Thursday, July 9, 2009

NEWS UPDATE 7/9: HAS HARRY REID TORPEDOED REFORM?

Health care reform ran into new BIG trouble this week with a series of comments from Senate Majority Leader Harry Reid.

On Tuesday, Reid leapt into the middle of reform negotiations, telling Senate Finance Committee Chairman Max Baucus that Democratic leaders had major concerns about the draft Senate Finance bill’s proposed taxation of some health benefits and the exclusion of a strong public plan.

The immediate result was the effective suspension of bipartisan negotiations on the Senate Finance draft, with Republican Senators Chuck Grassley and Orrin Hatch both saying that bill markup would have to be delayed indefinitely until the conflict was resolved.

Yesterday, Reid tried to soften his comments in conversation with Senate Republicans, but later indicated that taxing health care benefits was still unacceptable, leaving Senate Finance members wondering how else to help pay for the trillion dollars (or more, perhaps much more) that they estimate as the ten-year cost of reform.

Reid’s comments reflect the findings of a series of straw polls in which various senators’ constituents were asked if they supported taxing health care benefits (Surprise! They didn’t want any new taxes), as well as an aggressive union-led campaign against the idea.

Reid’s intervention could very well have torpedoed reform. It leaves Senate Finance with few choices for funding reform, and virtually none that are likely to attract any bipartisan support.

What may be even worse is that potentially killing taxation of health care benefits removes from the Senate Finance draft one of the very few provisions that might actually have resulted in some slowing of overall health care cost increases. Leaving tax deductibility of benefits in place will continue to encourage the belief in those who are lucky enough to have generous employer coverage that health care is “free.” Meanwhile, Reid’s insistence on a strong public plan as an alternative cost control mechanism is almost certain to end any support from moderate Republicans or centrist Democrats and to generate huge (and well-funded) opposition from insurers and providers.

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