Latest Health Care Flashpoint Strains Relationships Among Democrats

Last year’s health care debate was dominated by a bruising–and ultimately losing–fight over the public option. But simmering on the back burner for weeks while the public option ran its course has been a battle among Democrats over how to pay for health care reform. And now, with the public option swept into the dustbin, the fight over taxes has come to the fore, and is testing relationships all the way up the Democratic ladder to party leadership and the White House.

At issue is whether expanding insurance coverage to over 30 million Americans should be paid for by wealthy Americans (as the House would like), or, as the Senate calls for, by people who have expensive health care plans–many of whom are middle class. The vast majority of House Democrats–and the public at large–oppose the Senate proposal. But the idea has one powerful ally: President Obama.

“The polling just hasn’t moved an inch,” Rep. Joe Courtney (D-CT) told me. Recent data indicates that the public opposes the Senate’s so-called “Cadillac tax” plan by a two-to-one margin. “Frankly, it’s the same polling that was there when Obama went after McCain on this.”

According to Courtney many in the House believe that, after sacrificing the public option, Democrats should draw a line in the sand over the excise tax–including one Democratic leader.“I’ve heard that dynamic expressed [just this week] by one member of the leadership,” Courtney said.

He points out that the funding issue is in some ways more complicated than the public option. “The public option is not something that people have today, so letting go on that issue was not conceding a benefit that people have presently,” he points out. “Changing the tax status of health care–that’s a different dynamic…it’s going backwards for people.”

Courtney said the excise tax has become the major flashpoint in negotiations between party leaders over how to structure a final health care bill. In a Democratic caucus conference call yesterday, about 20 members asked questions of House leadership about their concerns over the direction reform will take. According to Courtney, seven of those were with regard to the Cadillac tax.

Courtney is the author of a letter, signed by 190 House Democrats, expressing strong opposition to the Senate tax plan, which he and many in Congress–including Speaker Nancy Pelosi–believe violates Obama’s campaign pledge not to raise taxes on the middle class.

Earlier this week, referring to the excise tax, Pelosi quipped that Obama hadn’t lived up to his promise. The next day, in a meeting at the White House, the tension boiled over, resulting in an exchange that put Pelosi and White House Chief of Staff Rahm Emanuel at bitter odds, according to a source briefed on the meeting.

In an interview this afternoon, Rep. John Dingell (D-MI), the Dean of the House, raised a number of similar concerns. “The House has given up two things that I regard as critically important. The first was the single payer. The second was [the public option],” Dingell said. (Dingell clarified later that the House hasn’t officially given up on the public option.)

“I personally am troubled that the Senate will come to conference as they usually do, saying to the House you have to take our bill because we can’t do anything different,” Dingell said. “I am troubled by the fact that I think the administration needs to spend more time talking to the House.”

“It hasn’t gotten to the point where it’s creating friction,” Dingell cautioned. “But if the White House doesn’t begin to talk more carefully with the House and listen more carefully to the concerns of the House it almost certainly will create serious friction and problems.”

There are potential fixes on the table, including changing the threshold of the Cadillac tax, and combining it with a progressive tax on the wealthy. But the White House isn’t budging–and rank and file Democrats have a warning for him.

“I hope the White House doesn’t have to learn that fact in an unfortunate and unpleasant way,” Dingell said. “[The Cadillac tax] also outrages, alienates, and infuriates millions” in the Democratic base.

In particular, it infuriates union leaders and members, many of whom regard high-end insurance policies as a major employment benefit. In that regard Obama will soon be meeting with high-level union officials to attempt to sell them on the policy. But their opposition is deeply entrenched. And, in a familiar dynamic, they are less willing to compromise now that their other key priority–the public option–has been scuttled. At the same time, Senate leaders say they can’t pass health care reform without their tax–and they can’t scale it back and replace the revenue with a tax on millionaires. In other words, this is shaping up to be the battle of January.