Democrats likely to tweak health care bill after CBO critique

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It's a minor setback for the Obama administration's goal of universal health care in the U.S. But it's a setback that will have to be addressed.

On Friday morning, the House Education and Labor Committee voted 26-22 along party lines to approve universal health care legislation. But the Congressional Budget Office -- Congress's independent budget analyst -- said the primary health care overhauls under consideration would not contain costs and could further increase already rising federal government outlays for medical services. The House Ways and Means Committee later approved its portion of the bill by a 23-18 vote, the Associated Press reported Friday.
Democrats oppose taxing health benefits

Further, CBO Director Douglas Elmendorf told lawmakers there is widespread agreement among health analysts that taxing health-care benefits would reduce federal outlays. Many House and Senate Democrats oppose that idea; the funding option has been a non-starter on Capitol Hill.

Early next week, the Senate Finance Committee is expected to resume deliberations on its version of universal health care, theWashington Post (WPO) reported Friday. President Obama has underscored that he wants a universal health care bill passed by Congress's August recess; Rahm Emanuel, his chief of staff, indicated that Obama would accept a Democratic-only supported health care bill if Republicans continue to resist reforms, or recommend a vote delay until Congress returns in September.

Political/Economic Analysis: The CBO said the House bill would cost $611.4 billion over 10 years. It's hard to question CBO's methodology and projections, given its track record for fair, non-agenda-oriented analysis -- a rare commodity in Washington.

As a result, House and Senate Democrats will have to find both additional spending cuts and revenue sources to keep universal health care legislation revenue-neutral -- i.e., without a negative impact on the federal budget.

The likely, easy hurdle: additional cuts from current federal health care programs. Budget analysts will be able to find more savings in Medicare and Medicaid. Look for Sen. Chris Dodd of Connecticut, a health-care policy veteran whose staff has reams of health-care policy experience, to find and announce new health care spending savings next week.

The tougher hurdle: revenue. The current plan would be financed by a 5.4 percent surtax on couples with more than $1 million in income, a 1.5 percent tax on couples with incomes above $500,000, and a 1 percent surtax on incomes over $350,000. One possible solution: raising taxes on those income categories to 5.75 percent, 2 percent, and 1.5 percent, and raising the tax increase on capital gains by as much as 1 percent.

Also, both health care bills will likely require corporations that don't offer health insurance to employees to pay into a federal health care corporation fund that would insure them; exemptions for small businesses will likely be offered on a sliding-scale basis.

An August vote remains likely, and the White House hints that it's open to Senate Democrats' using the reconciliation process, which would allow the majority to approve health care legislation with 50 votes (plus Vice President Joe Biden as the tie-breaker), rather than needing its filibuster-proof 60-vote margin.
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