As Congressional Democrats struggle to pay for a health overhaul, they’re looking at various new taxes, including a surcharge on the wealthiest Americans . But another group may also feel a pinch: those middle-class people who will have to buy health insurance under the mandate that is part of all the current proposals. And the subsidies that are supposed to help people pay their premiums are already being trimmed. The House bill introduced today would provide help to the poorest by expanding Medicaid eligibility. The bill also offers at least some subsidies to folks making as much as 400% of the federal poverty level ( check here to see what that level is for 2009). For a family of four, that’s $88,200. And, even with a subsidy, that family could spend as much as 11% of its income on health insurance premiums under the House bill. There are no subsidies for those making more than 400%. (See the Congressional Budget Office’s summary of the subsidies in a the table on page 10 of this PDF ). The House bill also would set some regulatory limits on premiums, which could vary by no more than a two-to-one ratio based on age. And it would cap out-of-pocket costs — charges such as co-pays and deductibles — at $5000 per individual or $10,000 per family. On the Senate side, the bill from the health

committee also offers subsidies up to 400% of the federal poverty level, but structured somewhat differently. For families at that level, premiums would be capped at 12.5% of income, slightly higher than the House bill, according to a CBO summary from July 2. The problem for lawmakers is the expense of these subsidies. The Congressional Budget Office pegged the cost of the House’s at $773 billion for 2010 through 2019. The House could pay much of that tab with money from its proposed surcharge on the richest people. For senators eager to avoid such a tax, slimmed-down subsidies will likely be appealing, so consumers should keep an eye out for these goodies to possibly get skimpier and go to fewer middle-income people. The Senate health committee already began that process. An earlier version of its bill included help for those making as much as 500% of the federal poverty level, or $110,250 for a family of four this year. And the closely-watched Senate Finance Committee bill, which has yet to be unveiled, may offer subsidies to a smaller group of people than either of the two bills that have already emerged. Lobbyists suggest the cutoff will likely be set at 300% of the poverty level or below. Anna Wilde Mathews writes the WSJ’s Healthy Consumer column.

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If Subsidies Slip, Middle Class Could Feel Health-Reform Pinch