hardest. Per ounce of alcohol, hard liquor now faces the highest
federal tax rate. The Senate option would raise the current tax
rate, and then apply the same rate to all types of alcoholic
drinks. Small wineries and breweries would get some consideration.

Health insurance provided by employers isn't taxable now, even
though it's considered part of overall compensation. Senators are
considering several options, including taxing health insurance
benefits for individuals making more than $200,000 a year, or
$400,000 for a couple. Another would limit the tax-free status of
health insurance to the value of the standard plan available to
federal employees.

Potential revenue raisers also include doing away with flexible
spending accounts, limiting the income tax deduction for
out-of-pocket medical costs, and charging upper income seniors more
for their Medicare drug plans.

Congress is forging ahead on health care, with no consensus in
sight on how to pay.

Few of Obama's proposed tax increases have been well received on
Capitol Hill, and there aren't many popular ideas coming from
lawmakers, either.

Democrats, who have been fighting the tax-and-spend label for
decades, are very much aware of what happened the last time a
Democrat won the White House and a Democratic-controlled Congress
voted to raise taxes. It was l993, and Republicans won control of
Congress the following year.

"Ever since then they've been especially scared to deal with
these difficult issues," said Eugene Steuerle, a Treasury official
under President Ronald Reagan.

Obama says his goals are to rein in costs, guarantee choice of
health plans and doctors, and ensure that all Americans have access
to affordable coverage. But guaranteeing coverage for all could
cost $1.5 trillion over the next decade, which has some advocates
concerned that Congress will pass a plan that falls short.

Medical providers have pledged to find $2 trillion in savings
over the next decade, but much of that money will be needed to keep
premiums from skyrocketing for those who already have coverage.

Rep. Charles Rangel, chairman of the tax-writing House Ways and
Means Committee, said Congress "absolutely" has the will to raise
taxes to pay for health care reform.

"Cut costs, raise revenue," the New York Democrat said.
"Closing loopholes could be considered raising taxes, right?"

But Rangel is one of the few lawmakers to openly embrace tax
increases. Today's Democratic Congress is, after all, very
different from the one that helped President Bill Clinton raise
taxes in 1993 to reduce federal budget deficits. Democrats retook
Congress in 2006 and expanded their majority in 2008 in part by
electing moderates in Republican-leaning districts.

Many of those newly elected Democrats are wary of voting to
raise taxes, especially when they are unlikely to get any
Republican support.

Obama's proposal targets high-income families by reducing their
tax deductions, including those for mortgage interest and
charitable donations, for individuals making more than $200,000 and
couples making more than $250,000.

Finance Committee Chairman Max Baucus, D-Mont., has been working
for months on a plan that would tax at least some health benefits
provided by employers.

Obama, however, opposed a similar plan offered by his rival in
the presidential election, Sen. John McCain, R-Ariz. Baucus' plan
is getting no better reaction from fellow Democrats in the House.

In a broadcast interview, Clinton said that Congress should
focus on containing costs rather than raising taxes. That would
mean expanding coverage more slowly. Even after 10 years there
might still be 15 million or more uninsured Americans.

Clinton, of course, remembers how hard it was to craft a massive
health care overhaul when he was president. It went about as well
as the 1994 elections did for the Democrats.
On the Net: www.finance.senate.gov

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