Conservative Democrats break ranks on health care

WASHINGTON -- Conservative House Democrats are demanding significant changes before they can support a sweeping health care overhaul, forcing the House to join the Senate in delaying action on President Barack Obama's top domestic priority.

The Blue Dog Democrats' list of demands came on the eve of House Democratic leaders' planned unveiling of their final bill Friday. The bill release was pushed back to Monday at the earliest and Democratic leaders agreed to devote Friday to meetings with the fiscally conservative Blue Dogs to work through their concerns.

These include the need for more cost containment measures, protections for small businesses and a focus on rural health care.

"We cannot support a final product that fails to" address these issues, members of the group wrote to House Speaker Nancy Pelosi and Majority Leader Steny Hoyer. Opposition from the 52-member group could imperil House passage of a bill.

Before Thursday, delays and intramural Democratic disputes over taxes and the role of government had seemed mostly confined to the Senate. A bipartisan deal emerging in the Senate Finance Committee was threatened this week when Senate Majority Leader Harry Reid indicated displeasure with the likely payment method, a new tax on health care benefits.

That's left Finance Committee members scrambling for alternative taxes to replace the $320 billion the benefits tax would have raised over a decade. Democrats are considering raising taxes on wealthy investors instead, along with other options, according to officials who spoke on condition of anonymity to discuss private negotiations. The proposal to extend the current 1.45 percent Medicare payroll tax to capital gains earned by high-income taxpayers would bring in an estimated $100 billion over 10 years.

In the House, Democratic leaders had hoped to release an ambitious bill Friday that would achieve Obama's goals of holding down health care costs and extending insurance to the 50 million people who lack it. Insurers would have to cover all comers, employers would be required to offer insurance and individuals would be required to purchase it, with subsidies for the poor. The tax-writing Ways and Means Committee met throughout the day Thursday to try to finalize plans on how to pay for the plan, with an income surcharge on high-earners of some 3 percent or more emerging as the leading option.

But the move by the Blue Dogs scrambled the equation. It was unclear whether Democratic leaders would be able to satisfy the group's demands since in some cases they're far apart from draft language produced by the three House committees writing health legislation.

Also unclear was whether the setbacks would amount to anything more than a brief delay for a bill of enormous complexity and controversy.

Hoyer sought to minimize the day's developments.

"Let me make it very clear that everybody in that room thinks we ought to pass health care reform," the Maryland Democrat said after he and Pelosi met for more than two hours Thursday evening with Blue Dog members.

But Hoyer said, "There's still some additional work that needs to be done."

One conservative Democrat, Rep. Mike Ross, D-Ark., said he believes no House vote should take place until September.

That is well past a midsummer informal deadline set by Pelosi, D-Calif.

"I promised the president that we would have legislation out of the House before we went on an August break," she said earlier in the day. "That is still my goal."

Among the Blue Dogs' concerns is the shape of a new public insurance plan that would compete with private insurers. House leaders envision making payment rates to providers in the plan some 5 percent higher than Medicare payment rates. Blue Dogs say they can't support any link to Medicare rates, which they say pays well below market rates and varies unfairly around the country.

That puts House leaders in a tough spot since many liberal Democrats are insistent that a new public plan be linked to Medicare.

Although the Blue Dogs haven't taken a position on whether they'd support new taxes, they also want the health care system squeezed harder for more savings and cost containment.

"Some people are getting confused and believing that the primary purpose behind health care reform is making health care affordable and accessible for everyone, which is certainly something we all want to accomplish," said Ross, who chairs the Blue Dogs' health care task force. "The Blue Dog Coalition talks about health care reform in the context of cost containment."

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Associated Press writers David Espo and Ricardo Alonso-Zaldivar contributed to this report.