WASHINGTON • House and Senate negotiators working on President Barack Obama's health overhaul bill appear likely to drop a proposed income tax increase on high-wage earners and possibly jettison a requirement for large businesses to offer coverage to their employees, Democratic officials said Tuesday.
Negotiators are considering extending the Medicare payroll tax, which now applies only to income from wages, to cover some of the investment earnings of couples making more than $250,000 a year, and individuals earning above $200,000. That could make up lost revenue from dropping the high-wage income tax and scaling back a proposed tax on high-value insurance plans, which is strongly opposed by organized labor and House Democrats.
On another high-profile issue, the negotiators are discussing a hybrid of a proposed national insurance exchange contained in the House bill and the state-by-state approach favored by the Senate. House Democrats are pressing for a national system to apply pressure to the insurance industry after their proposal for a new government-run insurance option was ruled out due to opposition from Senate moderates.
These officials also said key lawmakers and the White House were hoping to include more money to protect state governments from the cost of an expansion of the federal-state Medicaid insurance program for the poor. That issue flared after Sen. Ben Nelson, D-Neb., the critical 60th vote for the health care bill in the Senate, got a deal for the federal government to pay the full cost of Medicaid expansion in his state forever, whereas other states would have to pick up part of the tab after a few years.
The officials spoke on condition of anonymity, saying they were not free to disclose details of the negotiations.
The developments came as the pace of negotiations on health care legislation quickened with House members returning to Washington on Tuesday from a holiday recess. The White House wants a final bill for Obama to sign in time for his State of the Union address early next month.
House Speaker Nancy Pelosi, Senate Majority Leader Harry Reid and other Democratic leaders were scheduled to meet with Obama at the White House on Wednesday to narrow the numerous issues that remain unresolved. The president has weighed in forcefully in recent days, telling lawmakers he wants at least a pared-down tax on high-cost insurance plans as well as a commission with authority to order cuts to Medicare spending under limited circumstances — both measures designed to hold down spiraling health care costs.
The House-passed bill included an income tax increase on individuals making more than $500,000 a year and couples making over $1 million, as well as a requirement for large businesses to cover their workers. The Senate bill contained neither. It included a tax on high-value insurance plans and a modest increase in the Medicare payroll tax. Instead of requiring employers to offer health coverage, the Senate bill penalized businesses if any of their workers obtained government-subsidized health care.
The move away from the House approaches is a bow to the influence of moderates in the Senate, who oppose those and other liberal priorities and are critical to Reid's fragile majority in support of the bill.
Officials said Obama has indicated support for a national version of the exchange — a clearinghouse where consumers could shop for health coverage. He also is signaling support for ending the decades-old antitrust exemption enjoyed by insurance companies. On those two issues the president is siding with House Democrats over their Senate counterparts.
The legislation passed by both chambers before Christmas is similar in many respects, including expanding Medicaid and imposing a first-time requirement for almost everyone to purchase insurance. Both bills would extend health coverage to more than 30 million uninsured Americans over the next decade.
On other issues:
• House Democrats are pushing for more generous subsidies to help low- and middle-income people buy coverage, and Obama supports that. Under the Senate bill, the average subsidy that someone shopping in the exchange would get in 2019 is $5,600, while in the House bill it's $6,800.
• Negotiators are looking at how to tweak the tax on high-value insurance plans. As passed by the Senate, the 40 percent tax would hit individual health plans worth $8,500 or more and family plans worth $23,000 or more. Union leaders fear their members would be unduly penalized by the tax, and there's been discussion of moving the thresholds higher.
Obama met with union leaders Monday, and one union official familiar with the discussions said labor leaders and White House staff also explored the possibility of exempting or delaying health plans covered by collective bargaining agreements from being subject to the tax. They also discussed possible carve-outs for state and government employees, many of whom are unionized.
But some union officials are concerned about any compromise that would appear to give unions special treatment. They want a fix that protects both union and nonunion middle-class workers from paying higher taxes on health plans.
The goal was for White House staffers to come up with a revised plan for the insurance plan excise tax within 48 hours of Monday's meeting. Union leaders, including AFL-CIO head Richard Trumka, met with Pelosi on Tuesday afternoon.
The union officials spoke on condition of anonymity because of the sensitivity of the negotiations.