Conrad says health plan taxes needed, citing dramatic shift in economy

Taxes on the most opulent healthcare plans will be necessary to help finance reform, Senate Budget Committee Chairman (D-N.D.) asserted Wednesday.

Conrad said that the fiscal situation in the U.S. had warped so much since the presidential election -- when Democrats hit Sen. John McCainJohn McCainSenators push to authorize 4,000 more visas for Afghans Senate panel passes 4.5B defense bill Overnight Finance: Puerto Rico bill clears panel | IRS chief vows to finish term | Bill would require nominees to release tax returns MORE's (R-Ariz.) proposal to hit some tax benefits -- to demand the taxes on Americans' "Cadillac" plans.

"If you want to reduce overutilization, you have to consider the taxation of "Cadillac" healthcare plans," Conrad said during an appearance on MSNBC. "One of the proposals that is out there, that for the moment is being shunted aside, is to reduce that tax subsidy very, very modestly."

"The fact is, the circumstances of the country and the finances of the country have changed dramatically since the campaign," he added in defense of the plans.

The centrist Democrat's call represents a signal toward fellow Democrats, who are reluctant to sign onto similar taxes, that a tax on some plans may not be politically disastrous.

The Senate's Health, Education, Labor, and Pensions (HELP) Committee passed a preliminary version of healthcare reform on a party-line vote this morning. It complements a House version of the bill, which includes a surtax on high earners to finance its reform.

Conrad stressed, though, that more critical than the final bill's tax structure will be how healthcare reform addresses costs. On that point, the Budget chairman conceded Congress could get it wrong.

"Healthcare reform is actually part of a strategy to get our long-term deficits and debt under control. It's critically important that when we bend the cost curve, we bend it in the right direction," he said. "It's entirely possible that it could be bent in the wrong direction."

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