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Democrats Reach Deal on ‘Cadillac’ Tax

Updated: 4:05 p.m.

The White House and unions have reached an agreement on scaling back the “Cadillac” excise tax on high-cost health care plans, a move that helps clear the way for a broader deal on the health care overhaul, sources on both sides of the Capitol said.

Unions won an exemption for collective bargaining agreements until 2017 and for state and local government plans, according to a Senate aide.

The threshold for the tax would also be raised to $24,000 from $23,000 for a family plan, and dental and vision benefits were removed from the calculation. The thresholds would still rise 1 percent faster than inflation — a level that critics say would ultimately hurt middle-class families because it wouldn’t keep up with rising health care costs.

Rep. Lynn Woolsey (D-Calif.) said Speaker Nancy Pelosi (D-Calif.) told her the unions reached a deal with the White House, which she said showed the value of organized labor.

“Nobody can say that being a member of a union doesn’t mean something,” she said. Woolsey said she wasn’t told the details of the agreement.

The debate over the “Cadilac” tax is one of biggest disputes between the House and Senate over the health care reform bill, with the overwhelming majority of House Democrats opposed to the idea, which was first negotiated in the Senate Finance Committee. The tax has the support of President Barack Obama.

Ways and Means Chairman Charlie Rangel (D-N.Y.) earlier Thursday hinted a deal could be imminent when he said that leaders hoped to send legislation to the Congressional Budget Office tomorrow.

Leaders are heading to the White House this afternoon to continue health care negotiations.

House Majority Leader Steny Hoyer (D-Md.) also said on MSNBC that “very significant progress on that particular issue has been made” but declined to call it a “deal” given that the final bill has not yet been agreed upon.

Hoyer said that negotiators would likely work through the weekend to try and get an agreement.

One Democratic aide said the revenue lost by tweaking the Cadillac tax could be made up by imposing a Medicare tax on those who earn capital gains.

Other sticking points in discussions included whether to create a national insurance exchange, rather than the Senate’s proposed state-based exchange. However, that deal is unlikely to materialize unless a handful of centrist Senators — such as Joe Lieberman (ID-Conn.) and Ben Nelson (D-Neb.) — sign off on it beforehand.

In an interview Wednesday, Nelson declined to say whether he would oppose a national exchange, but said, “I’m convinced that’s not going to happen based on my conversations.”

Another bone of contention among negotiators has been enactment dates of various provisions in the bill. The House has been insisting on using their earlier dates in most instances, the Democratic aide said.

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