Oct. 30 (Bloomberg) -- Senate Majority Leader Harry Reid faces a dilemma as he hunts for votes for a plan to overhaul the health system: how to find what economists say may be as much as $100 billion to meet the demands of other lawmakers.

The Nevada Democrat is under growing pressure to exempt more workers from a proposed tax on high-end insurance plans; cut in half a proposed $40 billion fee on medical-device makers; increase subsidies to help lower-income Americans get coverage, and make it easier for the elderly to buy medication.

These and other possible changes may force Reid to consider new ways to raise revenue to meet President Barack Obama’s pledge that the bill won’t add to the federal deficit, said Uwe Reinhardt, a Princeton University health economist.

“The health-reform bill is no different than tribal warfare: To get this bill through, you’ve got to pay off the tribal chiefs,” Reinhardt said. “One would expect him to be somewhat short on revenue and have to do some real artistry.”

Reinhardt and other economists said those revisions could add as much as $100 billion to the bill, although potential cost-cutting measures such as setting up a new government-run insurance program could help offset that, they say.

Reid is melding a measure passed by the Senate health committee in July with an $829 billion proposal approved by the finance panel on Oct. 13. House leaders yesterday unveiled their own bill, which would cost $894 billion over 10 years to expand coverage to 96 percent of all Americans.

Many Scenarios

Democrats say Reid has sent a variety of bills to the Congressional Budget Office for cost estimates. He’s sharing few details about what his final bill will look like, other than that it will contain a government-run insurance plan.

Reid spokesman Jim Manley dismissed as “speculation” questions that the majority leader’s final measure would be short of revenue.

Still, Senate Budget Committee Chairman Kent Conrad of North Dakota said on Oct. 27 that Reid had “expressed an interest in replacement revenue.” When asked why Reid would be looking for new revenue, finance committee Chairman Max Baucus said, “It depends on what else is in the bill.”

Reid can’t afford to ignore lawmakers’ demands because he would need all 60 votes controlled by the Democrats in the Senate to overcome Republican stalling tactics.

Device Makers

Among other Democrats, Minnesota Senators Amy Klobuchar and Al Franken want a $40 billion fee on makers of medical devices to be cut in half. Minnesota is home to Minneapolis-based Medtronic Inc., the world’s largest maker of heart-rhythm devices, and St. Paul-based St. Jude Medical Inc., also a maker of devices to treat irregular heartbeats.

Florida Senator Ben Nelson wants Reid to close a $50 billion so-called doughnut hole in Medicare that forces seniors to pay out-of-pocket for some prescription drugs.

Senators like Jay Rockefeller of West Virginia are pushing to exempt more households from a proposed excise tax on the most-expensive health insurance plans provided by employers. Paul Van de Water, a health economist at the Center on Budget and Policy Priorities, said that would reduce projected revenue by about $20 billion, depending on where a final threshold is set.

New York Senator Charles Schumer yesterday said senators were also debating higher subsidies to help low-income Americans buy insurance and whether to mandate that employers provide coverage.

‘Serious Problems’

Douglas Holtz-Eakin, a former director of the Congressional Budget Office who was Republican presidential candidate John McCain’s top economic adviser in 2008, said a final CBO analysis will likely show a shortfall.

“Reid has a serious problem in making this add up,” Holtz-Eakin said. “He’s got to be a substantial amount short.”

Reinhardt and Holtz-Eakin said Reid may try budget maneuvers to make up any gap. One would be to include a long- term-care insurance proposal designed by the late Senator Edward Kennedy that would begin collecting premiums for five years before paying any claims. Reid can also tinker with the timing of when certain provisions take effect by collecting taxes and fees first and delaying subsidies, Holtz-Eakin said.

Clint Stretch, a principal at the Deloitte Tax LLC consulting firm, said Reid has few good choices if he considers new tax increases.

‘Not Popular’

“Tax increases are not popular,” Stretch said. “If you’re talking $100 billion, you’ve got to find one thing or two very big things” to make up for it.

Stretch said the few ideas that meet that criteria include the House’s proposal for an income surtax on couples earning more than $1 million a year and a version of an Obama budget proposal to limit itemized deductions for high-income individuals. Other proposals rejected earlier, including a tax on soda, may also be resurrected, he said.

One thing Reid will likely want to avoid, he said, are new taxes on businesses, which would likely organize against the bill.

“If they go after general business increases, it makes the bill more controversial.”

To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net

Last Updated: October 30, 2009 00:01 EDT