Obama & Labor Unions Strike Health Care Tax Deal

White House Scores Key Labor Deal


The White House on Thursday cut a deal with its closest labor allies to blunt the impact of a new tax on high-cost insurance policies — and blunt their protests against the health reform plan.

Democrats couldn’t eliminate the tax on union members’ high-cost insurance policies altogether but did put off the effective date until 2018, but only for labor agreements and state and local government workers.

And that seems sure to open up Democrats to charges that it took yet another behind-closed-doors bargaining session with a powerful interest group to close the deal on health reform.

But for a day at least, the White House could claim a significant victory on the road toward passing a health care reform bill, with a deal that averts a standoff on one of the most contentious issues standing in the way of a final compromise.

Other major issues remain under discussion, but according to an official familiar with the talks, negotiators have been sending proposals to the Congressional Budget Office for cost estimates — a sign that lawmakers are close to a deal on other pieces of the tax package. Key lawmakers are set to return to the White House Thursday night for more talks.

President Barack Obama traveled to the Hill on Thursday to speak to House Democrats and sought to rally House members by invoking reform’s historical potential. But his remarks also had a I-know-this-is-tough quality that reflects reform’s unpopularity with voters.

“Now, believe me, I know how big a lift this has been,” Obama said. “But I also know what happens once we get this done, once we sign this bill into law. The American people will suddenly learn that this bill does things they like and doesn’t do things that people have been trying to say it does. Their worst fears will prove groundless, and the American people’s hope for a fair shake from their insurance companies for quality, affordable health care they need will finally be realized.”

The deal focused on a provision that would levy an excise tax on “Cadillac” health insurance plans. Many labor union members have bargained over the years for such benefits in lieu of pay hikes and didn’t want to bear the brunt of the tax.

Major changes to the legislation include a modest increase in the threshold for taxation to $24,000 a year for family coverage, inserting adjustments for older workers and women and entirely exempting dental and vision plans for all Americans, starting in 2015.

A broad spectrum of union presidents announced their support for the reduced excise tax on a conference call with reporters Thursday afternoon, bringing a major Democratic constituency into line and helping to quell potential problems on the left in the House.

“We will endorse it, and we’ll do that proudly,” said AFL-CIO President Richard Trumka of the health care bill, assuming it stays true to negotiations. “We’ve been at this for 60 years, and we are extremely proud of the constructive role that labor’s played in advancing health care reform.”

The call, led by Trumka, included some of the labor leaders who fought hardest against the excise tax that remains in the legislation, such as Gerald McEntee of American Federation of State, County and Municipal Employees and Larry Cohen of the Communications Workers of America.

“I didn’t have any tremendous hopes for real success in this, but I was proven wrong,” said McEntee of the bill.

White House officials and labor leaders defended the agreement against a fresh round of Republican criticism that the bill was weighed down with special-interest deals and was a targeted attempt to mollify a key constituency. They sought to highlight aspects of the deal that would benefit more than just union members, including the higher threshold at which the tax would kick in and the exemption for dental and vision plans.

“It is fairly telling that opponents of reform are criticizing a transition period for workers and are silent about a similar transition period for their friends — the insurers,” said White House Communications Director Dan Pfeiffer. He was referring to the phase-in of the reforms and taxes affecting insurers and other industry groups between 2011 and 2018.

The changes slice $60 billion off the $150 billion the tax was expected to raise, Trumka said. He also defended the special exemption for union plans, saying that most of the changes labor had won would apply to all workers.

House Democrats peppered union leaders with questions about the deal at a closed-door session in the Capitol complex Thursday.

“My concern is that this [threshold] isn’t high enough to pass muster,” said one Democratic member who has been regularly briefed by House leaders on the White House negotiations. Asked whether the Democratic Caucus would reject the deal, the member said: “It’s possible.”

Connecticut Rep. Joe Courtney, who has led opposition to the excise tax, said after reviewing details of the deal: “It reflects a more intelligent direction, ... but I really am reserving judgment.”

The deal might also raise eyebrows in the Senate. Earlier Thursday, Sen. Russ Feingold (D-Wis.) sent Reid a letter asking that all “sweetener” provisions be struck from final legislation — a reference to agreements with Sen. Ben Nelson (D-Neb.), Sen. Mary Landrieu (D-La.) and others to help secure their votes.

“These ‘sweeteners’ are unjustifiable and only detract from our collective goal of putting America’s health care system on a better and more sustainable path,” Feingold wrote. “Several provisions were included in the health reform bill that create, rather than diminish, inequity. ... Simply put, they are intended to provide an undeserved windfall to specific states.”

Feingold’s letter became easy fodder for Republicans seeking to use the right words to attack the union bargain.

“Sen. Feingold says it well — that they should strike the unwarranted measures that win the support of certain members and special interests,” said Don Stewart, spokesman for Senate Minority Leader Mitch McConnell of Kentucky. “It’s emblematic of the whole debate, so it’s not a surprise. They’re not trying to get the support of the American people; they’re trying to get the support of the union lobbyists.”

To help make up for the lost revenue, Democrats are targeting at least two industries that already put up contributions to health reform’s bottom line. The hospital industry has been asked to offer an additional $15 billion in concessions on top of a $155 billion deal last summer with the White House, according to one source.

And the pharmaceutical industry has agreed to provide an extra $10 billion to its already negotiated $80 billion deal over 10 years.

Democrats are also negotiating further adjustments to the Medicare payroll tax rate, which was already increased under the Senate bill. Lawmakers and the White House are looking to apply the tax to investment income for high-income earners.

Maintaining the excise tax, which health care economists say can help control spiraling health care costs, was a top priority for Obama. But it has been fiercely opposed by top labor leaders and rank-and-file House Democrats.

House Speaker Nancy Pelosi (D-Calif.) said the push to send a final bill to CBO by Friday wasn’t because of political pressure generated by the Massachusetts Senate race, where Republican Scott Brown has said he would be the 41st vote to scuttle health reform if elected.

“No. The fact that CBO takes so much time is really more the issue,” she said. “When we’re ready to send something, we will. We’d like to do it as soon as possible, as soon as it’s ready. Most of this legislation CBO has seen.

“There are no real surprises in here because the makings of the reconciliation have been in the public domain, in our case for months, in the Senate’s case for several weeks, so much of that has been crafted,” Pelosi said.

House Majority Leader Steny Hoyer (D-Md.) said finishing by Friday was the goal. “That’s been the goal. But it’s a goal, it’s not a deadline,” he said.


Sources: Politico