New payroll tax being weighed for health care Value-added tax unlikely, members of Congress learn


WASHINGTON -- Seeking to raise about $60 billion to pay for health care reform, the Clinton administration is considering a new payroll deduction akin to the taxes already being taken out of paychecks for Social Security, Medicare and disability insurance, Hillary Rodham Clinton said yesterday.

Consulting with Republican and Democratic senators in a morning meeting, Mrs. Clinton also made clear that the White House has all but ruled out a national sales tax, also known as a value-added tax. That idea had met with bipartisan opposition in Congress.

Mrs. Clinton further disclosed that the administration is now inclined to give medical providers a year or two to voluntarily restrict price increases, with a mandatory price freeze in the wings if voluntary efforts do not keep medical inflation in line with the rest of the economy, senators said.

Mrs. Clinton vowed to hold further consultations in the weeks ahead. She said that the White House Task Force on National Health Care Reform, which she chairs, still intends to have a plan ready for the president to announce by the end of May.

Still, she left room for a slight delay, saying: "We intend to get this as right as we can. We want to make sure that every question anyone has is answered."

In her meeting with senators, Mrs. Clinton described the new payroll deduction under discussion as a "premium" and not a tax because, rather than going to the government, the funds would go directly to large consumer cooperatives set up throughout the nation to buy insurance for members, according to Sen. John D. Rockefeller IV, D-W.Va., the administration's point man on health care.

Such a new payroll tax -- perhaps 1 percent or 2 percent for the individual wage-earner -- would be an alternative to a government mandate that all companies buy health insurance for employees, according to administration proponents of the payroll deduction.

The payroll deduction plan would also require employers to pay a certain percentage of their payroll directly to insurance-purchasing cooperatives. Typically, companies that provide insurance to their employees now pay premiums directly to the insurers.

Some exemptions are likely for very small businesses, perhaps to be determined by the size of their payroll, sources said.

Mrs. Clinton disclosed little more about the administration's emerging reform agenda -- largely because many fundamental decisions have not been made. The process has been delayed in part by a lack of reliable medical statistics, she said.

The stated purpose of her latest visit to the Capitol was bipartisan consultation. And it appeared to be a rousing success, judging from the post-meeting rhetoric.

Republicans and Democrats alike hailed her appearance as reflecting a spirit of bipartisanship that they say will be vital if health care reform is to be enacted.

"It's very useful for the White House to reach out to people, and I'm appreciative of it," said Sen. Phil Gramm, a Texas Republican. "I think this is an important first step."

Senate Minority Leader Bob Dole,R-Kan., who led the Republican effort to hand President Clinton his first big defeat on a $16.3 billion job stimulus package, said he agreed with Mrs. Clinton that health care reform should be a bipartisan effort.

"So we're prepared to be responsive," he said.

Mrs. Clinton disclosed, in a post-meeting news conference, that her task force has been looking closely at various Republican health care reform proposals introduced last year in both the House and Senate, adding that Mr. Clinton's own agenda will likely include elements that Republicans have advocated.

Several Democratic senators said that they came away from the meeting with the impression that the administration now believes it needs to raise between $40 billion and $60 billion in public revenues to finance the reforms.

In addition to barring insurance practices that discriminate against small groups and unhealthy individuals, the administration is expected to seek reforms to limit medical malpractice litigation and gradually provide coverage to the estimated 37 million uninsured Americans.

The degree to which taxes must be raised to pay for universal coverage depends on how quickly the president wants to phase such coverage and on the comprehensiveness of the package of benefits that will be guaranteed to Americans.

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