Health Reform to Raise Taxes, President Says

WASHINGTON — President Clinton acknowledged for the first time Thursday that his health care reform package will require new taxes to pay for coverage of the 37 million Americans who now have no medical insurance--probably in the form of so-called “sin taxes.”

Until now, the President had avoided admitting publicly what members of the health care task force chaired by First Lady Hillary Rodham Clinton have been saying privately for weeks--that universal health care for all Americans will require tens of billions of dollars in new revenues. Some estimates put the cost of universal care at more than $90 billion a year.

Clinton’s decision to acknowledge what lies ahead comes in the context of surprisingly strong public acceptance of his proposals for higher taxes to reduce the deficit and stimulate the economy.

“We’re spending 14% of gross national product” on health care, Clinton said. “You do have to find some way to recover some revenues to cover people who now don’t have coverage--if the government pays for the coverage.”

Clinton, answering questions at the White House after a meeting with a group of labor and industry leaders, said the Administration is searching for ways to pay for the program “which wouldn’t necessarily increase middle-class tax burdens.”

But he said “health-related taxes,” such as levies on cigarettes, are different because of the high cost of health problems caused by smoking.

Many advocates of “sin taxes” would include new levies on alcohol, but the President pointedly avoided including that in his remarks.

Also conspicuously absent was any reference to imposing taxes on workers’ health benefits, a politically controversial idea floated earlier by Administration officials that would directly affect many of Clinton’s middle-income constituents.

Although Clinton acknowledged that some additional revenue from direct taxes will be needed to make health insurance universal, a White House official said the Administration continues to search for ways to shift the bulk of the cost to indirect forms of payment, such as higher insurance premiums--thereby minimizing the political impact.

The Administration’s health care task force is to report its recommendations on broadening medical coverage and containing costs by early May, just as key parts of the President’s economic package are coming to a vote on Capitol Hill.

Clinton’s remark about additional new taxes to fund health reform was heartily cheered by advocates of universal insurance coverage, who have been increasingly fearful that the President would first seek to contain medical costs and only gradually move toward providing health coverage to the estimated 37 million uninsured Americans.

“What it represents is a commitment by President Clinton to expand access sooner rather than later--because you don’t need new revenues if you’re just going to control costs. You can wait until the savings start rolling in,” said Edward F. Howard, executive director of the nonpartisan Alliance for Health Reform.

“I take this as a very positive sign, as somebody who wants to see universal coverage sooner rather than later,” Howard said.

But the possibility that Clinton might be willing to tax alcohol as well as tobacco was received with alarm by members of the wine industry, who used the occasion of a White House reception in recognition of Wine Appreciation Week to lobby against higher taxes on beer, wine and whiskey.

“We’ve never considered ourselves a sin to be taxed,” John Giumarra, chairman of the Wine Institute, told Clinton during a picture-taking session in the Grand Foyer of the White House.

“We’re agriculture. We’re families. We’re part of the great tradition of the United States,” said Giumarra, a vintner from California’s San Joaquin Valley. Any health care tax should be “broadly based,” the winemaker said. “Don’t put it on us.”

“We didn’t say that,” Clinton responded. “I specifically passed up a chance to say that today.” Throughout much of the campaign, Clinton gave somewhat greater emphasis to providing coverage for uninsured Americans than to containing health care costs.

But shortly after the election, health policy transition advisers told Clinton that it could take five years or more before any tangible savings are realized--even after the system he favors, called managed competition, is fully in place. The process is so complicated that it will likely have to be phased in, region by region, perhaps state by state.

Partly in response to such projections of the high cost of universal coverage, the President in his budget proposals last week called for more than $60 billion in Medicare and Medicaid savings over the next five years, largely by limiting the increases that doctors and hospitals are scheduled to receive.

Those projected savings are to be applied to reduce the federal budget deficit rather than being used for health care. So the White House Task Force on National Health Care Reform, headed by Mrs. Clinton, is considering an array of other tax hikes, particularly on tobacco.

The task force also may recommend freezing wages and prices for private doctors and hospitals, perhaps only as a short-term measure, to buy time for managed competition to be implemented, sources said.

Rep. Henry A. Waxman (D-Los Angeles), chairman of a House subcommittee that handles health care issues and one of Congress’ most influential voices on the subject, said Clinton’s talk of higher taxes for health care reform should come as a surprise to no one.

“If the President hopes to cover everybody in the country, they will have to come up with some revenues to do it--even though they may well bring about savings and efficiencies in the way health care is delivered.

“If they try to avoid coming up with new revenues, they will probably have a great deal of difficulty covering everybody,” Waxman said.

Times staff writers Paul Richter and Paul Houston contributed to this story.