Baucus Watch, Part VI

The senator’s thoughts on financing health reform

As chairman of the Senate Finance Committee, Senator Max Baucus holds the keys to health-care reform; any health-care legislation must pass through his committee. So what he says or doesn’t say is important to those following the twists and turns of the congressional effort to fix our health-car system. This is the sixth of an occasional series of posts on the senator’s pronouncements and how the media has covered them. The entire series is archived here.

What does Max Baucus really mean when he talks about ways to finance health reform? Money, as everyone knows, is the mother’s milk of politics—and, you might say, the mother’s milk of health system change. In his budget announcement last week, the President said he was earmarking (pardon the expression) $634 billion as a down payment to cover some people perhaps two years from now. About half of the money was to come from tax increases on wealthier Americans.

Press reports in the past week indicate that Baucus may be having second thoughts about the President’s financing proposal. Last Friday, the AP reported that Baucus said the tax package raises concerns and, in the senator’s words, “will require more study.” Yesterday, another AP story again noted that Baucus had “raised questions” about the proposed $634 billion down payment.

On Wednesday, The Wall Street Journal’s health blog reported that Baucus “raised a red flag today” over the administration’s plan to partially fund reform by lowering tax deductions for the wealthiest Americans. This way-too-brief account reported that Baucus said he was “especially concerned” about capping the deductions at a lower rate and was “wondering about the viability of that provision.” The blog post continued: ‘“You’re not wedded to the 28 percent limitation?’ Baucus asked Treasury Secretary Timothy Geithner. ‘I urge the administration to dig down deeper to find viable savings—concentrate on savings within health-care reform.”’ Geithner replied the administration was open to other ways of finding the money.

Uh oh! Does that mean that tax increases for the wealthy might not work as a partial funding source after all? Is the President’s financing proposal DOA? It would have been great had the Journal told us what all this meant. An article on Wednesday by Mike Dennison, a state house reporter for Lee Newspapers who keeps a close watch on Baucus, was more illuminating than the Journal. In his piece, Dennison revealed that Baucus told reporters he didn’t yet know the “tipping point” on how much more money will eventually be allocated to health reform.

Baucus did say, however, that he might want to eliminate the tax break workers now receive for health insurance provided by their employers. Under current law, employees do not have to pay taxes on the value of their health insurance benefits. There’s $160 billion in foregone revenue at stake. Perhaps Baucus and others are hoping to tap some of that money to finance coverage for the uninsured. Said Baucus: “I think that tax provision should be on the table. It’s currently too aggressive. I do not favor eliminating it. But I do think it needs to be trimmed, limited.” Last summer, we reported that many Democrats supported ending the tax break for workers. Sen. John McCain did too.

Do Baucus’s comments tee up a fight with the President? At the end of the campaign, then-candidate Obama slammed McCain pretty hard over the idea of taxing benefits. McCain proposed giving every family a $5000 tax credit to buy health insurance, but also proposed taxing health insurance benefits. “It’s a shell game,” Obama said. “He gives you a tax credit with one hand—but raises your taxes with the other.”

Baucus Watch will continue to report on the evolution of the senator’s thinking on this bound-to-controversial matter. We hope the press will, too.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman.