Hospitals on board, not Congress

WASHINGTON - The nation's hospitals agreed yesterday to take $155 billion less in future Medicare and Medicaid payments to help defray the cost of President Obama's health-care overhaul, but Congress bogged down further on how to pay its full cost and Senate Democrats edged away from the goal of passing legislation by early August.

Vice President Biden announced the agreement at the White House, with administration officials and hospital representatives at his side.

"We have tried for decades to fix a broken system, and we have never, in my entire tenure in public life, been this close," Biden said.

The deal allows hospitals to limit the damage to their budgets: The administration agreed to forgo bigger cuts under discussion, the American Hospital Association said in a memo to members.

On Capitol Hill, another significant source of funding appeared to be off the table. Democratic senators rebelled against a proposed tax on health-insurance benefits favored by some senior members of both parties.

Obama has set an ambitious timetable for legislation, with the hope of signing a comprehensive bill this fall.

But lawmakers returned Tuesday from their July Fourth break with misgivings about the benefits tax - a key element in the discussion - and questions about other parts of the complex legislation.

Under one proposal in the Senate, workers would pay income taxes on the value of their health insurance, once it exceeded a level to be determined by Congress.

Republicans favor such a tax as a way to slow medical costs. Democratic resistance appears to have stopped it.

"I don't see it as having any viability," Sen. Chris Dodd (D., Conn.) told reporters yesterday after a floor vote.

Senate Democrats are "pretty much ruling it out," said Sen. Olympia Snowe (R., Maine), who has been negotiating across party lines. "We have to really, I think, go back to the drawing board on some of the issues and try to see where we can achieve greater cost savings."

Republicans also conveyed strong opposition to allowing the government to compete with private industry in selling health insurance, something the Democrats support.

In the House last night, an income-tax surcharge emerged as a key option.

As discussed in the tax-writing House Ways and Means Committee, the surtax would apply to individuals with adjusted gross income over $200,000 and couples with over $250,000. Panel member Shelley Berkley (D., Nev.) said nothing was final yet.

Timing is crucial: Lawmakers may be loath to vote on the charged issue of health care next year, when all House seats and a third of the Senate's are up for election.

"I think the ultimate goal is to have a bill by the end of this year" that is signed into law by the president, Sen. Charles E. Schumer (D., N.Y.) said in an interview.

Republicans who met with Senate Majority Leader Harry Reid (D., Nev.) said he indicated he was willing to allow more time before legislation is brought to the floor.

One key Democrat, Senate Finance Committee Chairman Max Baucus of Montana, has long championed a tax on health benefits as the best way to pay for health care while simultaneously restraining the growth of the cost of coverage in the future.

But the idea has strong opposition from organized labor, a core Democratic constituency. House Democrats also have been resistant, and Obama campaigned against it in the presidential race.

The hospital deal follows concessions from drug companies and an announcement by Wal-Mart it would back a requirement for employers to pay toward health care.

"The administration has agreed that the total amount of hospital spending reductions will serve as a cap on such cuts throughout the legislative process," the American Hospital Association said in a memo to its members.

Some of the $155 billion in projected givebacks over 10 years touched off controversy within the hospital industry.

About $50 billion would come from reducing federal payments hospitals receive for providing care to uninsured and low-income patients. Public hospitals and children's hospitals, which serve many low-income patients, said such cuts would harm local communities.

House Republican leader John A. Boehner of Ohio criticized the hospital deal.

"The administration and congressional Democrats are literally bullying health care groups into cutting backroom deals to fund a government takeover of health care," he said in a statement.