"Change" May Include Employer-sponsored Programs

May 13. 2009 (PLANSPONSOR.com) - The Senate Finance Committee held a hearing on financing health care reform - and the current deductions for employer-sponsored programs are on the table.

In opening  remarks at the “Roundtable Discussion on “Financing Comprehensive Health Care Reform”, Senator Max Baucus (D-Montana) noted that the Committee had already held hearings on ways to reform the health care delivery system, and ways to provide health coverage to all Americans.   “This one thinks about money. With any luck, we’ll have a great deal of it.”

Baucus acknowledged that “the reforms that we are planning are not cheap,” but said that “…Americans already spend $4½ million on health care every minute of every day.”   He also said that “the Federal government alone spends nearly $700 billion a year on Medicare and Medicaid. And the Federal government forgoes almost $300 billion a year in Federal tax revenue in health care tax expenditures.”

“To make the system more affordable and provide coverage to all, we need to look at where we spend money on health care today. And when it comes to the government, we need to look at both spending and tax expenditures,” he said.

As for where to look, Baucus noted that the system itself needed reform.   “We should reform the health care delivery system to bring higher quality and greater efficiency to all Americans,” he said.

Employer-Provided Programs

And then he acknowledged the 800 pound gorilla in the room.   “We should also look at the current tax treatment of health care.”   He went on to acknowledge that “there is some controversy” in doing so.   “Some do not want to modify the current unlimited exclusion for employer-provided health care. And I agree that we are not going to eliminate the exclusion.

But the current tax exclusion is not perfect. It is regressive. It often leads people to buy more health coverage than they need. We should look at ways to modify the current tax exclusion so that it provides the right incentives. And   we should look at ways to make it fairer and more equitable for everyone.”

Baucus also said "We also need to look at other tax benefits for health care," and included tax-preferred health accounts and the itemized deduction for health expenses.   "We should try to make sure that those benefits are structured fairly and efficiently," he said, "and because of the cost of comprehensive health care reform, we will need to look at other options."   Among those options, Baucus said - "the President's proposal to limit itemized deductions."

"Finding money that we can all agree on will not be easy," he said, but went on to say that "achieving comprehensive health care reform is important enough that we must find a way to succeed."

"The Hardest Part"

Senator Charles Grassley (R-Iowa), ranking member on the Senate Finance Committee, in his opening  remarks said, I'll bet if you polled every member of Congress - asking them what they think would be the hardest part of health care reform - they probably would say "figuring out how to pay for it", and then admitted that if he were asked, he would agree with that statement.   He then asked the following:

  • What are the most appropriate financing tools available to us?
  • Should we look to non-health-related measures?
  • Or should we stick to health-related measures?

Grassley then proceeded to answer those questions. "Consistent with our interest in looking at all of the options out there, I think it's appropriate to look at both. But I will emphasize that I do not agree with all of the non-health-related measures we will examine. But that does not mean that we can't talk about them."  

Having said that, Grassley said that President Obama was going to be a "key player" in health care reform.   "The President's leadership is not only essential in finding ways to pay for health care reform, the President's leadership also is key if we want to get health care reform done this year."

Roundtable Discussion on "Financing Comprehensive Health Care Reform"

Member Statements:
Max Baucus, MT
Charles Grassley, IA

Witness Statements:

style="FONT-FAMILY: Georgia, 'Times New Roman', Times, serif"> Stuart H. Altman, Ph.D., Sol C. Chaikin Professor of National Health Policy, HellerSchool for Social Policy and Management, Brandeis University, Waltham, MA

Joseph R. Antos, Ph.D., Wilson H. Taylor Scholar in Health Care and Retirement Policy, American Enterprise Institute, Washington, DC

Katherine Baicker, Ph.D., Professor of Health Economics, Harvard School of Public Health, Cambridge, MA

Leonard Burman, Ph.D., Director, Tax Policy Center, Urban Institute, Washington, DC

Robert Greenstein, Ph.D., Executive Director, Center on Budget and Policy Priorities, Washington, DC

Jonathan Gruber, Ph.D., Professor of Economics, Massachusetts Institute of Technology, Cambridge, MA

Michael F. Jacobson, Ph.D., Executive Director, The Center for Science in the Public Interest, Washington, DC

James A. Klein, President, American Benefits Council, Washington, DC

Edward Kleinbard, Chief of Staff, Joint Committee on Taxation, Washington, DC

Gerald M. Shea, Assistant to the President for Governmental Affairs, AFL-CIO, Washington, DC

John Sheils, Senior Vice President, The Lewin Group, Falls Church, VA

Gail Wilensky, Ph.D., Senior Fellow, Project HOPE, Bethesda, MD

Steven Wojcik, Vice President of Public Policy, National Business Group on Health, Washington, DC