During the presidential campaign, progressives criticized Sen. John McCain (R-AZ) for dismantling the employer-based health insurance system by exposing employee tax benefits to income taxes. This morning, Sen. Max Baucus (D-MT) proposed financing his comprehensive health reform plan by reforming the tax incentives for employer coverage.

So what’s the difference? Why aren’t progressives jumping down Baucus’ throat and accusing him of treason? While McCain proposed replacing the employee deduction with a one-size-fits-all tax credit without reforming the health insurance market, Baucus pairs employee-tax tweaks with market reforms that would increase access to group coverage.

Baucus proposes two changes to the tax exclusion: capping the amount of health care premiums that can be excluded from employee wages and restructuring the exclusion on a sliding scale based on income, giving people with lower wages a larger deduction. But, since the plan simultaneously expands Medicaid, Medicare and SCHIP, creates an insurance exchange, allows Americans to buy into a new public plan, and ends discrimination against individuals with pre-existing conditions, the restructuring of the tax exclusion would not leave Americans without coverage.

Most progressives recognize the regressive nature of the employee tax exemption. As the Baucus white paper points out, “current incentives are also regressive because they are, for the most part, more valuable to taxpayers who are subject to higher marginal rates. As such, they give larger subsidies to higher-income workers, instead of to the lower income Americans who need more help buying insurance.” In fact, even Obama adviser Jason Furman argued that our current tax exemption for health insurance could (or should) be revamped.

The Baucus plan also meets another progressive requirement: it builds on the current employer-system. While the employer-based system isn’t perfect, it plays a crucial role in connecting Americans to coverage by encouraging risk pooling through employer policies and guarding against adverse selection. Baucus seeks to expand and strengthen the system by requiring employers to offer a Section 125 plan which would allow employees to pay their health insurance premiums through their employer’s payroll deduction and with pre-tax dollars.

As Ezra Klein points out, “by offering something that hews closely to Obama’s principles and traces the expressed preferences of most leading Democrats, [Baucus] he’s constructed a broadly acceptable base on which to build the process. There is plenty yet to be defined, traded, added, and decided — which is to say, there is plenty of reason for other senators to take a role in the process. If his colleagues agree, then this will be, as Baucus hopes, Max Baucus’s health reform process.”

Our guest blogger is Brian Levine, a Senior Policy Adviser at the Center for American Progress Action Fund.

Last week, progressives won a resounding victory. The question is: Now what? Today, the Center for American Progress released its own recovery strategy for 2009 and beyond. The CAP report cautions against being “penny wise and pound foolish” as we confront large budget deficits in the short-term. We must invest immediately in health care, energy and education to help our economy through this crisis and lay the groundwork for future growth.

The report lays out a strategy that begins with stabilizing the economy by ensuring the solvency of financial institutions, restoring confidence to the credit and stock markets, and ending the housing crisis, while jumpstarting the recovery with an intelligently crafted stimulus package.

These steps must be accompanied by a sustained economic agenda that focuses on build­ing the foundation for a brighter future. As the report points out:

Today’s crisis is not just the failing economy but the looming barriers to future prosperity in the form of unsustainable and growing levels of health care costs, the lack of adequate clean, depend­able energy, and our inability to educate our children for the needs of our economy.

We must slow the growth of health care costs, which will require an upfront investment, partly because it requires universal coverage. In addition to covering everyone, we must incorporate new medical technologies into the system and promote more efficient delivery of care.

We need to invest in a new green energy infrastructure to create jobs now and begin the shift to clean, sustainable energy. Using energy more efficiently makes our economy as a whole more efficient. And renewable energy and efficiency are growth industries that can drive American economic leadership well into the future.

And the economic crisis must not prevent us from transforming the public education system to one that prepares our children to compete for high-quality jobs in the global economy and tackling the problem of college affordability.

After the period when deficit spending is needed to strengthen the economy, we must restore fiscal discipline as quickly as possible.

Today, the Center for American Progress Action Fund released Change for America: A Progressive Blueprint for the 44th President, “to help guide the presidential transition process and steer the government in a new, more progressive direction.”

Among the various chapters on economic policy, foreign policy, and environmental policy is a detailed examination of how the new head of the Department of Health and Human Services (HHS) — Sen. Tom Daschle (D-SD), and Gov. Howard Dean (D-NH) are both being considered for the position — can expand health care coverage and simultaneously take steps to lower health care spending.

At a panel discussion unveiling the project, CAPAF Senior Fellow Jeane Lambrew outlined five concrete steps the new HHS secretary can take to address the health care crisis:

1. Reverse Bush’s August 17th SCHIP directive: Going beyond simply vetoing SCHIP expansion, in August 2007, President Bush issued a directive that required states with already expanded coverage to higher-income children “to limit eligibility to those who were uninsured for the previous 12 months.” As a result, states that have had their expansions blocked or have had to scale back plans to cover more children. The new HHS secretary should immediately reverse this policy.

2. Strengthen consumer protections in private plans: The Bush administration encouraged greater private plan participation in public programs, at the expense of consumer protections. Private insurers have scaled back Medicare benefits to discourage high-cost enrollees, used aggressive tactics to sign beneficiaries up for private insurance, and engaged in unscrupulous marketing practices. The new HHS secretary could issue clear guidelines that would protect high-cost beneficiaries, set standards for supplemental benefits and strengthen guidance on marketing.

3. Increasing scientific integrity: From limiting federal funding for embryonic stem cell research to deleting references to condom use from the Centers for Disease control and Prevention website, the Bush-run HHS consistently placed conservative ideology ahead of scientific integrity. The new HHS secretary should assert that all programs be held to the highest standards of medical accuracy, free from political interference and in accordance with leading ethical guidelines.

4. Prioritize prevention: 70 percent of deaths and 78 percent of health care costs are attributed to chronic diseases, many of which are preventable. Recent studies suggest that investing $10 per person per year in prevention could result in a savings of $16 billion, a return of $5.60 for every $1 invested. The new HHS secretary should establish a new council that would set prevention priorities, promote healthy lifestyles, and develop policy for all HHS programs. CAPAF has proposed ‘A Wellness Trust Fund’ that pools funding and directly pays for high-priority preventive and certain public health services.

5. Improve health infrastructure: The aging baby-boomer population pose enormous capacity and infrastructure challenges. The U.S. has fewer than 7,000 certified geriatricians, yet needs 14,000, and this discrepancy will grow up to a difference of 36,000 between available and needed geriatricians by 2030. The new HHS secretary should examine federal leverage points that can increase the supply of geriatricians by investing in federal scholarship and loan repayment programs, boosting capacity in nursing education, and enacting strategies that would increase wages and benefits for direct care workers.

In short, the Department of Health and Human Services is well positioned to take executive action to reverse Bush’s regressive initiatives. With control of a budget that comprises nearly 1/4 of all federal outlays and finances about 35 percent of the $2.6 trillion health system, the new HHS secretary has considerable authority to meet the challenges ahead.

In a recent letter to President-elect Barack Obama, a coalition of business and labor groups — the Business Roundtable, the National Federation of Independent Businesses, AARP and the Service Employees International Union — argue that “addressing skyrocketing health care costs is a critical component of stabilizing household, national and global economies” and warn that “inaction undermines the economic security of our families; limits the productivity of our work force; stagnates job creation and wage growth; and threatens to crowd out investments in energy, education and infrastructure.”

Today, Senate Finance Committee Chairman Sen. Max Baucus (D-MT) answers the call for reform with a detailed health care proposal designed to expand health care access and improve affordability.

The plan includes a mandate, requiring that all Americans obtain health insurance through an employer or the new Heath Insurance Exchange:

Requiring all Americans to have health insurance will help end the shifting of costs from the uninsured to the insured…This step is necessary for insurance market reforms to function properly and to send the cost shifting that occurs within the system. It is expected that the vast majority of American employers would continue to provide coverage at a competitive benefit to attract employees. Except for small firms, employers that choose otherwise must contribute to a fund that would help cover those who remain uninsured.

Baucus’ proposal expands Medicare, Medicaid, and State Children’s Health Insurance Program (SCHIP) and opens “Medicare to people ages 55 to 64.” As the New York Times reports, “Medicaid would be available to everyone below the poverty level and could provide at least seven million more people with access to the program.” SCHIP “would be expanded to cover all uninsured youngsters in families with incomes at or below 250 percent of the poverty level ($44,000 for a family of three),” raising the income limit “in about half the states.”

Here are the guts of the proposal:

- A choice of public or private: Creates a “health insurance exchange,” where people could choose from among private insurance policies and a new public Medicare-like plan.

- End to discrimination: Prohibits insurers from denying coverage of preexisting conditions or age.

- More affordable coverage: Offers new tax breaks for individuals and small businesses to offset the costs of insurance.

- Easier to enroll: Ends the current ban against immigrants participating in Medicaid or SCHIP in their first five years in the United States.

- Focus on prevention: Uninsured would receive a “RightChoices” card that guarantees access to recommended preventive care.

- Payment reform: Refocuses payment incentives from quantity (fee-for-service) toward quality and value.

Baucus finances the plan by “eliminating, fraud, waste, and abuse in public programs,” ending overpayments in the Medicare Advantage program, increased transparency, and “careful reforms of medical malpractice laws that could lower administrative costs and health spending.” More controversially, Baucus also proposes revisiting “the current tax treatment of employer-sponsored health insurance…. a benefit valued at $245 billion annually.”