House Democrats' health bill would tax rich to finance insurance expansion

House Democratic leaders Tuesday unveiled their bill to reform America's health care system - and insure an additional 37 million Americans over the next 10 years - to the tune of more than $1 trillion, funded mostly through an up-to-5.4 percent surtax on income for the wealthiest Americans, The Washington Post reports.

The plan would cover "more people through Medicaid and (provide) subsidies to help others meet a new federal mandate to purchase insurance. Democratic aides said the proposal would cost more than $1.2 trillion over the next 10 years, and would ensure that 97 percent of Americans were enrolled in a health plan by 2015. "About half of the cost would be covered by reducing spending on federal health programs, primarily Medicare, which serves the elderly and the disabled. But much of the rest of the money would come from a new tax on families earning more than $350,000 a year and individuals earning more than $280,000. The taxes, which would take effect in 2011, would affect about 2.1 million taxpayers, the nonprofit Tax Policy Center projected." The surtax would start at 1 percent and rise to 5.4 percent on incomes over $1 million. The highest tax rate in 2011 (when the Bush tax cuts end) would rise to 45 percent (Montgomery and Connolly, 7/15).

The tax would raise $544 billion over 10 years, Democrats say, USA Today reports. Absent from the House bill is a tax on employer-provided health benefits. "A separate proposal to pay for health care by taxing some benefits offered by employers - currently exempt from federal taxes - lost steam this month in the Senate because Democratic lawmakers, including Sen. Charles Schumer of New York, said it would have been too great a burden on middle-class families" (Fritze, 7/14).

The New York Times: "Employers who do not provide health insurance to workers would generally have to pay a fee or penalty to the government. The fee would be equal to 8 percent of wages for an employer with an annual payroll of more than $400,000."

"A partial, preliminary estimate by the Congressional Budget Office said it would cost slightly more than $1 trillion over 10 years to expand coverage as provided in the House bill. But Democrats said the cost would be fully offset by proposed savings in Medicare and other health programs and by revenue-raising changes in federal tax laws. Douglas W. Elmendorf, director of the budget office, said that by 2019 the bill could reduce the number of people without health insurance by 37 million, leaving 17 million still uninsured. Nearly half of the uninsured would be illegal immigrants, Mr. Elmendorf said" (Pear and Herszenhorn, 7/14).

Los Angeles Times: "All poor Americans making up to 133% of the poverty level would become eligible for Medicaid, which in some states is now limited to families. … People making between 133% and 400% of the federal poverty line -- roughly $29,300 to $88,200 for a family of four -- would be eligible for credits to help them buy insurance" (Levey, 7/15).

Reuters: "Legal U.S. residents be would be required to enroll in health insurance or face an income tax penalty of 2.5 percent. The bill would allow some exemptions" (Frank, 7/14).

Issues remain, Politico reports: "For instance, (House Energy and Commerce Committee Chairman Henry) Waxman (D-Calif.) incorporated into the bill the drug industry's $30 billion deal with the White House and the Senate Finance Committee to help close a gap in prescription drug coverage for seniors. But he refused to strip a provision that reinstates price controls on drugs purchased by seniors who qualify for both Medicare and Medicaid, despite the pleas of more than 60 fellow Democrats. Those rebates will cost drug companies more than $50 billion, and they'll lobby fiercely against them" O'Connor, Brown and Frates, 7/15).

Some business and Republicans are speaking out against the bill,  The Wall Street Journal reports: "Employers with payrolls exceeding $400,000 a year would have to provide health insurance or pay the 8% penalty. Employers with payrolls between $250,000 and $400,000 a year would pay a smaller penalty, and those less than $250,000 would be exempt. Certain small firms would get tax credits to help buy coverage. The relatively low thresholds for penalties triggered the sharpest criticism yet from employer groups, who said the burden on small business is too high and doesn't do enough to help them expand insurance coverage. 'This bill costs too much, it covers too few and it has way too much government involvement,' said Michelle Dimarob, a lobbyist with the National Federation of Independent Business, the main trade group for small firms. 'Small business doesn't want any of those things'" (Adamy and Meckler, 7/15).

The Associated Press: "Three House committees will begin voting on the bill Thursday. Changes in the legislation are likely to satisfy a group of moderate and conservative Democrats who are withholding support. The 1,000-page bill is unlikely to attract any Republican backing, and business groups and the insurance industry immediately assailed it as a job-killer" (Werner, 7/15).