How will we pay for health care reform?

Health care reform doesn’t want to be free.

It wants to raise taxes and increase some health insurance premiums. Doctors, hospitals and pharmacies may want to charge some patients more if health care reform passes, and insurance companies may cover less ? forcing your out-of-pocket costs higher.

Businesses will want to pass on higher health costs and taxes to consumers, while workers will ask for bigger raises to cover their costs.

Raising the price you pay for health care isn’t the idea, of course. President Barack Obama insists reform will eventually mean less money out of your pocket through lower-cost, higher-quality care.

In the short term, though, even the most optimistic assumptions suggest we’ll need to spend $100 billion a year for the next 10 years to expand health care coverage and services ? on top of the $2.4 trillion we already spend for health care.

That money has to come from somewhere.

“That’s the challenge, actually paying for it,” said Igor Volsky, health care researcher at the Center for American Progress, a liberal think tank.

That challenge grew last week. The head of the Congressional Budget Office said that health plans under discussion will add to the federal deficit, not reduce it.

A key group of moderate Democrats known as the Blue Dogs said it wouldn’t support any plan that increases the deficit: Revenue must go up, or spending somewhere else must go down, to pay for expanded health coverage.

Meanwhile, Obama said in his weekly address Saturday that he “will not sign on to any health plan that adds to our deficits over the next decade.”

So the search is on to find the money.

Last week, House Democrats floated a plan that raises taxes on the wealthy, which Republicans said would devastate small businesses and consumers. The White House has suggested limiting deductions for wealthy taxpayers, while some senators still think taxing health care benefits is the key.

Paying an additional $100 billion for health reform may look difficult. In a $3 trillion to $4 trillion federal budget, though, negotiators think savings could cover at least part of that cost.

About $50 billion annually could come from easing the growth in Medicare and Medicaid spending. That won’t be painless: Doctors and hospitals would certainly see reimbursements cut, so they’ll try to pass those reductions on to patients, who would then pay higher bills, higher insurance premiums, or both.

They may also decide to stop taking poor or elderly patients.

Even so, such a reduction might be easier than the other piece: $50 billion a year in higher taxes to pay for expanding coverage to the poor and uninsured.

“Tax increases are unfortunately going to be needed,” said Marcia Nielsen, former executive director of the Kansas Health Policy Authority. “Sometimes you’ve got to spend a little to get a little.”

Who pays those taxes, though, may be the key hurdle in passing any reform plan.

Republicans howled last week after Democrats suggested a graduated surtax that kicks in for couples earning $350,000 or more, jumping to a 5.4 percent surtax on income higher than $1 million.

“The last thing we need to do in an economic recession with staggering unemployment is to raise taxes on small businesses that will cripple our economy and kill jobs,” said U.S. Sen. Kit Bond, a Missouri Republican.

On the Senate floor last week, GOP Sen. Pat Roberts of Kansas said higher income taxes “would be a devastating hit on our nation’s small businesses ? the same small businesses that create roughly 70 percent of jobs in this country.”

He added: “We should not be raising taxes on these job creators.”

House Democrats said surcharges were the best way to raise enough money: Smaller tax increases on soft drinks, for example, or tobacco (again) wouldn’t yield enough and would hurt poorer taxpayers.

And they insist the taxes won’t hit small businesses.

“By some estimates, health care reform could save small businesses as much as $855 billion over the next 10 years and prevent the loss of 128,000 jobs,” the Democratic National Committee said last week.

Other Democrats are more cautious.

“There are a number of proposals out there to pay for health care, and several have merit,” said Sen. Claire McCaskill of Missouri, including limiting deductions for the wealthy and raising Medicare taxes for those with high levels of investment income.

Some senators, including Finance Committee chairman Sen. Max Baucus, a Montana Democrat, are still exploring another approach. They like taxing health care benefits, perhaps only for generous health care packages above a certain cost.

But Obama specifically rejected that approach during the campaign, and many Democrats oppose the step because it might be seen as a middle-class tax increase.

“Basically the president is not helping” on the benefits issue, Baucus said.

Congressional Budget Office director Douglas Elmendorf said the tax break is a “subsidy” that encourages workers ? many of them in labor unions ? to transfer taxable income into nontaxable health packages, a further cost to the Treasury.

But increased direct taxes aren’t the only way you may end up paying for reform.

The House proposal, along with virtually every other plan now on the table, would require some businesses to provide health coverage for their workers or pay a penalty. Those same plans also require almost everyone to carry some kind of health insurance (with subsidies for the poor paid for by the tax increases).

Without that mandate, it would simply cost the government too much to fully cover the 40 million to 50 million uninsured people. And, insurance companies say, they can’t cover everyone ? including those with pre-existing conditions ? unless healthier workers are paying their share.

“We’ve said we’ll take on all comers … and move away from charging people based on their health status,” said Tom Bowser of Blue Cross and Blue Shield of Kansas City. “But in order for that to work … there needs to be a meaningful mandate that everyone have insurance.”

Employer mandates have some support. In a recent USA Today/Gallup poll, six of 10 people surveyed supported an employer mandate, while 58 percent supported an upper-income tax increase to expand health care coverage.

Business leaders, though, say the costs of any mandate will either be passed on to consumers through higher prices or will cause layoffs and more unemployment.

“Why are small businesses being asked to pay for the tab on health care?” U.S. Rep. Sam Graves, a Missouri Republican, asked in a statement last week. “Reforming health care does not mean we have to penalize businesses with more taxes.”

And many younger workers will face paying health insurance premiums for the first time, further denting their pocketbooks.

Ready for some good news?

If health care reform passes, and if it works ? two huge “ifs” ? the nation’s overall $2.4 trillion health care bill should eventually go down, ultimately saving you money.

That is: You might pay higher taxes, or higher prices for some consumer goods, but you’d pay less for a doctor’s visit, or an operation, or medicine. You’d get better health care earlier, further saving cash. More people carrying insurance should, in theory, reduce your premiums.

“There’s plenty of money in the current system, even if it’s not reformed, that’s spent unwisely,” said Douglas Henley, CEO of the American Academy of Family Physicians. “That can be saved to be re-funneled to appropriate care.”

But he and others say that will take time ? and we’ll have to pay while we wait.

“Reform is going to take many, many years before we have a system that insures everyone,” Nielsen said. “We’ve got to be able to pay for some of those upfront costs now.”

(c) 2009, The Kansas City Star. Source: McClatchy-Tribune Information Services.