The legislation calls for a 61-cent increase in the federal excise tax on a pack of cigarettes. The revenue would be used to subsidize health insurance for children and some adults with incomes too high to qualify for Medicaid — the government health insurance program for the poor — but not enough to afford insurance on their own.
Members of the Senate Finance Committee brokered a bipartisan agreement Friday that would add $35 billion to the program over the next five years. The Bush administration had instead recommend $5 billion.
Sen. Max Baucus of Montana, the committee's chairman, said the proposal would lead to more than 3 million uninsured children obtaining health coverage. But others said that estimate is high because they believe some families that would sign up for the program would have already been getting their coverage through the private sector.
The Senate legislation expands the State Children's Health Insurance Program beyond the original intent of the program, White House Spokesman Tony Fratto said Saturday.
"It's clear that it will have the effect of encouraging many to drop private coverage — purchased either through their employer or with their own resources — to go on the government-subsidized program," Fratto said. "Tax increases are neither necessary nor advisable to appropriately fund SCHIP."
Congress is considering renewing the program before it expires Sept. 30. When Congress approved the program in 1997, it provided $40 billion over 10 years. States use the money, along with their own dollars, to subsidize the cost of health insurance. The federal government covers about 70 percent of the cost.
"Congress needs to deliver a bill the president can sign or they need to send him an extension so that people don't worry about losing their current coverage," Fratto said. "It's important that Congress understands the serious consequences of delaying this or sending the president legislation that he clearly cannot sign."
Fratto also called on the Senate Finance Committee to consider the president's recommendation to tax employees on the health insurance premiums paid by their employers. The president would offset the increased taxes by giving taxpayers a deduction or credit. The result would be a tax cut for most families, but not for those with the highest-priced insurance plans. The Bush administration says such changes could make insurance more affordable for many families.
Republican Sens. Charles Grassley of Iowa and Orrin Hatch of Utah had called on the president Thursday to step back from veto threats of legislation that had not been finalized yet.