Senate Finance Committee releases policy paper describing options to pay for health overhaul

Senate Finance Committee Chair Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa) on Monday released a 41-page document outlining policy options for financing health care reform, The Hill reports (Young, The Hill, 5/18).

The paper is the third and final to be released before the senators draft health reform legislation. The document says Baucus and Grassley do not support all the proposals included in the paper, but does not indicate which are backed by the senators (Wayne, CQ Today, 5/18). The options, which will be discussed at a closed-door committee meeting on Wednesday, include a number of proposed spending cuts and new or revised taxes (Drucker, Roll Call, 5/18).

The report outlines several ways to gain revenue by re-evaluating the tax exemption for employer-sponsored health care benefits, which cost the government $194.2 billion in revenue in 2008, according to the report. The options include:

• Capping the amount of health benefits that can qualify for the exemption;

• Taxing benefits for higher-income residents;

• A combination of the two previous options, in which tax-exempt benefits are capped only for higher-income residents (Adamy, Wall Street Journal, 5/19); or

• Eliminating the exemption and creating a system based on deductions or tax credits (Edney, CongressDaily, 5/18).

The document suggests that the cost of living in different areas of the country and inflation would be taken into account to determine who would qualify for the exemption (CQ Today, 5/18).

In addition, the report suggests modifying or eliminating tax exemptions for itemized deductions for medical expenses, health savings accounts and flexible spending accounts (CongressDaily, 5/18). The paper also calls for levying new taxes on not-for-profit hospitals that do not provide enough charity care or meet other requirements (Wall Street Journal, 5/19). One proposal would cut or reduce a special deduction for BlueCross and BlueShield companies (Cohn et al., CongressDaily, 5/19).

The document also proposes new taxes on alcohol and for the first time "sugar-sweetened drinks." Sugary drinks would include nondiet sodas, fruit and vegetable drinks, energy and sports drinks, iced teas, iced coffees, and flavored milk and dairy drinks (Budoff Brown, Politico, 5/18).

Medicare, Medicaid Changes

The policy option paper also examines changes in the Medicare and Medicaid programs as a means to finance health care overhaul, CQ HealthBeat reports. The report suggests making Medicare Payment Advisory Commission-recommended changes to the payment system by reducing, eliminating or creating standards for annual increases for certain treatments and fee-for-service providers. The paper also proposes reducing Medicare spending by adjusting the payment formula for home health care, medical imaging and durable medical equipment. In addition, the document calls for spending adjustments be made in Medicare Part A and Part B based on geographic variations (Reichard, CQ HealthBeat, 5/18).

The paper is available online (.pdf).