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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Financing Health Reform

There’s a great piece up at TNR today from Jonathan Cohn succinctly describing the state of play among Senate Democrats on the subject of how to finance health care reform. It focuses on the proposal in the Baucus bill, originally suggested by John Kerry, to raise a very large chunk of cash through an “excise tax” on high-end private health insurance policies.
An immediate problem, as those following the debate may recall, is that some major unions have negotiated very generous health care benefits for not-necessarily well-compensated workers that could be exposed to the tax. Such union members also tend to be older, and/or work in risky occupations, both of which boost the price tag for insurance. Moreover, people in states with unusually high health-care costs could run afoul of it as well. As Cohn points out, the Senate Finance Committee, which must approve some plan for health care reform financing, has a large number of Democrats who represent one or the other of these sensitive constituencies. But there’s a potential solution:

There’s a way out of this dilemma. Since the Kerry proposal taxes insurers rather than individuals, it would be relatively straightforward to dictate that groups facing high costs because of age, unusually large regional variations, or physical risk don’t see their prices go up by that much (or at all). And while carving out some exceptions to the insurance tax change would mean reducing the revenue from the tax, that money could be made up by making the tax itself larger–or adding some other revenue source, whether it’s a smaller version of the House income tax or maybe even a small tax on sugary sodas.

This won’t be easy, but resolution of the financing issue is at least as important as all the high-profile arguments over the public option.

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