updated 1/14/2010 6:27:27 PM ET 2010-01-14T23:27:27

In a major breakthrough, union leaders bowed Thursday to White House demands for a new tax on high-cost health plans as part of landmark health care legislation taking final shape in intensive negotiations. "We are on the doorstep" of success, President Barack Obama said.

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The tentative agreement on the tax, which included significant concessions by the administration, was disclosed as leading lawmakers set an informal timetable of Friday for a compromise on the health care bill that Obama made a top priority in taking office a year ago.

Democrats expressed the hope that the agreement would quickly open the way for progress on other key issues where House and Senate-passed bills differ, as well as attempts by the White House to squeeze additional financial concessions from drug makers, nursing homes and other health care providers.

On a separate issue, makers of generic drugs, backed by the White House and a senior congressional ally, sought to reduce the patent protection that pharmaceutical companies receive for their new-to-market biotech products. The House and Senate bills both limit competition for 12 years.

The fast-paced events came as senior lawmakers went to the White House for the second straight day of bargaining over terms of a final compromise, and Obama gave a rousing speech to rank and file House Democrats in a late-afternoon appearance in the Capitol complex.

Referring to polls that show lagging support for the legislation, he told Democrats, "I know how big a lift this has been."

In remarks that look ahead to the fall campaign, he added, "If Republicans want to campaign against what we've done by standing up for the status quo and by standing up for insurance companies over American families, that is a fight I want to have."

Republicans are nearly unanimously opposed to the legislation, and have made clear they intend to try to turn it to their advantage in midterm elections this fall in which 37 Senate seats and all 435 House seats are at stake.

The president wants legislation to expand health care to millions who lack it, crack down on insurance industry practices such as denial of benefits on the basis of pre-existing medical conditions and slow the growth of health care costs generally.

The president has told lawmakers he wants the tax on high-cost plans included in the legislation to help rein in costs. But that position courted conflict with labor leaders who fear exposing their membership to higher taxes, as well as with House Democrats who omitted it from the legislation they initially passed.

The day's events underscored the urgency with which the White House and top Democrats were working, and the tentative agreement on a new tax on high-cost plans was the most prominent fruit of the effort.

"This was a very critical issue that had to be resolved, and I think it has been," said Rep. Rob Andrews, D-N.J., who told reporters he had been briefed on the emerging agreement to impose a tax on costly insurance plans.

Who's who in the health care debate

While not all details were set, it appeared the union leaders had backed down on their outright opposition to a new tax, and the White House had agreed to several concessions to mollify their concerns.

In a significant victory for unions, the 40 percent excise tax would not apply to policies covering workers in collective bargaining agreements, state and local workers and members of voluntary employee benefit associations through Dec. 31, 2017.

Rep. Joe Courtney, D-Conn., and others said the tax would apply to fewer plans than was the case in the Senate-passed bill and would exclude the value of dental and vision coverage. They added it would provide an exemption for residents of states where the cost of health care is particularly high, as well as for employees of high-risk professions.

A union official familiar with the details said the tentative agreement would raise the threshold on insurance policies subject to tax from $8,500 in the Senate-passed bill to $8,900 for singles and from $23,000 to $24,000 for family coverage. Even the new thresholds would be subject to adjustment if unexpected rises in health care occur by the time the plan is effective, this official said.

Additionally, AFL-CIO President Richard Trumka told reporters that beginning in 2017, all health plans — union and nonunion — would be permitted to seek coverage in insurance exchanges that would be set up under the bill to allow consumers to shop for coverage issued under federal regulations.

White House officials disputed that, saying the issue was not settled.

Health care: How a bill becomes a law

Originally, the tax included in the Senate bill was estimated to raise $149 billion through 2019. Trumka said the revisions would reduce that amount by $60 billion — money that negotiators would have to find elsewhere or else reduce the coverage in the legislation.

While the tax would be applied to high-cost plans, the Congressional Budget Office has said its principal impact would be to prompt consumers to purchase lower-value coverage. That, in turn, would raise the income tax they pay by reducing the deduction they can take for health care expenses.

Officials said the agreement was thrashed out over more than 15 hours of negotiating at the White House that ended after midnight Wednesday. Participants included Trumka; Andy Stern, head of Service Employees International Union; Anna Burger, head of Change to Win, and the leaders of unions representing teachers, government workers, food and commercial workers, and electricians. Obama's deputy chief of staff, Jim Messina, was the lead White House bargainer, although Vice President Joe Biden also was involved periodically.

In an indication that lawmakers and the White House were driving for a swift agreement, House Speaker Nancy Pelosi, D-Calif., and House Majority Leader Steny Hoyer, D-Md., issued a statement pledging to have any final bill posted online for 72 hours before a vote is called.

A spokesman said the plan would require the Congressional Budget Office to issue a formal report on the bill's cost and coverage before the 72-hour clock began running.

Once a final compromise is reached, Democrats intend for a vote first in the House, then a final showdown in the Senate. There, Majority Leader Harry Reid will need to post a 60-vote majority to clear the way for final passage.

Republican opposition has been virtually unanimous in both houses — only Rep. Anh (Joseph) Cao of Louisiana among GOP lawmakers has voted for the bill — and there is not a vote to spare in the Senate.

There, Democrats have 58 votes; independents aligned with them hold two.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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