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Democrats unhappy with proposed tax

Unhappy Senate Democrats on Thursday found plenty to complain about in the fine print of the latest health overhaul bill, particularly a tax provision they fear would hit hard at middle-class Americans, from coal miners in West Virginia to firefighters in New York.
/ Source: The Associated Press

Unhappy Senate Democrats on Thursday found plenty to complain about in the fine print of the latest health overhaul bill, particularly a tax provision they fear would hit hard at middle-class Americans, from coal miners in West Virginia to firefighters in New York.

The opposition sprang up a day after Senate Finance Committee Chairman Max Baucus, D-Mont., unveiled long-delayed legislation that would transform the nation's health care system, requiring almost everyone to buy insurance, making insurance companies cover people with pre-existing medical conditions and reining in spiraling health care costs.

The bill has given fresh momentum to President Barack Obama's top domestic priority of extending health coverage and controlling costs.

To pay for the 10-year, $856 billion bill Baucus wants to tax high-value insurance plans, those worth $21,000 for a family and $8,000 for an individual. Baucus says those are "Cadillac plans" enjoyed by a small minority of Americans. Aides said about 10 percent of plans and 8 percent of taxpayers could be affected.

But other Democratic senators fear that the tax would reach deep into middle-class pocketbooks, and labor unions are upset. Two Democrats on the Finance Committee, Sens. John Kerry of Massachusetts and Jay Rockefeller of West Virginia, along with other senators, say they want to limit the tax before signing off on the bill.

"We need to make it fairer to working people so that working folks don't get dragged into this at a level where they just don't have the incomes to support it," Kerry told reporters after a closed-door committee meeting to discuss the bill. The panel will begin voting on the bill Tuesday.

Rockefeller, who met privately with Obama on Wednesday, said the proposal "could prevent workers in high-risk professions from getting the health benefits that they need, particularly coal miners," a significant constituency in his state.

It was one of several concerns raised Thursday by Democrats, forecasting contentious debate when Baucus' committee acts on the bill and during later votes in the Senate. Beyond the question of how the legislation would impact working-class Americans, liberal lawmakers are concerned about the absence of a new government-run insurance plan.

Instead of the so-called public plan, Baucus went with nonprofit cooperatives.

Although he failed in his monthslong quest to get Republican backing for his bill and now faces a host of Democratic concerns, Baucus defended his efforts Thursday.

"I don't think there will be any changes in the core provisions of the bill," Baucus said.

At a campaign-style rally at the University of Maryland on Thursday, Obama called reinventing health care a "defining struggle of this generation," though he barely mentioned Baucus' bill. For many of the students, after graduating they would be faced with the requirement to buy health insurance under the Baucus plan.

The high-value insurance plan tax, which Obama embraced in his speech to Congress last week, is a major source of revenue for Baucus' bill, bringing in an estimated $215 billion over 10 years.

If it's changed, Baucus would have to raise revenue elsewhere, which is not easy. Baucus and other supporters of the measure, including Sen. Kent Conrad, D-N.D., say it would have the positive effect of driving down health care costs over the long term by encouraging companies to move toward cheaper health plans and workers to use less care.

Conrad, who was part of the six-member negotiating team Baucus led for months to try to reach consensus on a bill, said numerous health policy experts had advised that the tax was a good way to go. Baucus initially had supported taxing employer health benefits before he dropped the idea for political reasons; the idea was proposed during last year's presidential campaign by GOP nominee Sen. John McCain, and Obama campaigned against it.

The 35 percent tax levied on insurance plans is a different approach, though unions and employers contend it will end up being passed along to workers. Conrad acknowledged the criticism but said it was a necessary step.

"Does that create some pain? Yes, it does," Conrad said. "People want to see real pain, stay on the current course" — with health care costs rising unchecked, he said.

The House bills have no insurance plan excise tax and instead propose raising taxes on the highest-earners. The Senate's No. 2 Democrat, Dick Durbin of Illinois, said Thursday he thought that was a better way to go.

Kerry, who originally proposed the idea of taxing the high-value plans, said he would offer an amendment next week to raise the value of the plans being taxed to $24,000 for a family plan and $9,800 for an individual plan. He said this would make a difference in exempting some union plans and focusing the tax on wealthier workers.

The average cost of an insurance plan is around $14,000 for a family of four and $7,200 for an individual, according to the U.S. Chamber of Commerce.

Several critics said the tax would disproportionately impact union retirees and workers, particularly in the manufacturing sector.

Also Thursday, the Obama administration announced $25 million in grants for states and health care systems to experiment with alternatives to costly medical malpractice lawsuits, an issue that long has divided Washington.