House health plan to boost taxes on rich

[July 15, 2009]  WASHINGTON (AP) -- House Democrats on Tuesday rolled out an ambitious $1.5 trillion plan that for the first time would make health care a right and a responsibility for all Americans, with Medical providers, employers and the wealthiest picking up most of the tab.

The federal government would be responsible for ensuring that every person, regardless of income or the state of their health, has access to an affordable insurance plan. Individuals and employers would have new obligations to get coverage, or face hefty penalties.

Health care overhaul is President Barack Obama's top domestic priority, and his goal is to slow rising costs and provide coverage to nearly 50 million uninsured Americans.

The plan would slow Medicare and Medicaid payments to medical providers. From big hospitals to solo physician practices, providers also would be held to account for quality care, not just ordering up tests and procedures. Insurance companies would be prohibited from denying coverage to the sick. The industry also would face stiff competition from a new government plan designed along the lines of Medicare.

The liberal-leaning plan lacked figures on total costs, but a House Democratic aide said the total bill would add up to about $1.5 trillion over 10 years. The aide spoke on condition of anonymity to discuss the private calculations.

The legislation calls for a 5.4 percent tax increase on individuals making more than $1 million a year, with a gradual tax beginning at $280,000 for individuals. Employers who don't provide coverage would be hit with a penalty equal to 8 percent of workers' wages with an exemption for small businesses. Individuals who decline an offer of affordable coverage would pay 2.5 percent of their incomes as a penalty, up to the average cost of a health insurance plan.

With Obama pressing Congress to act on health care this summer, House leaders want to move their bill quickly through three committees and to a floor vote before the August congressional recess. But a group of moderate and conservative Democrats has withheld support, and no Republican votes are expected. The House bill seemed unlikely to win broad backing in the Senate.

Standing before a banner that read "Quality Affordable Care for the Middle Class," House Speaker Nancy Pelosi, D-Calif., called the moment "historic and transformative." The bill would provide "stability and peace of mind" by braking costs and guaranteeing coverage, she said.

"We are going to accomplish what many people felt wouldn't happen in our lifetime," said House Energy and Commerce Committee Chairman Henry Waxman, D-Calif., one of the main sponsors. Obama issued a statement hailing the measure.

Democrats said the income tax increase would apply only to the top 1.2 percent of households, those who earn about one-quarter of all income. The wealthiest 4 percent of small business owners would be among them. The tax would start at 1 percent for couples making $350,000 and individuals earning $280,000, ramp up to 1.5 percent above $500,000 of income, and jump to 5.4 percent for those earning above $1 million.

The tax would raise an estimated $544 billion over 10 years.

Business groups and the insurance industry immediately assailed the legislation. In a letter to lawmakers, major business organizations branded the 1,000-page bill a job-killer. Its coverage mandate would automatically raise the cost of hiring a new worker, they said.

"Exempting some micro-businesses will not prevent this provision from killing many jobs," the letter said. "Congress should allow market forces and employer autonomy to determine what benefits employers provide, rather than deciding by fiat."

The business groups also warned that the U.S. health care system could be damaged by adding a government-run insurance plan and a federal council that would make some decisions on benefits, as called for in the legislation. Thirty-one organizations signed the letter, including the U.S. Chamber of Commerce, the Business Roundtable representing top corporate CEOs and the National Retail Federation.

The House bill would change the way individuals and many employers get health insurance. It would set up a new national purchasing pool, called an exchange. The exchange would offer a menu of plans, with different levels of coverage. A government plan would be among the options, and the exchange would eventually be open to most employers. Insurers say that combination would drive many of them out of business since the public plan would be able to offer lower premiums to virtually all Americans.

But backers of a public plan -- including Obama -- say it would provide healthy competition for the insurance industry.

Under the House bill, the government would provide subsidies to make coverage more affordable for households with incomes up to four times the federal poverty level, or $88,000 for a family of four and $43,000 for an individual. Medicaid -- the federal-state health program for the poor -- would be expanded to individuals and families up to 133 percent of the poverty line. The legislation also would improve the Medicare prescription drug benefit by gradually reducing a coverage gap known as the 'doughnut hole.'

The individual and employer coverage requirements would raise about $200 billion over 10 years, the Democratic aide said.

Even before the bill was unveiled, the House Ways and Means Committee announced it would vote on the proposal beginning on Thursday. The panel is one of three that must act before the bill can go to the full House, probably later in the month.

Across the Capitol, the Senate Health, Education, Labor and Pensions Committee slogged toward passage of its version of the bill on what was expected to be a party-line vote. Another panel, the Senate Finance Committee, was striving to unveil a bill by the end of the week. But the outlook in the Senate remained uncertain.

Some House Democrats privately have expressed concern that they will be required to vote on higher taxes, only to learn later that the Senate does not intend to follow through with legislation of its own. That would leave rank-and-file House Democrats up for re-election next year in the uncomfortable position of having to explain their vote on a costly bill that never reached Obama's desk or became law.

[Associated Press; By RICARDO ALONSO-ZALDIVAR and ERICA WERNER]

Associated Press writers David Espo, Alan Fram and Andrew Taylor contributed to this report.

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