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A tax provision in Baucus' bill arouses ire

A charge on so-called Cadillac health plans will hurt middle class, fellow Democrats say.

WASHINGTON - Unhappy Senate Democrats yesterday targeted a tax provision in the latest health-overhaul bill that they fear would hit hard at middle-class Americans.

The opposition sprang up a day after Senate Finance Committee Chairman Max Baucus (D., Mont.) unveiled long-delayed legislation that would transform the nation's health-care system.

Giving momentum to President Obama's top domestic priority, it would require almost everyone to buy insurance; make insurance companies cover people with preexisting medical conditions; and rein in spiraling health-care costs.

To pay for the 10-year, $856 billion bill, Baucus wants to tax high-value insurance plans - those worth $21,000 for a family and $8,000 for an individual.

Baucus said those were "Cadillac plans" enjoyed by a small minority of Americans. Aides said about 10 percent of plans and 8 percent of taxpayers could be affected.

But other Democratic senators fear the tax will be passed on to consumers and reach deep into the middle class, and labor unions are upset.

Two Democrats on the Finance Committee, Sens. John Kerry of Massachusetts and Jay Rockefeller of West Virginia, along with others, said they wanted to limit the tax before signing off on the bill.

"We need to make it fairer to working people so that working folks don't get dragged into this at a level where they just don't have the incomes to support it," Kerry told reporters.

The panel is to begin voting on the bill Tuesday.

Rockefeller, who met privately with Obama on Wednesday, said the proposal "could prevent workers in high-risk professions from getting the health benefits that they need, particularly coal miners," a significant constituency in his state.

Insurers and business groups also oppose the new tax and other fees in the bill, and the U.S. Chamber of Commerce is wasting no time making its objections known.

The chamber announced it would begin airing a new TV ad today in more than a dozen states lambasting "Washington politicians" who "want new taxes on health-care companies - taxes that will get passed on to you."

Republicans remained bitterly critical of the Democratic efforts, scoffing even at an Obama plan to give $3 million each to selected localities and health-care systems for experimental projects aimed at better protecting doctors from frivolous lawsuits.

Sen. John McCain (R., Ariz.) called the plan "wasteful and unnecessary."

Liberal lawmakers also expressed concern that the Baucus plan lacked a new government-run insurance plan.

Instead of the so-called public plan, Baucus went with nonprofit cooperatives.

"A public option will be in the bill that passes the House of Representatives," Speaker Nancy Pelosi emphasized.

Although he failed in his months-long quest to get Republican backing for his bill and now faces a host of Democratic concerns, Baucus defended his efforts yesterday.

"I don't think there will be any changes in the core provisions of the bill," Baucus said.

At a campaign-style rally at the University of Maryland yesterday, Obama called reinventing health care a "defining struggle of this generation," though he barely mentioned Baucus' bill.

Many of the students, after graduating, would be required to buy health insurance under the Baucus plan.

The high-value insurance-plan tax, which Obama embraced in his speech to Congress last week, is a major source of revenue for Baucus' bill, bringing in an estimated $215 billion over 10 years.

If it is changed, Baucus would have to raise revenue elsewhere, which is not easy.

Sen. Kent Conrad (D., N.D.), part of the six-member negotiating team Baucus led for months to try to reach consensus on his bill, said numerous health-policy experts had advised that the tax would encourage companies to move toward cheaper health plans and workers to use less care.

"Does that create some pain? Yes, it does," he said, but he also warned of "real pain" if health costs rose unchecked.

The House bills have no insurance-plan excise tax and instead propose raising taxes on the highest earners.

The Senate's No. 2 Democrat, Richard J. Durbin of Illinois, said yesterday he believed that was a better way to go.

Insurance plans on average cost $14,000 for a family of four and $7,200 for an individual, according to the U.S. Chamber of Commerce.