WASHINGTON — House and Senate negotiators working on President 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 crucial 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.
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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 today 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.