By DAVID ESPO and ERICA WERNER
Associated Press Writers
WASHINGTON — Key Senate Democrats, bidding for bipartisan support on health care, pared back subsidies designed to make insurance more affordable on Thursday and floated a compromise that rules out direct government competition against private insurers.
Despite the cost-cutting, the proposal backed by Sen. Max Baucus, chairman of the Senate Finance Committee, requires most individuals to purchase coverage and forbids insurance companies from denying it on the basis of pre-existing medical conditions.
The brief outline did not specify how the government’s costs would be covered, although Baucus and many Republicans favor a tax on certain employer-provided health benefits. The Montana Democrat has said he intends to hold the cost of the legislation to about $1 trillion, well below the $1.6 trillion estimate the Congressional Budget Office made of an earlier set of options.
Across the Capitol, Democrats on the House Ways and Means Committee privately circulated a list of possible tax increases to pay for expanded health care.
They ranged from raising the Medicare tax, slapping a 10 percent tax on a can of sweetened drink, raising the alcohol tax, imposing a new tax on employers equal to 3 percent of payroll and taxing employer-provided health insurance benefits above certain levels.
Also under consideration was a value added tax, a sort of national sales tax, of up to 1.5 percent or more, with housing, education, financial services and medical care potentially exempt.
House Democrats were expected to unveil an outline of their own to expand health coverage on Friday, although several officials said they did not plan to include mention of the tax increases under consideration.
Taken together, the developments reflected an eagerness by congressional Democrats in both houses to meet a self-imposed deadline of having health care legislation to the floor of both houses of Congress by summer. President Barack Obama has made the issue one of his top priorities.
Neither the Senate Finance Committee outline nor the list of tax options under review by House Democrats was made public. The Associated Press obtained copies of both.
“There’s no doubt in my mind we’re going to get a bipartisan bill,” Baucus told reporters as he emerged from a meeting with a small group of Republicans he referred to as a “coalition of the willing.”
The senior Republican on the Finance Committee was not nearly as bullish.
“I’m still at the table. I wouldn’t be at the table if I didn’t think there was some hope for it,” said Sen. Chuck Grassley, R-Iowa. “But tomorrow it could be an entirely different story.”
According to a 10-page outline that described the proposal, federal subsidies would be available to help families up to 300 percent of poverty, or $66,000, purchase insurance. An earlier proposal set the level at 400 percent of poverty, or $88,000.
At the same time, the new outline could require higher out of pocket costs from individuals because companies would be permitted to offer policies that cover less of an insured’s anticipated medical costs than was earlier proposed.
Many Democrats want the government to be able to offer insurance in competition with the private industry, a provision they say would hold down costs. But most Republicans are opposed.
The outline presented at meeting with Republicans left the matter open, but suggested creation of nonprofit co-ops to offer insurance, rather than the government. The co-ops could accept federal loans for startup operations, but would have to repay the money.
Similarly, the outline leaves open the question of requiring larger employers to provide insurance.
As an alternative, it suggests requiring companies to pay a portion of the cost of insurance for lower income workers not offered coverage at work.
While Baucus supports a tax on health benefits, Obama opposed it in last year’s presidential campaign and attacked his rival, Sen. John McCain, R-Ariz., for proposing it.
Administration officials have refrained from criticizing it in recent weeks, but organized labor is opposed, fearing it would mean higher taxes for some of its members.
Congressional aides say Democrats are eager to exempt union contracts from the proposed tax, but Republicans want to include them. In its most recent form, the proposal would impose a tax on plans in which the combined employer and employee premiums are above about $17,000.
That would raise an estimated $270 billion over a decade, less if union-negotiated plans were exempt.