The House Ways and Means Committee has passed a plan to overhaul the U.S. health care system, including the addition of a government-run insurance plan to compete with private insurers and paying for its reform efforts by taxing the nation’s wealthiest citizens.

Early Friday morning (July 17), the House Ways and Means Committee voted 23-18, for the America’s Affordable Health Choices Act of 2009. Three Democrats – Rep. Ron Kind of Wisconsin, Earl Pomeroy of North Dakota and John Tanner of Tennessee – broke party rank and voted with the committee’s Republican members in opposition of the bill.

The substance of the bill closely mirrors that of one passed by the Senate’s Health, Education, Labor and Pensions Committee two days earlier, in creating a national health insurance exchange, providing consumers with a way to choose the best coverage, and a public plan supported by the federal government to compete with private insurers in that marketplace.

The House and Senate are considering individual bills on health reform, prior to the president’s approval.

Paying for change

The House plan differs, however, in that over the next decade, it would tax families making more than $350,000 annually to the tune of $544 billion to help pay for reforms.

The committee approved a graduated surtax structure, where a 1% surtax is levied on families with income between $350,000 and $500,000; 1.5% on families earning between $500,000 and $1 million; and 5.4% on couples whose income exceeds $1 million per year

The remaining money needed to fund the initiative will come from payment and delivery system reform in Medicare and Medicaid, the committee said.
In addition to the public plan “operating on a level playing field” with private insurers, according to the committee, the bill includes individual and employer mandates. The bill provides assistance for lower-income individuals to obtain coverage and penalizes those who can afford it but go without by as much as 2.5% of their income.

Employers must provide health insurance for their employees or contribute 8% of their payroll tax to help pay for participation in the government plan. The nation’s smallest businesses, those with payroll under $250,000, are exempt from the mandate with the payroll penalty phasing in starting at 2% for firms with annual payrolls over $250,000 rising to the 8% for firms with payrolls above $400,000.

‘Ready for reform’

Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.) said America “is ready for reform,” given the rising costs of health care.

Charles Rangel

“Today the committee approved legislation that will encourage competition in the health insurance marketplace, control costs and improve access to quality affordable care,” Rangel said in a statement. “This uniquely American solution will put patients first, make critical investments in primary care and nurses, and reform the health care delivery system so that we can build a healthier, more productive economy.”

Health Subcommittee Chairman Pete Stark (D-Calif.) called the vote “another historic step toward enacting health care reform this year.”

The House committee’s bill will be merged with provisions currently under consideration in the Energy and Commerce Committee and the Education and Labor Committee. The full House will address these measures in the coming weeks.

The Senate is also working on health care reform as both houses work toward an end of August deadline imposed by President Barack Obama to make health care reform law.

The House bill was recently endorsed by several organizations, including the AARP and the American Medical Association.

Highlighting the end of coverage denials based on pre-existing conditions, the health insurance exchange and Medicare reform, the AMA said the bill had  “a broad range of provisions that are key to effective, comprehensive health system reform,” in a statement.