Health Care Reform's Final Sticking Point: How to Pay for It
Surcharges, Cost Cuts and New Taxes
The House uses a combination of a tax surcharge on wealthy Americans and new Medicare spending reductions. Individuals with annual incomes over $500,000 -- as well as families earning more than $1 million -- would face a 5.4% income tax surcharge.
The Senate bill aims to cut Medicare expenses by $480 billion through cost-control measures that will reduce payments to providers of Medicare. The bill also imposes a 40% tax on so-called Cadillac health plans, those valued at more than $8,500 for individuals and $23,000 for families. The Senate bill would also hike Medicare payroll taxes on families making over $250,000; the House bill doesn't.If you don't have insurance now, both versions would require you to purchase coverage. The House bill imposes a fine of up to 2.5% of your income if you don't. The Senate plan levies a fine of up to $750, or 2% of your income, whichever is greater. Both versions include a hardship exemption for poorer Americans.
The other key goal is reaching a compromise on abortion. The final version will definitely prohibit the use of federal funds for abortion. Sen. Ben Nelson (D-Neb.) has made it clear he will vote no on the final legislation unless he's satisfied with the abortion compromise. Without his vote, the bill would die in the Senate.
Little Room to Manuever
The key negotiating will be done between the House and Senate leaders and the chairman of the committees that were involved in drafting the legislation. Given that Democratic party leaders know they have very little wiggle room, they'll likely pick a few items from the House bill that they expect will be acceptable to the Senate and get the compromise bill back to the floor as quickly as possible, probably in a matter of weeks. The leaders know the 60 votes needed in the Senate is fragile.
Assuming a compromise is reached and the final bill passes, it will mean tens of millions of uninsured Americans will be able to get health insurance in the future. Provisions include:
- Subsidies for a family of four to buy insurance. This will most likely be available to families making up to about $88,000 annually, or 400% of the federal poverty level.
- A limit on out-of-pocket expenses.
- Insurance companies will no longer be able to deny coverage for pre-existing conditions.
- Insurers will be barred from charging higher premiums based on a person's gender or medical history.