News & Events

The bill for health reform (MS)

PRESIDENT OBAMA was right Monday to use his nomination of an Alabama doctor as surgeon general to pressure Congress to reform the nation’s healthcare system. Momentum for action on Capitol Hill slowed while the president was in Europe and Africa. Obama – and voters – should demand that lawmakers start making hard decisions on how to pay for coverage of the nation’s 47 million uninsured and how to slow the growth in overall health costs.

The bill for covering the uninsured will require new taxes, never a popular choice. The most promising brake on health cost inflation is Obama’s proposal for a new public health plan option with low overhead and the power to negotiate bulk discounts.

Congress rejected Obama’s proposal to pay for universal coverage in part by limiting the deductions that the wealthy can take for their charitable contributions and mortgage interest payments. Instead, the two leading funding proposals are a surtax on individuals earning more than $280,000 and couples earning more than $350,000, and a new tax on health insurance benefits that workers receive from their employers.

The chief proponent of the surtax is Representative Charles Rangel of New York, chairman of the House Ways and Means Committee. The surtax would begin at 1 percent of income at the $280,000 level and increase for higher brackets. Rangel estimates that it would yield about $550 billion over 10 years, or about half the cost of covering the uninsured. He would provide for the rest by lowering spending for Medicare and achieving other healthcare savings.

Opponents will surely depict the surtax as a form of class warfare. But in recent decades, incomes have grown much faster – and tax rates have dropped more – for the wealthiest families than for poor and middle-class families.

Meanwhile, powerful senators have supported the new tax on workers’ health benefits. But unless it were limited to the benefits received by upper-income taxpayers, it would violate Obama’s campaign pledge not to raise taxes of any families earning less than $250,000 a year. Still, Congress could take some of the sting out of Rangel’s surtax while abiding by Obama’s pledge if it limited the tax on benefits to the rich. According to the Committee for a Responsible Federal Budget, taxing benefits of those earning more than $250,000 would generate $40 billion over 10 years.

Another campaign pledge Obama should not break is his insistence on a public plan option. A Medicare-like nationwide plan could drive hard bargains with providers, especially drug companies, and function without the high administrative costs of for-profit insurers. Any healthcare reform package without a public plan will simply ratchet up health inflation.