Cabinet Members Attack Democratic Health Care Plan : Politics: Sullivan and Martin say ‘pay or play’ proposal would cost employers $30 billion a year. Some say officials are ignoring idea’s benefits.

Two Bush Administration Cabinet officials attacked a key Democratic proposal Thursday that would require all businesses to offer health insurance, declaring that it would cost employers $30 billion a year and have a devastating effect on employment.

In an unusual joint news conference, Labor Secretary Lynn Martin and Health and Human Services Secretary Louis W. Sullivan took the political offensive and blasted the “pay or play” plans sponsored by key congressional Democrats.

Under the plans, employers would be required to offer health insurance for all workers or pay a 7% payroll tax into a public fund to provide coverage for the uninsured. Senate Majority Leader George J. Mitchell (D-Me.) and other legislators back such plans.

These proposals “would result in lost jobs, higher employer costs, higher taxes and a huge new government-run health program,” Sullivan said. “ ‘Pay or play’ is the wrong medicine and we shouldn’t take it,” he said. Employers would be forced to pay $30 billion a year in taxes and an additional $36 billion in general tax revenues also would be needed, according to Martin. The Democratic idea means “pay and pay by the middle class,” the labor secretary said.

The tough language appeared designed to discredit the Democrats on the health care issue and prepare the way for the Administration’s own proposal, which will be unveiled formally later this month.

But the Urban Institute, a respected Washington think tank that conducted a study for the Labor Department, contended that the criticism by the two Cabinet officers was unfair.

They “ignore the fact that there are a lot of benefits to pay or play,” said the institute’s John Holahan. “A lot of people would be better off” because everyone would be covered, either through work or as part of the public program, he said.

The White House approach toward expanding protection for the 35 million Americans without insurance coverage is likely to focus on tax credits to help individuals buy health insurance policies, officials indicated Thursday. The credits would cost the Treasury billions of dollars, and the money would be recouped by raising taxes on workers who have relatively generous health benefits. Now, health insurance is a tax-free fringe benefit. Under the Administration approach, the value of insurance premiums above a certain level--perhaps $2,000 a year--would be considered taxable income.

The President has not yet decided on the precise groups to be affected. But sources said that taxation of benefits might be limited to people earning $90,000 a year or more.

The Administration also wants to revive a proposal initially offered last year to require Medicare beneficiaries with incomes over $125,000 to pay substantially higher premiums for their Part B insurance, which helps pay doctor bills. All Medicare recipients now pay $31.80 a month for this coverage, regardless of their income.

Congress ignored the idea last year, but the Administration “intends to make a real run at it this time,” according to a source who attended a special White House meeting to discuss the health care program.

The Administration plan also will seek to expand the use of special cost-saving programs for those enrolled in Medicare as well as Medicaid, the federal health program for the poor. The health care issue--rising costs combined with the erosion of benefits or the loss of coverage entirely for many Americans--became a hot political topic after November’s upset Senate election victory by Sen. Harris Wofford (D-Pa.) over former Atty. Gen. Dick Thornburgh.

“It’s an issue that’s been waiting to happen,” Labor Secretary Martin said at the news conference.

In the “rush to find a desperately needed answer,” the advocates of “pay or play” will make the situation worse, she said. “Do we want a huge new public plan?” she asked rhetorically.

However, the Urban Institute contended that Martin and Sullivan were incorrect in their interpretation of the results.

Although Sullivan claimed that jobs would be wiped out, “the report doesn’t say anything about jobs,” said Holahan, health policy director for the institute.

Democratic advocates of “pay or play” fired back at the Administration Thursday. “The Administration has criticized other proposals while offering none of its own,” said Majority Leader Mitchell.

Sen. John D. (Jay) Rockefeller IV (D-W.Va.), one of his party’s leaders on health care issues, said: “What this Administration is about . . . is trashing ideas anyone else has. I’m fed up with their games.”

Martin and Sullivan “are saying silly things,” Rockefeller said. “They’re trying to scare (people) instead of offering any semblance of a plan of their own.”

Walter Maher, Chrysler Corp.’s director of federal relations, attended the Labor Department news conference and accused Martin and Sullivan of unfairly “tarring” the idea of requiring all employers to offer health insurance or else pay into a public fund.