Policy

ObamaCare, the Upgrade

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Version 2.0

In preparation for Thursday's almost-certain-to-feature-no-bipartisanship bipartisan health care summit, President Obama released a detailed upgrade to his health care reform plan this morning. The proposal, along with the summit, represent a last-ditch, last-chance, last-hurrah, end-of-the-road, double-overtime final showdown in which the White House puts it all on the line, goes for the gold, and takes it to the limit for the American people, or something. Whatever your cliche of choice, what matters is that even some of reform's most ardent supporters seem to recognize that this is it for health care reform; if it doesn't pass now, then the only thing left will be to write R.I.P. columns and fight over the book deals about How It Failed and Why The System Is Broken. 

In other words, a lot is potentially riding on this updated version. So is it any better? If by "better" you mean "includes more spending and more taxes than the Senate bill," then the answer is yes! Philip Klein has the skinny:

President Obama's plan would eliminate the so-called "Cornhusker Kickback" and instead raise the Federal government's Medicaid subsidies to all states; it would close the so-called "donut hole" on Medicare prescription drug benefits by providing more subsidies to seniors; it would increase subsidies for individuals and small businesses to purchase insurance; and it would hike funding for health clinics. To address the controversy surrounding the so-called "Cadillac Tax" on benefit rich health care plans, it essentially gives everybody the deal that unions cut last month, which would delay enactment of the tax until 2018 and raise the value of the health plans that are affected. All of these provisions will make it more costly than the Senate bill.

To finance the changes, President Obama proposes raising taxes even more than the Senate plan does. Under Obama's proposal, higher income workers would see their portion of the Medicare payroll rise even higher. The tax would create a marriage penalty by applying to individuals earning over $200,000 and couples earning over $250,000. When the original version of the Senate health care bill was produced, the Medicare tax on those earning over $200,000 was supposed to be 0.5 percent. In the version that passed in December, the tax had been raised to 0.9 percent. And though it hasn't even been made law yet, Obama is raising the Medicare tax for the third time, by assessing an additional 2.9 percent tax on income "from interest, dividends, annuities, royalties and rents…" This follows the historical pattern of payroll taxes, which have increased 20 times since first introduced in 1935, going from a combined total of 2 percent (including employer/employee contributions) to 12.4 percent today.

The Obama proposal would also raise the proposed tax on drug makers by $10 billion, to a combined $33 billion over 10 years, while delaying enactment by a year.

All of which is to say it strongly resembles the rumored House/Senate compromise plan that failed to emerge in the wake of Scott Brown's upset win in Massachusetts. Will it work? Like Keith Hennessey, I doubt it. Nothing here is likely to garner additional Republican support. And Democrats, with good reason, are still skittish about this bill. As Hennessey suggests, this looks more like a blame-management focused exit strategy than a way forward.