Can Congress Make Health-Care Reform Pay for Itself?

Can Congress Make Health-Care Reform Pay for Itself?

The budget that just passed both houses of Congress has given the prospects for
health-care reform this year a big boost. With the inclusion of procedural
language that would make it impossible for opponents to filibuster, it will now
take a simple majority to pass the Senate, rather than 60 votes,
simplifying the political arithmetic considerably.

But that is only the
beginning. As hard as it will be for lawmakers to navigate the political and
philosophical minefields to get to 51 votes for health-care reform, the most
difficult challenge of all may be the number on the bottom line. Under the
budget rules, any reform scheme will have to pay for itself within six

Trying to meet that ambitious goal in such a short time frame may make it
hard for lawmakers to make the wisest policy choices. Though advocates
say that fixing the health system promises big savings over the long haul,
it will take some big, up-front investments — in technology and preventive
care, for instance — whose benefits will not begin to take effect for years.
And most of the savings will accrue not to the Federal Government — whose
direct costs for health care are felt largely through the Medicare and
Medicaid programs — but to the economy writ large, where health care now
accounts for about 17% of all spending, more than double its percentage in
1970. “Ironically, the things that may wind up being the most important are
the things that we will get little or no credit for” under the budget rules,
says White House Office of Management and Budget Director Peter Orszag.

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So daunting is the prospect of passing a bill that fits the confines of a
pay-as-you-go budget that a coalition of 30 organizations pushing for health-care reform — including the U.S. Chamber of Commerce, organized labor, the
drug lobby, AARP and organizations representing hospitals, doctors and
patients — wrote a letter in March asking lawmakers to suspend the rule with
respect to health-care reform. But officials at both ends of Pennsylvania
Avenue say that would be political suicide at a time of record deficits — and
a guarantee that Republicans and fiscally conservative Democrats would not support the

So where will lawmakers find the money President Obama proposed a $634 billion
“reserve fund,” paid for by higher taxes on the wealthy, but even if that passes, experts say it won’t be enough to cover even half the cost of comprehensive health-care reform
over the next 10 years. Hospitals and doctors are also bracing for what
they expect will be efforts to cut the reimbursements they get for treating
patients under Medicare and Medicaid.

One of the biggest ways to raise money to pay for health-care reform is also the
most politically delicate: taxing employer-provided health benefits. It’s an
idea that Obama criticized when his opponent John McCain proposed it during
last year’s presidential campaign, but one that his top White House advisers
now say should remain on the table. And it is an approach that Senate Finance
Committee chairman Max Baucus says he is considering.

It’s easy to see the appeal, if you look at the numbers. The Congressional
Budget Office has estimated that fully counting employer-provided health
benefits as taxable income could bring as much as $246 billion a year into
federal coffers. But the politics of taxing something
that workers now believe they get for free would be treacherous. More likely than a total
elimination of the favorable tax treatment is the prospect of putting some
kind of limit on that deduction — forcing workers to pay taxes, for instance,
if their employer offers a particularly lavish plan. Or lawmakers may come
at it another way, curbing the tax deduction that companies can take for
offering those benefits.

Such choices get to the real truth behind the cold hard numbers of
health-care reform. Every one of them is a political calculation, one that
pits one constituency against another. Can lawmakers really balance the
books on health-care reform “You can do it,” says former Senate majority
leader Tom Daschle, a leading voice in the health-care-reform effort. “It’s just
a matter of how much pain you want to endure.” See the top 10 medical breakthroughs of 2008. See TIME’s Pictures of the Week.