So, while trying to agree on the biggest health care revamp since Medicare began in 1965, lawmakers also must pick winners and losers among spending cuts and tax increases they need to fund it.

“It’s the most difficult political decision we have to make,” said Sen. Charles Grassley, the Finance Committee’s top Republican. “You’re talking about saving money on Medicare; that’s always controversial. You’re talking about maybe tax increases; that’s very controversial. There’s hardly anything with financing that is not going to be controversial.”

In the hunt for funding, House Ways and Means Chairman Charles Rangel is eyeing $210 billion over 10 years from a proposed crackdown on offshore corporate tax havens.

Senate Finance Committee Chairman Max Baucus says the government can save billions by basing Medicare payments on the quality and not just the quantity of care. Obama yesterday proposed $58 billion in new taxes, including $17 billion through 2019 from taxes on securities dealers and life insurance products. Sen. Tom Harkin, an Iowa Democrat, says lawmakers ought to consider a special tax on soda and “junk” food.

The odds of winning so many funding fights are so daunting that an odd-couple coalition of more than two dozen interest groups, including the pro-business U.S. Chamber of Commerce, the AFL-CIO union federation and the AARP retirees’ lobby, wants lawmakers to drop Obama’s deficit-neutral goal as a potential deal killer.

“Requiring spending or revenue offsets for the entire cost” of a health-care package “will significantly reduce the likelihood of enacting legislation to achieve essential reform,” the groups said in a joint letter.

Congressional rules may force lawmakers to find offsetting spending cuts or tax increases, particularly if Democrats use fast-track procedures they may need if negotiations fail to attract Republican support in the Senate.

The fast-track process would require finding net savings of at least $1 billion over five years. Under normal budget rules, which can be waived, lawmakers would have 10 years to offset the cost. – Bloomberg

Breaking the Bank

The risk of derailing the health plan may be just as high if Democratic leaders in Congress, already under fire from Republicans for multitrillion-dollar budgets and soaring deficits, don’t offset the cost.

“One of the easiest things for the anti-reform side to say is ‘the measure breaks the bank, that measure is going to cost a fortune,’” said Senator Ron Wyden, an Oregon Democrat.

Obama’s 2010 budget proposes to pay for his health plan in part by raising $267 billion from limiting deductions by upper- income taxpayers for items such as charitable donations and home-mortgage interest. The Senate unanimously rejected that idea last month, citing potential harm to charities.

More Cuts

Obama proposes another $309 billion in cuts to health-care programs, including $177 billion in savings from payments to private insurance companies participating in the Medicare program, such as UnitedHealth Group Inc. and Humana Inc. The administration also wants pharmaceutical companies such as Eli Lilly & Co. and AstraZeneca Plc to offer bigger drug discounts to Medicaid and would reduce federal payments to hospitals with high patient-readmission rates.

Obama yesterday said industry groups including the American Medical Association, the American Hospital Association, the Pharmaceutical Research and Manufacturers of America and America’s Health Insurance Plans have pledged to slow projected spending growth by $2 trillion over the next decade.

Grassley expressed doubt today that those savings will materialize. “I’m sure we’ll be waiting for some time before this fairy dust becomes real gold,” he said.

Democrats in Congress passed a $3.6 trillion budget on April 29 that gives few clues about how they plan to pay for health-care changes, leaving that to be sorted out later. No Republicans in either the House or Senate voted for the budget.

Roundtable Discussion

The Senate Finance Committee held a roundtable today to discuss the issue. Baucus, a Montana Democrat, said his goal is to propose a bill next month and send legislation to the Senate floor in July. Obama has said he wants a bill on his desk this year, before lawmakers turn their attention to the 2010 midterm elections.

Deficit concerns have members of Congress looking far and wide for money. Rangel, a New York Democrat, seized on Obama’s proposal last week to end tax breaks for multinational companies, such as Caterpillar Inc. and Procter & Gamble Co., and do more to track down assets stashed in overseas tax havens.

“I’ll use it in a minute to support health care,” Rangel said.

Wyden has proposed taxing employer-paid health insurance premiums, which could bring in $700 billion over five years, or more than the proposal’s current estimated cost.

Reducing Tax Breaks

Baucus said at today’s roundtable that lawmakers are considering reducing the tax break on benefits, although he said they won’t repeal it altogether. The benefits tax idea is politically dicey for Obama, who last year lambasted Republican presidential nominee John McCain for a similar proposal. Health and Human Services Secretary Kathleen Sebelius told the Ways and Means Committee last week that the administration is willing to consider the proposal.

Asked about Sebelius’s comments, McCain, a Republican senator from Arizona, laughed and said, “It’s a logical step; that’s why I proposed it during the campaign.”

Baucus declined to say whether he supports a soda tax, saying “there are a lot of trial balloons here and this is one of them.”

Harkin said lawmakers aim to save money through smoking- cessation programs, free mammograms, colorectal screenings and other preventive measures. The problem, Harkin said, is that the Congressional Budget Office says such future savings are too speculative to count in deficit estimates.

“They can’t calculate, although they know that’s going to produce savings,” said Harkin. “That’s one of our problems.”