WASHINGTON -- A new mandatory payroll deduction being considered by the Clinton administration to finance health care reform could be as high as 7 percent for companies and 2 percent to 3 percent for workers, Hillary Rodham Clinton told representatives of unions and consumer groups yesterday.
Such a levy would come on top of the 15.3 percent in deductions already being taken out of paychecks for Social Security, Medicare and disability insurance -- split evenly between a company and the worker. The new levy would allow employers to stop paying insurance companies directly for covering their workers.
A broad health care payroll deduction based on a percentage of income would hit hard at highly compensated workers, who typically pay much less than 2 percent or 3 percent of their income for medical coverage, analysts say. Most union workers also would feel a jolt because they pay little out-of-pocket expenses for their often-generous health-care plans negotiated through collective bargaining.
Similarly, a 7 percent payroll levy would be a blow to companies -- mostly small businesses -- that do not offer medical insurance to workers. On the flip side, among the corporate beneficiaries would be many manufacturing companies with an aging work force -- such as auto companies -- that now pay 14 percent or more of their payroll for employee health benefits. As currently envisioned by the White House, funds generated by a health care payroll deduction would go directly to large consumer cooperatives set up throughout the country to buy insurance for members.
It is unclear whether such a payroll levy, if adopted by Congress, would be sufficient to finance the overall health care reforms being planned by the Clinton administration.
According to Ira C. Magaziner, director of the White House Task Force on National Health Care Reform, there are 37 million uninsured Americans and another 22 million with inadequate coverage. Providing for them could cost as much as $30 billion to $90 billion a year, or more, depending on how comprehensive a benefits package they will be given and how quickly the uninsured can be brought under the umbrella of universal coverage.
Health care analysts said yesterday that a 9 percent or 10 percent payroll levy could raise about $300 billion a year -- but that would be offset by the estimated $200 billion being spent now by employers for workers' health benefits and the estimated $55 billion being spent by employees themselves.
Analysts say that each percentage point in the payroll deduction would raise $25 billion or more.
The first lady, who chairs the health care task force, disclosed the payroll deduction projections during a meeting yesterday convened by Sen. Paul Wellstone, D-Minn.
It was Mrs. Clinton's third visit to Capitol Hill in a week, while the task force refines its recommendations to the president.