White House and Congressional officials worked through Thursday night and into the wee hours of Friday as they continued to press for a final accord on far-reaching health care legislation.
Oliver Morin/Getty House majority leader Steny H. Hoyer, Democrat of Maryland.Officials on all sides were holding the details close, but the talks were clearly focused on how to make insurance affordable for more Americans and how the government will pay for the overhaul package.
Talks at the White House are scheduled to resume Friday at 2:30 p.m.
The Thursday night talks, in the Cabinet Room, wrapped up at about 1:25 a.m. Friday, and the White House issued a statement saying: “They made solid progress toward a final package, including common-sense adjustments that strengthen the legislation and make sure it works for middle-class families while bringing down costs and expanding coverage to millions of Americans.”
Translation: Officials continue to grapple with two of the thorniest challenges in developing a final bill, whether or how to increase federal subsidies to help moderate-income Americans afford health insurance, and how to cover the rising 10-year price tag of the legislation so the bill does not add to the federal budget deficit.
The House majority leader, Representative Steny H. Hoyer, Democrat of Maryland, said Friday morning that officials were close to a deal but would still need to confirm that the changes they were making were affordable and in keeping with President Obama’s demand that the bill not add to the federal budget deficit.
“I got to bed around 2 o’clock this morning,” Mr. Hoyer said on CNBC’s Squawk Box. “It was a long night at the White House. I think we are getting very close. I would certainly hope within the next 24, 48, 72 hours that we have a general agreement between the Senate and the House.”
Mr. Hoyer added: “We have indicated this bill will be paid for. We have indicated we want to bring the deficit down with this bill. We need to make sure that those representations are correct in terms of whatever agreements we make. But I think we are getting very close.”
Earlier Thursday, the White House and Congressional leaders struck a tentative deal with organized labor groups on a proposal to tax high-cost, employer-sponsored insurance policies as one way to pay for the legislation. The bill the Senate passed included a version of this excise tax that the Congressional Budget Office said would generate $149 billion over 10 years toward the cost of the legislation.
But after making changes to mollify organized labor groups and reduce the number of union-sponsored insurance plans that will be hit by the excise tax, the version of the tax to be included in the final bill will probably generate only $90 billion, officials said. (The Congressional Budget Office has not yet issued an official analysis, so the amount could be more or less.)
Mr. Obama continues to insist that the health care bill not add to future deficits. According to the budget office, the Senate bill would reduce future federal deficits, over 10 years, by $132 billion. But when revenue from a new long-term care insurance program is set aside to pay future benefits, along with money for Social Security, the Senate bill would reduce future deficits by less than $10 billion.
So the change in the excise tax quickly put policymakers in an approximately $50-billion hole. And that hole is expected to grow even bigger as top White House officials and Congressional leaders work through other issues that will raise the cost of the legislation.
The agreement on the excise tax, should it hold together, is a major breakthrough in resolving one of the big differences between the House and Senate versions of the legislation: how to pay for new insurance coverage provisions that will help provide benefits to more than 30 million people.
The excise tax had been the biggest revenue raiser in the Senate bill, which also included an increase in the Medicare payroll tax for individuals earning more than $200,000 and couples earning more than $250,000. That Medicare tax provision would have raised $87 billion over 10 years.
The House bill called for an income surtax on individuals earning more than $500,000 and couples earning more than $1 million, which would have raised $460 billion by 2019. But Mr. Obama in recent discussions has sided with the Senate in calling for all of the new taxes and fees in the bill to be kept within the “health care arena.”
Officials are considering a number of steps that would broaden the Senate’s increase in the Medicare payroll tax. One would be to apply the payroll tax to capital gains and other “passive” or “unearned” income. Another would be to dial up the increase in the payroll tax rate itself.
Republicans are already readying a number of criticisms of the plan to increase the payroll tax, also known as the hospital insurance tax.
One criticism is that the approach would undermine one of the core original concepts of Medicare, which is that it serves a social insurance compact between generations of Americans, with the working population contributing premiums (the payroll tax) that pay benefits after retirement. By this argument, as a smaller number of wealthy Americans pay a larger share of the future benefits of Medicare for everyone, the program looks more like traditional welfare than a prepaid retirement benefit.
Another is that the Democrats will create a “marriage penalty” in the payroll tax for the first time. Individuals earning less than $200,000 would not pay any additional payroll tax. But a husband and wife, each earning more than $125,000, would face a tax increase because together they earn more than $250,000.
But with so much pressure on Democrats to increase the size of the legislation, and raise subsidies to make insurance affordable, there is little room to maneuver. Officials are already looking at ways to extract more savings from the pharmaceutical industry, and scouring the landscape for other provisions known in Capitol Hill lingo as “pay-fors.”
One of the biggest challenges facing the White House and Democratic leaders in Congress -– a challenge that is literally keeping them awake at night -– is how to increase the new federal subsidies, particularly for American families earning less than 250 percent of the federal poverty level, or about $33,150 in today’s dollars.
The House bill is more generous in this regard than the Senate bill. And policymakers know that once a bill is adopted, the first thing analysts will do is draw up a table showing how much families at various income levels can expect to pay in insurance premiums and out-of-pocket expenses.
Actually, it’s what families will be forced to pay given that the legislation would require nearly everyone to obtain insurance. If the cost of coverage seems unreasonably expensive for average Americans, public reaction to the bill would almost certainly be negative, possibly prompting a backlash against Democrats at the polls in November.
Mr. Hoyer on Friday morning would not predict when a deal would be announced, but he said: “I think it’s sufficient to say we are very close, we have been working very hard. We are working very long hours trying to get this done for the American people. The president has been very engaged in our discussions.”