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Humbled, Reid Hopes to Press Forward With Obama's Blessing on Health Care Tax

Dec. 24: Senate Majority Leader Harry Reid walks with Sens. Christopher Dodd and Max Baucus after the Senate approved President Obama's health care bill on Capitol Hill. (Reuters)

Senate Majority Leader Harry Reid comes back to Washington next week seemingly humbled after a racially tinged gaffe forced an apology to President Obama, but the senator returns with the one bright spot -- the president's blessing on a health care bill that could end up raising taxes on thousands of middle class workers and their families.

Over the weekend, Obama outlined his support for the Reid plan to impose a "Cadillac tax" on high-end health insurance policies. House lawmakers and unions oppose the fee. 

Obama is expected to meet Monday with union leaders, but White House Council of Economic Advisers chief Christina Romer said Sunday the president is not willing to move very far on his position.

"We feel very confident that -- that, based on their numbers, based on the Joint Committee on Taxation's, that the -- the Senate version of the bill would genuinely slow the growth of costs over the long run by about 1 percentage point a year, which may sound small, but it's actually enormous. And in terms of what it adds up to over time, it's huge. I think the important thing is, the president, he has made this a priority," Romer said.

Romer was citing a Centers for Medicare and Medicaid Services report released Saturday that concluded that the tax on "Cadillac" health plans, as well as reductions in annual increases to Medicare providers, have the potential to hold down costs. 

But the authors also warned that keeping costs down by 1 percentage point is dependent on withstanding political fallout, and the actuary's office said Medicare cuts "may be unrealistic."

Even with a reduction in the pace of growth, the CMS actuary found that health care costs under the proposed plan will increase by $222 billion over the next 10 years. Health care already consumes one-sixth of the U.S. economy, with private insurers and the government paying the bulk of costs.

Romer said, "Health care reform is the number-one thing you've got to do to get your long-run budget deficit under control."

But for opponents of the Cadillac tax that means greater expenses. A proposed exemption up to $23,000 for some workers leaves one in four union employees -- including some first responders -- exposed to tax hikes, labor leaders say. 

Raising the threshold to $27,000, would reduce the exposure to one in 14. But Romer said $27,000 is too high a margin. 

"I think you've got to be very careful on the numbers," she told ABC's "This Week." I think the important thing is the -- you know, the incentives that it provides to genuinely slow the growth rate of costs."

Obama said in his weekly radio address on Saturday that the Senate legislation will take several years to implement -- without actually starting to produce benefits until 2014 -- but "once I sign health insurance reform into law, there are dozens of protections and benefits that will take effect this year."

The president listed individuals with pre-existing conditions not being denied coverage, tax credits for small business owners to buy coverage for employees, free preventive care requirements for insurance companies and prohibitions on insurance companies dropping coverage for ill patients. 

"In short, once I sign health insurance reform into law, doctors and patients will have more control over their health care decisions and insurance company bureaucrats will have less," Obama said.

While the president favors the Senate's version, not only for its spending formula but for its more lax language on abortion coverage, he would be violating his own campaign pledge.

On the campaign trail in September 2008, then-candidate Barack Obama said he "can make a firm pledge: Under my plan, no family making less than $250,000 a year will see any form of tax increase, not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes."

But any fallout for a broken pledge will hit Reid before Obama --as the midterm election in 2010 is already proving Reid's biggest electoral challenge of his career. But that may be a risk some Democrats are willing to take. 

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