US Health Reform In Doubt After Massachusetts Vote

by Mike Godfrey, Tax-News.com, Washington

21 January 2010

The election of Republican Scott Brown to the vacant Senate seat in Massachusetts has dealt a potentially fatal blow to President Obama's legislative agenda, particularly his aspiration to provide near-universal healthcare coverage for uninsured Americans.

The election of Brown, who replaces the late Edward Kennedy, means that the Democrats have lost the 60-seat super majority in the Senate that they need to pass a health reform bill. As a result, Republicans can employ the dreaded filibuster tactic, which could eventually see proposed healthcare legislation talked out of the Senate. Worryingly for Obama, the Massachusetts vote could also be said to represent a mini-referendum on his first year in office in a state which traditionally elects Democrats to Congress.

While both the Senate and the House of Representatives have approved differing versions of healthcare reform legislation, they remain at odds over how the bill, which is estimated to cost in the region of USD1 trillion, should be paid for. The main revenue raiser in the Senate bill is a 40% excise tax on high-end "Cadillac" health insurance plans. But House Republicans favor the use of a 5.4% surtax on individuals with annual adjusted gross income (AGI) of USD500,000 and on couples with annual AGI of USD1m.

While this small, but important, change in the complexion of the Senate gives President Obama a major headache as he attempts to force though healthcare reform – his flagship policy – before he delivers the State of the Union address next month, there are some avenues open to the administration and Democrats in Congress to ensure that the bill can still pass. One is for the House to simply vote on the Senate bill as written without going through the painful exercise of attempting to reconcile the competing proposals. Once approved in the House, the bill could then be signed into law by the President. However, many House Democrats are opposed to aspects of the Senate bill, especially the Cadillac tax, and this is unlikely to be an option.

Alternatively, Democrats could attempt to ram through the legislation before Brown takes his seat, which is currently occupied by Paul Kirk, former assistant to Kennedy, although this could be viewed as something of an underhand tactic at a time when Obama is attempting to clean up the legislative process in Washington.

More likely, the President and key Congressional Democrats will have to spend many weeks cajoling moderate Republicans in the Senate into accepting some form of compromise, which could see many of the current proposals watered down, including the new taxes. In the worst case scenario for the Obama administration, negotiations towards a final bill may have to be abandoned if an agreement cannot be reached any time soon, at least temporarily.

What is clear is that Brown opposes the healthcare legislation currently under consideration in Congress and he has vowed to vote against it.

"It will raise taxes, increase government spending and lower the quality of care," Brown says on his campaign website. "I support strengthening the existing private market system with policies that will drive down costs and make it easier for people to purchase affordable insurance."

"I am a free enterprise advocate who believes that lower taxes can encourage economic growth. Raising taxes stifles growth, weakens the economy and puts more people out of work," he declared.

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