Senator Kent Conrad, Democrat of North Dakota and the chairman of the Budget Committee, zeroed in on the health care issue in his very first question of Mr. Elmendorf, and he seemed intent on illustrating the importance of an alternate health care bill still being developed by the Senate Finance Committee, of which Mr. Conrad is a main author.
“Dr. Elmendorf, I am going to really put you on the spot, because we are in the middle of this health care debate — but it’s critically important we get this right,” Mr. Conrad said. “Everyone has said, virtually everyone, that bending the cost curve over time is critically important, and one of the key goals of this entire effort. From what you have seen, from the products of the committees that have reported, do you see a successful effort being mounted to bend the long-term cost curve?”
Mr. Elmendorf was unequivocal. “No, Mr. Chairman,” he replied. “In the legislation that has been reported, we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health-care costs.”
In his testimony, Mr. Elmendorf said that one step that would contribute in a large way to offsetting costs would be to tax some employer-provided health benefits, which are currently excluded from taxable income.
Mr. Conrad and Senator Max Baucus, Democrat of Montana, the chairman of the Finance Committee, have advocated such a change. But the Finance Committee was forced to scrap its plan to tax some employer-provided benefits because of the objections of President Obama and other Democratic leaders in Congress.
Asked about Mr. Elmendorf’s comments, Mr. Baucus said the White House had tied his hands on the issue.
“Basically, the president is not helping us,” Mr. Baucus said. “That’s making it difficult.”
Members of the Finance Committee estimated that the proposal to tax some benefits would have raised about $320 billion over 10 years, toward defraying the roughly $1 trillion cost of the health care legislation over that period. Mr. Baucus said he is now working on a menu of smaller proposals to fill that hole.
House Democrats never expressed much interest in the idea of taxing benefits, which would have a strong impact on union workers whose contracts provide generous health coverage. Instead, the House Democrats proposed an income surtax on the highest wage-earners that would yield about $550 billion over 10 years. (full story here NYT)