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Health Care Taxes in Doubt after Senate Upset

January 20, 2010

Senator-elect Scott Brown’s victory in the Massachusetts race for the late Ted Kennedy’s seat was full of ironies.

The win came the evening before the anniversary of Barack Obama’s inauguration and was widely seen as a rebuke to Obama’s performance in his first year on the job. Brown was the first Republican to win a U.S. Senate race in Massachusetts since 1972, and claimed the seat belonging to long-time lion of the Senate, Ted Kennedy, a staunch Democrat from one of the most famous Democratic families in the country, and in a state that has been long identified with Democrats.

Kennedy's widow Vicki campaigned on behalf of Democratic candidate Martha Coakley, but Coakley still lost by about a 5-point margin. Vicki Kennedy had been urged to fill her husband's Senate seat after his death last summer.

Another irony was that a different Kennedy actually ran in the race as a Libertarian, but candidate Joe Kennedy was not related to the more famous Kennedy family, even though he shared the same name as Teddy's father and eldest brother. Probably more than a few voters were nonetheless confused by the similarities.

In addition, Brown campaigned on a platform of becoming the 41st vote against health care reform in the Senate, even though his state is the only one with a state-wide health insurance mandate like the kind in the Senate bill.

Brown’s victory could well upend the progress made on passing Kennedy’s lifelong goal of health care reform, just as a final deal seemed within reach between Democratic House and Senate negotiators and the White House.

If Kennedy had lived, he likely would have shepherded the bill through negotiations with long-time friends on both sides of the aisle and made passage much less fraught with partisan rancor.

However, the passing of his Senate seat to a Republican may well prove to be the undoing of the final legislation.

The deal between House and Senate negotiators involved some key compromises on taxes, especially the tax on so-called “Cadillac” health care plans. Labor union leaders had demanded changes in the Senate version of the bill to avoid having the taxes fall on middle-class workers, especially government and unionized employees, and those in high-risk professions such as police officers and construction workers. A week ago, that deal seemed to have been made and received the blessing of key union leaders, whose support will be crucial to Democrats in the midterm elections (see Democrats Reach Deal with Labor on Health Taxes).

Now the status of those tax compromises seems very much in doubt, along with the fate of the entire bill, even though it has been passed by both chambers of Congress. One option could be for House Democrats to simply vote to approve the Senate’s version of the bill, but that would mean risking the loss of support of organized labor, along with liberals who consider the Senate’s version too favorable to the health insurance industry.

House and Senate Democrats could also try to cobble together a final compromise quickly and attempt to pass the final bill before Brown is certified and sworn in to office, but that would risk even further partisan rancor, and a likely backlash in the opinion polls and the midterm elections. Another option would be to use a tactic known as reconciliation to try to make changes in the final bill without the need for a filibuster-proof 60-vote majority, but the legalities are unclear and procedural hurdles could be many.

Democrats in Congress and the Obama administration face many difficult choices ahead.

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