Budget watchdog warns on healthcare plans

Under questioning by members of the Senate Budget Committee, Douglas Elmendorf, CBO director, said bills crafted by House leaders and the Senate health committee do not propose “the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount.’’

“On the contrary,’’ Elmendorf said, “the legislation significantly expands the federal responsibility for healthcare costs.’’

Though President Obama and Democratic leaders have said reining in the skyrocketing growth in spending on government health programs such as Medicaid and Medicare is their top priority, the measures put forth would not fulfill their pledge to “bend the cost curve’’ downward, Elmendorf said. “The curve is being raised.’’

The CBO is the official arbiter of the costs of legislation, and Elmendorf’s stark testimony is certain to undermine support for the measures, even as three House panels began debate yesterday with the aim of putting a bill on the House floor before the August recess.

Fiscally conservative House Democrats were threatening to block passage of legislation in the Energy and Commerce Committee, primarily because of concerns about the long-term costs of the House bill.

Cost is also a major issue in the Senate, where some moderate Democrats have joined Republicans in calling on Obama to drop his demand that both chambers pass a bill before the August recess. While the Senate health committee passed its bill Wednesday with no GOP votes, members of the Senate Finance Committee were struggling to craft a bipartisan measure that does more to restrain costs.

Mitch McConnell of Kentucky, the Senate Republican leader, said, “Instead of rushing through one expensive proposal after another, we should take the time we need to get things right.’’

White House officials played down the budget director’s assessment, calling it premature. Spokesman Bill Burton said the healthcare legislation is a work in progress and Obama is committed to “finding different ways to save money and produce the revenue that we need for comprehensive healthcare reform.’’

Asked what provisions would be needed to slow the growth in federal health spending, Elmendorf urged lawmakers to begin taxing employer-provided health benefits, calling the tax-free treatment a federal subsidy that encourages spending on ever more expensive health packages.

Key senators, including the Senate Budget chairman, Kent Conrad, have been pressing to tax employer-provided benefits, and there’s wide agreement among economists that such a tax would give businesses and individuals an incentive to become thriftier consumers.

But Senate leaders last week objected, saying the idea does not have enough support among Senate Democrats to win passage. Critics of the proposal say it would target police and firefighters, who receive generous benefits packages. And if the tax is trimmed to apply only to upper-income beneficiaries, it would lose its effectiveness as a cost-containment measure.

Harry Reid of Nevada, Senate majority leader, dismissed Elmendorf’s push for the benefits tax. “What he should do is maybe run for Congress,’’ Reid said.

Max Baucus, the Senate Finance chairman, however, expressed frustration that the tax on employer-funded benefits had fallen out of favor, in part because the White House opposes the idea. Baucus said Obama had hindered his efforts to reach a bipartisan deal. Taxing high-cost employer-provided health insurance benefits was the finance panel’s primary way of financing the bill, generating roughly $320 billion of the $1 trillion, 10-year price tag.

Despite warnings from the budget office, House Democrats pushed ahead yesterday, with three committees taking up their version of health legislation.

They won a coveted endorsement of their legislation from the American Medical Association, saying the bill “includes a broad range of provisions that are key to effective, comprehensive health system reform.’’ The insurance industry, however, said it opposes key elements of the bill, saying a government plan “will cause millions of patients to lose their current coverage.’’

Obama, meanwhile, was doing all he could to encourage Congress to act. He met yesterday with two potential Senate swing votes, Ben Nelson, a Nebraska Democrat, and Olympia J. Snowe, a Maine Republican. The president’s political organization has launched a television ad campaign aimed at nudging moderate Democrats off the fence.

Reid, however, dismissed the ads as “a waste of money’’ and called the campaign “Democrats running ads against Democrats.’’

Material from the Associated Press was used in this report.