Senate Finance Committee discusses taxing certain health benefits

Washington -- The Senate Finance Committee edged closer to consensus on endorsing a national health insurance exchange and examined taxing wealthier employees' health benefits, but members were still divided over whether to create a public health insurance plan as part of national system reform.

The Finance panel met privately for more than eight hours on May 14 to discuss options for expanding health care coverage as outlined in a 61-page policy options paper the committee released three days earlier. The paper is the second of three designed to lay the groundwork for national health reform legislation. Senate Finance Committee Chair Max Baucus (D, Mont.) hopes to send a bill to the Senate floor before the August congressional recess.

The meeting produced no breakthrough agreements but instead served to educate members on details of health policy, including the potential role of a health insurance exchange, said Baucus and Sen. Charles Grassley (Iowa), the highest-ranking Republican on the panel. Grassley said some senators thought the exchange would regulate health plans, but they became more comfortable with the idea when experts in the room explained that an insurance exchange would only help consumers compare and enroll in health coverage plans. The policy options paper suggests an exchange as a way to increase competition among health plans.

Grassley also said the meeting allowed senators to express numerous conflicting views. Baucus and Grassley sparred over whether the system needs a public health insurance plan to compete nationally with private plans, as well as whether employers should be required to provide health insurance or help pay for it, Grassley said. Baucus, speaking after the meeting, downplayed the conflicts between Democrats and Republicans.

"Between the two sides, there is some difference, that is true. But I don't want to emphasize that because questions were asked on both sides looking toward compromise," Baucus said. Grassley said the private meeting, the second of three, was more about educating senators than reaching major agreements. "This is the place to get an understanding of the differences."

The newest policy options paper suggests:

• Creating a Medicare-like public health insurance plan to compete with private plans. The plan could be managed by the Dept. of Health and Human Services, regional third-party administrators, or states. The HHS-managed option would pay physicians the same as Medicare or up to 10% more, while the third-party option would require pay rate negotiations with physicians.
• Requiring individuals to enroll in health insurance coverage or pay a penalty based on the least-expensive health plan available in the area. Employers also would be required to offer their employees coverage or help pay for it.
• Requiring small group market and individual market health plans to offer coverage and renewals to everyone regardless of health status.
• Expanding Medicaid to cover some of the country's 46 million uninsured, including allowing states to waive the five-year waiting period for Medicaid coverage for non-pregnant adult immigrants.

Searching for dollars

Much of the discussion at the Finance Committee's third and final public health reform roundtable meeting on May 12 focused on limiting the tax exclusion for employer-sponsored health benefits. Senators queried 13 experts on methods to finance national health reform.

Narrowing the tax exclusion from an unlimited amount to the average amount deducted -- about $5,000 for individuals and $13,000 for families -- would raise about $580 billion over a decade, according to John Shiels, senior vice president of the Lewin Group, a health care consultant and research firm.

Jonathan Gruber, PhD, economics professor at the Massachusetts Institute of Technology, said the current unlimited tax exclusion unfairly provides greater tax benefits to wealthier families. "It's a highly regressive benefit."

The American Medical Association supports eventual replacement of the employer tax exclusion with health insurance tax credits for individuals and families. As an incremental step toward that goal, the AMA supports capping the tax exclusion.

But James Klein, president of the American Benefits Council, has another viewpoint. "We believe that the exclusion is fundamentally important in order to maintain and hopefully expand on the employer-based system." The council is an association of large employers.

Baucus said he doesn't support eliminating the tax exclusion entirely. "I do think it makes sense to look at income limits in exclusion." President Obama also has opposed ending the exclusion to help pay for health reform but supports tax credits to help buy coverage.

Protesters disrupted the third roundtable in a similar fashion as they did the second, held on May 5. The California Nurses Assn. and other supporters of a single-payer, government-financed and controlled health insurance system delayed the start of the Finance hearing for several minutes. They took turns standing up, shouting that they were being excluded from the debate and being removed by security officers. "Talk minus action equals zero!" yelled one protester as Baucus pleaded for order.

Baucus told the protesters he would personally listen to their views after the meeting. However, later in the roundtable he acknowledged that he doesn't think a single-payer system is a viable reform option.