Democrats Scramble to Cut Costs From Health Plan

Robert Pear|The New York Times

The high cost of securing health insurance for all Americans, the top domestic priority of President Obama, has Congressional Democrats scrambling to scale back their proposals or find ways to trim tens of billions of dollars a year from existing health programs.

Stethescope and money

According to slides presented at a closed-door meeting this week, members of the Senate Finance Committee are debating several new ideas, including “an automatic mechanism” to reduce the growth of Medicare under an expedited procedure like the one used to close military bases.

The documents displayed in the slides show that the committee is also considering a proposal that would require some employers to contribute to the cost of Medicaid or private health insurance for low-wage workers. One purpose is to discourage employers from foisting the cost of employee health benefits onto the federal government, a maneuver that would push up the cost of revamping the health system.

Mr. Obama suggested earlier this week that the total cost to overhaul the health care system would be “on the order of $1 trillion over the next 10 years.” But initial estimates by the Congressional Budget Office, the official scorekeeper on the cost of legislation, have come in much higher, leaving many lawmakers with sticker shock and casting about for alternatives.

As the Senate health committee continued drafting a companion bill on Thursday, one of its Democratic members, Barbara A. Mikulski of Maryland, said, “Obviously this is not going to go as fast as we thought.”

The Finance Committee has wrestled all week with the three biggest issues in the health care legislation: how to pay for coverage of the uninsured, whether to create a new public insurance plan and whether to impose new obligations on employers.

But it is the cost of the legislation that seems to bedevil lawmakers the most. A budget office estimate of $1.6 trillion as the cost of an earlier Finance Committee draft sent members hunting for ways to pare the expense. Peppered with questions about the legislation, the committee’s chairman, Senator Max Baucus, Democrat of Montana, has postponed a drafting session that was to have begun early next week.

Still, Mr. Baucus was upbeat on Thursday. “We are getting closer and closer and closer,” he said after a two-hour meeting of a half-dozen senators — three Democrats and three Republicans. “There’s no doubt in my mind that we will have a bipartisan bill.”

Other Democrats said the cost estimate and the resulting delays were a temporary setback, not a deal-killer.

Indeed, Speaker Nancy Pelosi of California said they were evidence of a vibrant democratic process.

“The give and take, the back and forth of different ideas — you may call them snags, we call them the legislative process,” Ms. Pelosi said. “This is a situation where everybody wants to hear everyone’s ideas, put it all on the table, see what it does for the American people. What is it that we can afford?”

Three House committees have been working for months to develop a single big proposal of their own and expect to unveil it on Friday.

Under new cost-saving ideas being considered by the Senate Finance Committee, there would be a goal for Medicare spending that “ensures continued sustainability and bends the Medicare cost curve.” If the goal was not met, “an automatic mechanism would be triggered to achieve those spending reductions.”

An existing federal panel, the Medicare Payment Advisory Commission, would make recommendations to Congress on how to achieve the savings, and Congress would take an up-or-down vote on the recommendations, which could cut payments to hospitals, managed care plans and other health care providers.

The White House has said Mr. Obama is open to the idea of giving more power to the Medicare commission. To help pay for health care legislation, he has proposed more than $600 billion of Medicare and Medicaid savings, about a third of it from hospitals, over the next 10 years.

Senator Pat Roberts, Republican of Kansas, urged his colleagues to consider the possible harm to hospitals and clinics. “More cuts to Medicare?” he said. “Let’s not do that right now, please.”

Democrats are also considering changes in a proposal that would require employers to provide health benefits for their workers or contribute to the cost of such coverage. Under the new option, employers would not have to provide coverage, but would have to pay “50 percent of the national average Medicaid costs for workers enrolled in Medicaid,” the program for low-income people.

Democrats plan to offer federal subsidies or tax credits to help people with low or moderate incomes buy insurance on their own. Senator Kent Conrad of North Dakota said Democrats were looking for ways to limit the subsidies, a major cost. Under the latest option floated by Mr. Baucus, employers would be required to pay “100 percent of the cost of the tax credit for workers receiving the tax credit.”

Senator Orrin G. Hatch, Republican of Utah, said these proposals were misguided because they would create a disincentive for employers to hire low-income people.

“This means that small-business people won’t hire anybody who’s on Medicaid,” Mr. Hatch said. “They won’t hire any low-income workers. They get penalized for doing it.”

Some Democrats share that concern.

Finance Committee documents also flesh out proposals to tax employer-provided health benefits in excess of a certain value — say, $6,200 for individuals and $15,700 for families, which the documents project as the value of the standard Blue Cross plan for federal employees in 2013.

The documents say such a tax could raise $418 billion over 10 years. But the revenue would drop sharply, to $162 billion, if the tax applied only to more affluent people: individuals with incomes over $100,000 and families over $200,000.

CNBC Slideshows:

For decades, employer-provided health benefits have not been counted in workers’ taxable income. Mr. Baucus and many economists say the tax break is inequitable because its benefits go disproportionately to people with higher incomes.

David M. Herszenhorn contributed reporting.