Health Care: Reid Considers More Progressive Funding Solutions for Senate Bill

When the now infamous "Baucus Caucus Bill" was released, one thing that progressives pounced upon was the lack of any sort of public option... And they were totally right to do so. However, another fatal flaw in that bill that remains in the merged Senate bill is the 40% excise tax on insurance companies that offer "Cadillac plans" that cost more than $8,000 for individuals. Senate ConservaDems claim that this will lower costs for everyone, but a number of unions are balking that this will hurt middle-class families who depend on comprehensive health benefits that their unions worked hard to negotiate. After all, remember that a number of these workers had to forego pay raises (and in some cases, accept pay cuts) just to get these so-called "Cadillac plans"... And the Senate wants to punish these workers with an extra tax?

Well, leave it to our good Senator to fight back and offer better solutions.

Pressing to begin the Senate's landmark floor debate on healthcare legislation this week -- and to finish by the end of the year -- Majority Leader Harry Reid (D-Nev.) is considering new ways to fund the bill by raising the payroll taxes that upper-income workers pay for Medicare.

Reid is studying the idea, senior Democratic aides say, because of criticism of a plan approved by the Senate Finance Committee that would impose new taxes on insurance companies that offer expensive healthcare plans. [...]

Labor unions and other critics say the Cadillac tax would hit too many middle-income consumers whose health premiums are high because they live in high-cost areas, not because the plans offer luxury benefits.

Reid, who is facing a tough reelection campaign with the strong backing of organized labor, is exploring ways to scale back the Cadillac tax. He is considering the Medicare payroll tax hike to make up for the revenue that would be lost if the Cadillac tax applied to fewer plans.

Under the current system of financing the Medicare hospital insurance trust fund, employers and employees pay a tax of 1.45% on wages.

Reid is reportedly considering increasing the rate about half a percentage point for workers earning more than $250,000 a year.

Some Democrats and analysts see the proposals as a way to offset the cost of the healthcare bill, shore up the Medicare trust fund -- and keep the burden of both efforts on upper- income people.

Another approach under consideration would expand the tax to cover unearned income, such as capital gains, not just wages.

I would happily support either the Medicare payroll tax hike only for the super-rich earning over $500,000 a year (somewhat like the House's version, just better understood) and/or increasing the capital gains tax on those super-rich Wall Street traders. Why should Nevada's working families be hit with higher taxes just for negotiating better health insurance? Shouldn't we instead lessen the burden on the working class by focusing on those who have gotten away with so much, including the recent TARP bailouts, but have paid so little?

I applaud Harry Reid for looking at more progressive funding solutions for the Senate health care bill. I just hope that, like the public option, he'll be able to design the funding in a way to get the votes necessary for passage.