Top economic adviser touts health insurance tax, public option

A senior economic adviser to President Barack Obama says two proposals are key to reining in healthcare spending: a tax on expensive health insurance plans and a public health insurance option.

Speaking at the liberal Center for American Progress, White House Council of Economic Advisers Chairwoman Christina Romer broadly outlined the Obama administration’s case that reforming healthcare is essential to the goal of resolving the government’s long-term budget deficits.

Romer’s comments may be seen as an insight into Obama’s views on the public option and health insurance tax. And with House and Senate leaders on the brink of unveiling their respective bills, Romer's ideas take on new weight.

Romer offered a strong endorsement of a proposal, conceived by Sen. John Kerry (D-Mass.) and adopted as part of the Senate Finance Committee’s healthcare reform bill, to levy an excise tax on the highest-cost insurance plans.

“A policy such as this is probably the number-one item that health economists across the political spectrum believe is likely to stem the explosion of healthcare costs,” Romer said.

Proponents of this tax view it as essential to limiting overly generous health benefits, thus reducing the use of healthcare services, and generating hundreds of billions of dollars in much-needed tax revenue to pay for expanding healthcare coverage the uninsured.

Organized labor remains staunchly opposed to new taxes on the generous health benefits enjoyed by many of their members. For the same reason, House Democrats rejected the excise tax.

“It’s bad policy, it’s bad politics, and it’s totally unacceptable to put the costs of healthcare reform on the backs of working families,” AFL-CIO President Richard Trumka said on a conference call with reporters Monday. Trumka left the door open to taxing even higher-cost plans, however: “If you wanted to tax the Goldman Sachs plans, I’d say that’s fine.”

During his run for the White House, Obama opposed a more extensive proposal to tax all insurance benefits, promoted by GOP presidential candidate Sen. John McCain (Ariz.).

Despite her clear endorsement of the excise tax, Romer stopped short of saying it is essential to healthcare reform. “Obviously, there are other ideas about how to pay for health reform within the [10-year] budget window,” she said, such as the House’s proposed income surtax on high-income earners and Obama’s notion of capping itemized income tax deductions.

Romer also said that the public option, which has gained currency in recent weeks on Capitol Hill, is a “potentially important source of cost containment,” especially in states were small handfuls of insurers dominate the individual and small-group market.

“A public health insurance option would be a credible entrant in concentrated markets and would serve as a competitive, alternative choice, constraining the ability of insurers to raise premiums and thus containing the growth rate of costs,” Romer said.

Liberals have been unsatisfied with the White House’s actions to support the public option, especially after various news outlets reported that Obama himself prefers a “trigger” for the public option, as proposed by Republican Sen. Olympia Snowe (Maine), that would establish the plan in states underserved by private insurers.

The White House has pushed back against the notion that Obama’s support for the public option is soft. Obama “supports the public option because it has the potential to play an essential role in holding insurance companies accountable through choice and competition,” White House communications director Dan Pfieffer wrote on the White House’s blog Sunday.

Romer would not comment on the trigger or an alternative proposal, which could be part of the Senate bill, to allow states to opt out of the public option. “I don’t want to get out ahead of the legislative process. Lots of things are bubbling up these days."

The ability of the public option to generate cost savings, particularly those that will be recognized by the Congressional Budget Office, is a key reason why more previously reluctant Democrats have begun to embrace the proposal, which has been pushed by congressional Democratic leaders. All of the healthcare bills approved by congressional committees this year include a public option except the Finance Committee’s measure.

Senate Majority Leader Harry Reid (D-Nev.) is expected to announce Monday that he plans to bring a healthcare reform bill including a public option to the Senate floor. Meanwhile, House Speaker Nancy Pelosi (D-Calif.) said last week she is near to accumulating enough votes to pass legislation with a public option in her chamber.

Michael O'Brien contributed to this article.