Democrats reach deal on 'Cadillac' health tax

Speaker of the House Nancy Pelosi talks to reporters about healthcare after a meeting with U.S. President Barack Obama and House committee chairs at the White House in Washington, January 6, 2010.

WASHINGTON (Reuters) - The White House and labor unions reached a tentative deal on revising a tax on high-cost insurance plans as Democratic healthcare negotiators in the U.S. Congress pushed on Thursday for a quick final compromise.

It was not immediately clear if the deal would be enough to ease the concerns of all the Democrats in the House of Representatives who oppose the "Cadillac tax" in the Senate's version of a healthcare bill.

The tax, backed by President Barack Obama, has been criticized by labor unions and some Democrats who said it would hit middle-class families and union members who gave up higher wages for better health benefits.

Democratic Representative Joe Courtney, a leading critic of the Senate tax, said the deal would raise the tax's income threshold and exclude supplemental coverage for dental and vision. But even the revised tax could face problems in the House, he said.

"Right now I think that this is a real uphill battle," Courtney told reporters. "There's a high degree of skepticism about it."

He said it also was unclear if all the labor unions that had opposed the tax signed off on the agreement. "It sounds like they are still talking," he said.

The Cadillac tax was one of the biggest stumbling blocks as House-Senate negotiators continued a second day of talks at the White House to find a final deal on the overhaul, Obama's top legislative priority.

The House and Senate versions of the overhaul must be melded into one bill and passed again by each chamber before Obama can sign it. Democratic leaders met at the White House for eight hours on Wednesday and reported significant progress on a variety of issues.

They will return to the talks on Thursday afternoon, and Obama is scheduled to talk to House Democrats at the Capitol afterward.

FRIDAY GOAL

Negotiators said they hope to send the Congressional Budget Office a package of agreements on how to pay for the plan by Friday. "It's a goal, not a deadline," Senate Democratic leader Steny Hoyer told reporters.

Both bills would extend insurance coverage to more than 30 million uninsured Americans, create a mechanism where individuals can shop for insurance plans and bar insurance practices like refusing coverage to people with pre-existing medical conditions.

If they agree to a deal on the Cadillac tax, negotiators will still need to find ways to raise more revenue. They have been considering raising the payroll tax on Medicare, the health program for the elderly, and extending it to income from investments by the wealthiest Americans.

Some House members said they also were interested in seeing the pharmaceutical industry kick in more than the $80 billion it agreed to pay last year in a deal with the White House.

"I have not heard a figure, but I know $80 billion was too low," House Rules Committee Chairwoman Louise Slaughter said.

Democrats are trying to move quickly to merge the two bills and get the final version approved before Obama's State of the Union speech in early February.

Public opinion polls show majorities opposed to the healthcare overhaul, and Democrats are anxious to move on to the economy and creating new jobs ahead of November's congressional elections.

Neither chamber has much wiggle room in the negotiations. A shift of three votes in the House could doom the bill, which passed by a 220 to 215 vote in November.

The Senate has even less room for error -- the bill passed on Christmas Eve with exactly the 60 votes it needed to overcome unified Republican opposition and a single defection could doom it.

(Additional reporting by Jeff Mason, Thomas Ferraro and Andy Sullivan; editing by Matthew Bigg and Eric Beech)