WASHINGTON – Job-based health care benefits could wind up on the chopping block if President Obama and congressional Republicans get serious about cutting the deficit.

Budget proposals from leaders in both parties have urged shrinking or eliminating tax breaks that help make employer health insurance the leading source of coverage in the nation.

The idea isn’t to just raise revenue, economists say, but finally to turn Americans into frugal health care consumers by having them face the full costs of their medical decisions.

Such a re-engineering was rejected by Democrats only a few months ago, at the height of the health care overhaul debate. But Washington has changed, with Republicans returning to power and widespread fears that the burden of government debt may drag down the economy.

“There is no short-term prospect of enactment,” said former Senate Majority Leader Tom Daschle, a leading Democratic adviser on health care. “However,” he said, “in a tax reform (and) deficit-reducing context in the long term, the prospects are much better.”

He opposes repealing the tax break by itself, but says he’d be “willing to look” at it with other changes that improve access to quality care while cutting costs.

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Labor unions are preparing for another fight.

Tampering with health care tax breaks is “a terrible step in the wrong direction,” said Mary Kay Henry, the new president of the Service Employees International Union, which represents many hospital workers.

Repealing the tax break could raise several hundred billion dollars a year. Many economists believe employers would boost pay if they didn’t provide health care. Repeal proponents usually call for a tax credit to offset part of the cost of individually purchasing coverage.

 


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