Senators mull tax hikes to pay for health care

WASHINGTON (AP) — Senators are considering limiting — but not eliminating — the tax-free status of employer-provided health benefits to help pay for President Barack Obama’s plan to provide coverage to 50 million uninsured Americans.

Finance Committee Chairman Max Baucus, D-Mont., said Tuesday that there are no easy options. Senators began grappling with how to finance guaranteed coverage, a cornerstone of Obama’s plan to overhaul the health-care system. Independent experts put the costs at about $1.5 trillion over 10 years.

Obama sees a world in which doctors and hospitals compete to offer quality service at lower costs, and the savings help cover the uninsured. Turning that vision into reality remains the biggest challenge for the president and his backers, because hard cash — not just ideas — is required to cover upfront costs of expanding coverage.

The president put health-care industry leaders on notice Tuesday that he expects them to fulfill their dramatic offer of $2 trillion in savings over 10 years. “I will hold you to your pledge to get this done,” Obama said in a letter released by the White House that went to groups representing insurers, hospitals, doctors, drug makers and others.

But those savings — even if the industry delivers every penny — won’t all accrue to the government. So the financing package for Obama’s plan is likely to include a mix of tax increases and spending cuts in federal health programs.

Among the possibilities: tax increases on alcoholic beverages, tobacco products and sugary soft drinks, and restrictions on other health-care-related tax breaks, such as flexible spending accounts.

Some taxes don’t seem to be on the table, such as a federal sales levy to pay for health care or a new payroll tax.

Congressional leaders say they want to pass legislation in the Senate and House this summer.

On the controversial question of taxing health benefits, Baucus is staking out a position that could put him at odds with Obama.

Obama opposed such taxes during the campaign, arguing they would undermine job-based coverage. His aides say he’s open to suggestions from Congress, even if he criticized Republican presidential rival John McCain for proposing a sweeping version of the same basic idea.

Baucus said he wants to modify the tax break, not abolish it.