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Mass. health model inspires key senator

Panel considers creating agency to ease insurance

By Lisa Wangsness
Globe Staff / May 13, 2009
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WASHINGTON - A key Senate leader appears to be leaning toward proposing a new tax on employer-provided insurance benefits and creating a new federal agency modeled on one in Massachusetts to make it easier for individuals and small groups to buy insurance.

The Senate Finance Committee is discussing a series of policy options for sweeping healthcare legislation scheduled to be completed by mid-June. On Monday, the committee released options for insuring the nation's 47 million uninsured, including expanding Medicaid, subsidizing private insurance for low-income people, and creating a public insurance plan - an idea Republicans have flatly rejected.

Yesterday, the committee debated how to pay for subsidizing insurance for the uninsured, which could cost as much as $1.4 trillion over 10 years. The panel's chairman, Senator Max Baucus of Montana, a Democrat, pointed to the tax exclusion, a rich source of cash. Senators will also consider other options, including "sin" taxes on soda and alcohol and limiting tax breaks for other health benefits, such as tax-preferred health accounts.

"The reforms that we are planning are not cheap," Baucus said.

Senator Charles Grassley of Iowa, the ranking Republican on the Finance Committee, said lawmakers should try to eliminate wasteful spending before imposing new taxes.

And starting to tax the health benefits the vast majority of Americans get through their workplace could set the stage for a battle with the White House; President Obama spent millions of dollars during the campaign attacking his Republican rival, John McCain, for proposing to end the tax exclusion, which Obama said amounted to taxing health insurance.

Baucus said yesterday that he does not believe the benefit should be eliminated, but that it should be fairer and less regressive. Under current law, those with the most expensive insurance get the largest benefit.

Limiting the tax exclusion is one of the few options that could provide large amounts of revenue to expand health coverage. Employer-provided insurance is considered part of workers' compensation, but unlike salaries, is not taxed as income.

Kenneth E. Thorpe, chairman of the Department of Health Policy and Management at the Rollins School of Public Health at Emory University, said it is worth "well over $250 billion a year."

The Finance Committee's options for expanding coverage include phasing in new regulations requiring all insurance products to cover basic medical services that the least expensive plans in some states don't cover currently, such as prescription drugs and mental health and substance abuse services. No annual or lifetime limits would be allowed. Insurers could vary premiums based on a few factors, such as age and geographic location, but could no longer refuse to cover someone.

The committee's policy options also explain the workings of the Commonwealth Health Insurance Connector, which helps Massachusetts individuals and small business employees compare and purchase insurance. Based on that model, the proposal calls for creating a national website that would offer one-stop shopping for individuals and small groups. Jon Kingsdale, executive director of the Commonwealth Connector, said policymakers have clearly taken note of the popularity of the Massachusetts website.

Material from the Associated Press was used in this report.