Democrats Weigh Health Mandate as Obama Urges Taxing Wealthy

June 7 (Bloomberg) -- President Barack Obama wants Congress to consider taxing the wealthy instead of workers to pay for a health-care overhaul, as House Democrats discuss a plan to require health insurance for most Americans.

The Obama administration stepped up efforts to influence health-care legislation today as advisers David Axelrod and Austan Goolsbee appeared on television talk shows to discuss the issue.

The president is trying to avoid broad-based levies such as a Senate proposal to tax some employer-provided health benefits Axelrod said. Instead he is urging lawmakers to reconsider limiting all tax deductions for Americans in the highest tax brackets.

“He made a very strong case for the proposal that he put on the table, which was to cap deductions for high-income Americans, and he urged them to go back and look at that,” Axelrod said on the CNN’s “State of the Union.” Goolsbee, appearing on “Fox News Sunday,” said Obama is “mindful” about how “ordinary Americans are able to foot the bills” and never proposed taxing employee benefits.

House Democrats are weighing a new proposal in response to Obama’s call for legislation to be enacted by August. An outline of the plan obtained by Bloomberg News would require Americans to have insurance with some exceptions.

It would probably exempt those who can prove they can’t find an affordable policy. There could be a tax penalty for those with adequate financial resources who don’t elect to get insurance, according to the outline.

Group Rates

The outline suggests consumers who have individual health insurance policies that they like could keep them. Still, it says that “by and large” the nation’s market for individually purchased health insurance policies would move to a new federally operated exchange. It would permit both individuals and employees of small firms to buy policies at less expensive group rates.

“States will have the option to run a state exchange but the default will be a national exchange,” according to the outline.

Karen Lightfoot, a spokeswoman for House Energy and Commerce Committee Chairman Henry Waxman, a California Democrat whose panel is working on a proposal, said the document that is circulating is not the official work of the committee.

All House Democrats will be briefed June 9 on the details of a single piece of legislation that three House committees will work on, with the House slated to act by the end of July. The proposal is part of a broader push by Democrats in Congress to complete a revamp of the U.S. health-care system by an early fall timetable set by Obama.

Kennedy’s Approach

In the Senate, health committee chairman Edward Kennedy has an early draft of legislation that also includes a so-called “individual mandate,” and would require all employers to supply health insurance for workers or contribute to the cost of a plan.

Kennedy, a Massachusetts Democrat, would also create a public health plan to compete with private insurers, a priority of Obama’s that is opposed by Republicans, and would bar insurers from limiting coverage.

The effort to overhaul health-care would affect a sector that makes up 17 percent of the U.S. economy. The goal of Democratic supporters is to provide insurance to most of the nation’s 46 million uninsured, and lower the soaring cost of care. A key challenge is the potential impact of legislation on an already rising U.S. budget deficit that may reach $1.8 trillion this year.

Axelrod, speaking on CNN today, said the ultimate goal of legislation is to reduce costs.

“We have to bring down the cost of health care,” he said. “If we do that and make it affordable, people are going to buy it, mandate or no mandate.”

Burdens on Business

Google Inc. Chief Executive Eric Schmidt, speaking on Fox, said reducing costs would also ease burdens on business.

“The only way to really address this is to address the combination of coverage and cost,” Schmidt said. “So anything that the Congress and the president does has to do that. And from my perspective, the sooner the better.”

“You won’t fundamentally solve the problems in business until you solve the problem of spiraling health-care costs, which is driving everybody crazy,” he added.

Lawmakers have a plethora of proposals to raise the hundreds of billions estimated to be needed for an overhaul, including new taxes on soda, beer, and wine, and a partial tax on employer-provided health insurance for the first time. The tax-free nature of employer-provided insurance is the biggest tax expenditure in the federal budget.

Taxing Cap Deductions

Obama’s own proposal would set a 28 percent cap on tax deductions for items such as mortgage interest, investment expenses and charitable gifts for Americans in the two highest tax brackets, which would be 36 percent and 39.6 percent under his proposals. Without the cap, they would be able to deduct 36 cents and 39.6 cents on the dollar for those expenses, respectively.

Obama also proposes new taxes on securities dealers and life insurers, and to raise revenue by prohibiting certain estate-planning techniques.

House Democrats intend, like Kennedy, to include a new government program to provide health-care to a portion of the uninsured who don’t already qualify for Medicare or Medicaid, according to the outline.

While the lawmakers continue working out the details, they intend the new program to operate through the exchange and for both the public program and private insurance policies to have the same basic benefits.

Helping the Poor

House Democrats want to improve the Medicaid health-care system for the poor, including a uniform benefits package and “improved” provider payments. They are weighing whether to add people who are near the poverty level to Medicaid or to provide subsidies to allow them to purchase their own policies.

The plan would place new restrictions on private insurers, including a bar on excluding coverage for those with “pre- existing conditions.”

The legislation would seek to get some cost savings from Medicare and Medicaid, including incentives for doctors to coordinate their care and get bonuses for improving quality, according to the outline.