Rostenkowski Successor’s Plan Omits New Health Tax

The new chairman of the pivotal House Ways and Means Committee offered his own blueprint Monday for overhauling the nation’s health care system, proposing to provide universal coverage without imposing broad new tax increases on most Americans.

Like the more expansive reform proposal sent to Congress by President Clinton, the plan offered by Rep. Sam Gibbons (D-Fla.) would require all employers to contribute to their workers’ health insurance, paying at least 80% of the cost of the average policy premium.

But Gibbons’ approach is a sharp departure from that of his predecessor, Rep. Dan Rostenkowski (D-Ill.), who declared just six weeks ago that the American public should be prepared for large tax hikes to finance universal coverage. Gibbons became acting chairman of the key committee last week after Rostenkowski was indicted on corruption charges.

His proposal represents an attempt to cobble together a sufficient majority of Democrats on the fractious Ways and Means Committee to approve some kind of health care reform plan this year.

Many lawmakers are clearly wary of the Clinton initiative and rival congressional plans that call for significant tax increases or that contain provisions opposed by small businesses, which have emerged as a potent lobbying force in the health care debate.

The Gibbons plan contains no big tax hikes on individuals. It assumes that enough money can be collected from employers who currently do not offer health insurance to underwrite the cost of extending coverage to all Americans and providing subsidies to small businesses with low-wage workers.

In the Gibbons plan, the “major thing that is absent is taxes; they are not going to be here,” said Rep. Pete Stark (D-Hayward), who briefed reporters on the contents of the plan.

(Gibbons was in Normandy for the 50th anniversary of D-day; he was in a paratroop division that jumped behind German lines in the pre-dawn hours before the Allied invasion.)

In addition, the Gibbons plan offers the promise of significant financial relief to states such as California, where Medi-Cal, a jointfederal-state program that helps pay the medical bills of poor people, is a growing burden on the state budget.

Under Gibbons’ blueprint, states could gradually reduce their spending on such programs, starting in 1998. The national Medicaid program for the poor would become part of a bigger federal program, called Medicare Part C, for individuals who lack private insurance and for small firms that must begin providing it.

Besides eschewing broad increases in individual taxes, the Gibbons proposal calls for a smaller cigarette tax hike than requested by Clinton. The President wants to raise the federal cigarette tax by 75 cents a pack, and the figure was boosted to $1.25 in a bill prepared by a Ways and Means subcommittee.

But Gibbons’ plan, called the “chairman’s mark”--the starting point for the full committee’s debate and action--would require an increase of 60 cents a pack, spread over five years. The federal tax currently is 24 cents a pack; Gibbons would increase it to 39 cents next year, 54 cents in 1997, 69 cents in 1998 and 84 cents in 1999.

The Gibbons plan also scraps the President’s proposal for a 1% payroll tax on companies with more than 1,000 workers that choose to opt out of large insurance purchasing pools and to continue their current health insurance programs.

Under his plan, an employer would be required to pay 80% of the average health insurance premium, a cost estimated at 80 cents an hour for individuals. Companies with fewer than 25 workers and average annual wages of less than $26,000 per employee would receive tax credits that would reduce the cost of coverage to an estimated 50 cents an hour.

Firms with more than 50 employees would be forced to buy private health insurance for their workers. Smaller companies and individuals could get coverage through the new Medicare Part C program.

Under both the Clinton and Gibbon plans, a two-worker family would decide which employer’s health plan to use. Even if both signed up under a plan offered by one spouse’s employer, the company not selected would still be required to pay the average premium cost for its workers.

In such cases, some of the funds collected would be sent to the firm that provides coverage for the whole family. But under the Gibbons proposal, most of the money would go to the federal government for a five-year period for use in the Medicare C pool for the poor and for workers at small firms. This source of additional revenue potentially could generate billions of dollars annually, but the Ways and Means Committee had no specific estimates.

Roughly 20 million workers are covered by insurance policies provided by the firms where their spouses works. Often, the spouse’s employer is a major industrial firm with generous benefits, such as General Motors or Xerox. Until now, these companies have been hoping that health reform would reduce the financial burden they bear to provide insurance for spouses and dependents of their employees. They are likely to object to Gibbons’ effort to divert most of the savings to the government for at least five years.

After five years, Ways and Means analysts estimate, health care reform would generate enough savings to give those companies some financial relief.

Although health care coverage premiums would be collected from every employer by the Internal Revenue Service through a payroll charge called Medicare Part C, the Ways and Means staff has carefully avoided referring to those collections as taxes. Instead, they are referred to as “retention of a portion of non-enrolling employer payments.”

In addition to this source of revenue, the apparent need for higher taxes has been eased by new financial projections. The Congressional Budget Office has increased its estimate of savings from cost containment and reduced its estimate of the cost of the mandatory package of benefits, according to Stark.

All Americans would be covered by 1998 under the Gibbons plan, which calls for a standard benefits package that includes:

* A yearly deductible of $500 for each individual and $750 for each family for doctors’ charges.

* Unlimited hospital days with no deductible.

* Prescription drug coverage after a separate $500 deductible.

* Checkups and preventive care for children with no deductible.

Self-employed persons would be allowed to deduct 25% of their insurance premiums until 1998 and 100% in future years.