White House, hospitals reach deal on health care
Deal with hospitals comes as Obama health plan bogs down in Congress
By Ricardo Alonso-Zaldivar, Associated Press Writer
On Wednesday July 8, 2009, 3:51 pm EDT
WASHINGTON (AP) -- The nation's hospitals agreed Wednesday to give up $155 billion in future government payments to help defray the cost of President Barack Obama's health care overhaul, even as Congress got bogged down trying to pay for the plan.
Vice President Joe Biden announced the agreement at the White House, with administration officials and hospital representatives at his side. "Reform is coming. It is on track; it is coming. 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 also allowed hospitals to limit the damage to their budgets. The Obama 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. Leaders on both sides said they will keep working on a bipartisan deal -- even if it takes longer than they had hoped.
In a firm message to lawmakers, Biden added, "We can't wait ... and the entire Congress knows it."
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 4 break with deep misgivings about the benefits tax -- a key element in the discussion -- and questions about many parts of the complex legislation.
Under a proposal in the Senate, workers would have to pay income taxes on the value of their health insurance, once it exceeded a certain level yet to be determined by Congress. Republicans have favored such a tax as a way to slow medical costs. Yet Democratic resistance appears to have stopped it.
"I don't see it as having any viability," Sen. Chris Dodd, D-Conn., told reporters Wednesday after a floor vote.
Senate Democrats are "pretty much ruling it out," said Sen. Olympia Snowe, R-Maine, a moderate who has been negotiating across party lines. "We have to really, I think, go back to the drawing board on some the issues and try to see where we can achieve greater cost savings."
Time is running out: Lawmakers may be more reluctant to vote on the a charged issue of health care next year, when all House seats and one-third of Senate seats are up for election.
One 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 have also been highly resistant, and Obama himself campaigned hard against it in last year's presidential race.
The deal with the hospitals -- the one bright spot right now for Obama -- may also be on shaky ground. Officials said it's linked to the Senate Finance Committee legislation that Baucus is negotiating, and whose prospects are uncertain. It would follow concessions from drug companies and an announcement by Wal-Mart last week that it would support an employer requirement to help pay for health care.
Hospitals would also get something out of the deal -- the administration agreed not to push for deeper cuts.
"The administration has agreed that the total amount of hospital spending reductions will serve as a cap on such cuts throughout the legislative process, including conference committee deliberations, when the House and Senate work to create one reform bill," the American Hospital Association said in a memo to its members.
Hospitals also won an understanding that if the Finance Committee's legislation includes a public health insurance plan, it would reimburse hospitals at above the rates Medicare and Medicaid pay, which hospitals have long complained are insufficient.
Some of the $155 billion in projected savings touched off a 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. Those payments are now made through the Medicare and Medicaid programs.
But public hospitals and children's hospitals, which serve many low-income patients, said such cuts would harm local communities. The National Association of Public Hospitals and Health Systems and the National Association of Children's Hospitals, which were not directly involved in the talks, said in a joint statement: "Such reductions could severely damage safety net providers if not carefully crafted."
"This is essential funding that supports trauma centers, burn care units and medical training," said Melissa Stafford Jones, president of the California Association of Public Hospitals.
House Republican Leader John Boehner of Ohio criticized the hospital deal, saying it was negotiated out of public view. "The administration and congressional Democrats are literally bullying health care groups into cutting back-room deals to fund a government takeover of health care," Boehner said in a statement.
Associated Press writers David Espo, Erica Werner and Alan Fram contributed to this report.