Obama Appeals to Caucus to End Dispute on Health Care (Update1)

Jan. 14 (Bloomberg) -- President Barack Obama will urge rank-and-file House Democrats today to end their differences with the Senate and close ranks to reach an historic deal over health-care legislation, an administration official said.

Obama is scheduled to address the House Democratic Caucus at 5:05 p.m. Washington time after about eight hours of marathon negotiations at the White House yesterday. Obama also will make remarks about jobs and the economy, said the official, who spoke on condition of anonymity because the remarks weren’t complete.

House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid were among 11 lawmakers who met with Obama and White House aides yesterday to try to reconcile two versions of legislation that would implement the biggest changes in U.S. health care in 45 years and extend insurance coverage to tens of millions of Americans.

“We made significant progress,” Obama, Reid and Pelosi said afterward in a joint statement.

Issues in dispute include a Senate plan to tax the most- expensive health-care benefits provided by companies and how to structure new health-insurance exchanges on which uninsured and self-employed consumers could buy coverage.

“We’ve been talking about the whole gamut of issues” dividing the House and Senate bills, House Majority Leader Steny Hoyer of Maryland told reporters yesterday after the lawmakers took a break from the meeting to return to Capitol Hill for votes.

Further Discussions

Obama attended most of the meeting, though he was in and out of the room to address the situation in Haiti, White House spokesman Reid Cherlin said in an e-mail. The meeting lasted from about 10:30 a.m. until 6:40 p.m. Washington time, and lawmakers plan further discussions in the coming days, the spokesman said.

How to pay for the bill, which may cost $1 trillion over a decade, looms as the biggest stumbling block. Lawmakers are considering ideas such as extending the Medicare payroll tax to capital gains and other unearned income for the first time, taxing high-end health-insurance plans and imposing a new income surtax on the wealthiest Americans.

Leaders of organized labor, concerned over the excise tax on so-called Cadillac health plans, met separately with administration officials, Representative Robert Andrews, a New Jersey Democrat, told reporters.

Union Members

Lawmakers are discussing ways to ease the impact of the tax on union members as well as on “a broad subset” of other middle-class Americans, said Andrews, the head of a House health subcommittee who was briefed on the talks. “Details are not yet clear,” he said.

The legislation passed by the Senate on Dec. 24 calls for a 40 percent levy on health-insurance premiums that exceed $8,500 for individuals or $23,000 for families. There are higher thresholds for retirees 55 years of age and older and workers in high-risk professions such as firefighting.

Union leaders say many of their members, who traded wage increases for greater health-care coverage, would be among the hardest hit by the proposal.

When House leaders took their break for afternoon votes, Pelosi ignored questions from reporters as she slipped into an elevator at the Capitol.

Surtax Opposition

Among the other lawmakers attending the talks were Senate Finance Committee Chairman Max Baucus, a Montana Democrat, and House Ways and Means Committee Chairman Charles Rangel, a New York Democrat.

Rangel said Tuesday night that among the measures lawmakers are considering is the tax on unearned income. Rangel, whose panel writes tax law, said the idea of expanding the Medicare payroll tax to unearned income was preferable to the Obama- backed proposal to tax health benefits.

He said applying the Medicare tax to unearned income would be “comparable to the surtax” that House Democrats want to impose on the highest-income people and which has drawn opposition in the Senate. The House bill, approved on Nov. 7, calls for a 5.4 percent income surtax on singles who earn more than $500,000 and couples who make more than $1 million. An expanded Medicare tax “covers the same people,” Rangel said.

The tax is currently 2.9 percent on salaries, split evenly between employers and workers. The Senate proposal would add 0.9 percentage points to the individual portion of the tax for those who earn more than $200,000 and married couples who earn more than $250,000.

Nationwide Exchange

A Democratic leadership aide said this week Obama also favors a House plan to set up a nationwide exchange on which people could buy low-cost insurance. And the president backs the repeal of the insurance industry’s antitrust exemption, said the House aide, who spoke on condition of anonymity.

Dan Pfeiffer, Obama’s communications director, said those were “at best educated guesses.” Pfeiffer said in a statement that work on merging the House and Senate bills is continuing and “there simply isn’t anything final to discuss yet.”

The Senate bill calls for each state to set up its own exchange, which House lawmakers say wouldn’t be as effective.

Among those opposed to a repeal of the antitrust exemption is Nebraska Senator Ben Nelson, a Democrat who provided the 60th vote that cleared the way for Senate passage of its health bill. Nelson, a former insurance company executive, says a repeal would hurt small insurers.

Senate Judiciary Committee Chairman Patrick Leahy, a Vermont Democrat, and 18 other senators yesterday sent a letter urging Obama, Reid and Pelosi to repeal the exemption.

“There is simply no reason for health insurance and medical malpractice insurance companies to be exempt from federal laws prohibiting price fixing, bid rigging and market allocation,” the senators wrote.

To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.net; Roger Runningen in Washington at rrunningen@bloomberg.net