The White House has agreed to exempt collective bargaining agreements from the Cadillac tax until January 1, 2018 and increase the threshold of the plans affected by the tax.

Beginning on January 1, 2013, a family plan that costs more than $24,000 and an individual policy valued at $8,900 will now be subject to the 40% excise tax, labor leaders said during a conference call outlining the new compromise. The new provisions would reduce the estimated revenue from the excise tax by $60 billion, forcing lawmakers to make-up for the lost revenue by increasing the payroll tax (which would still hit union members) or applying it to investment income.

AFL-CIO President Richard Tumka laid out the other compromise provisions:

- The threshold can also be adjusted further in three ways: if between 2010-2013, inflation increases higher than expected, if plans have a high number of older workers, women, high risk individuals and qualified retirees.

- Beginning in 2015, dental and vision benefits will be excluded from the cost of the plan.

- Collective bargaining agreements would be able to go into the exchange beginning in 2017.

Critics will interpret the temporary exemption as a special interest carve out for a vital political constituency, but it makes perfect policy sense. Unlike non-union labor negotiations which can be re-negotiated annually, collective bargaining agreements tie unions down for multiple years. The temporary exemption allows them to get out of the way of a moving train. After all, collective bargaining agreements are not the same as raise negotiations for non-union employees. While the latter operates under the implicit assumption that a certain percentage of compensation is dedicated for health benefits and is exempt from taxation, a union collective bargaining agreement enters into an explicit trade off between taxable and nontaxable compensation.

Typically, a union negotiates a certain dollar agreement from the employer for total compensation as well as how that will be divided between wages and benefits. The employer could agree to compensate its workers $30 per hour and the union would decide to allocate $20 to wages and $10 to health care. Or, it may choose to spend $15 on wages and $15 on health care. Whatever the case, the unions weighs the benefits of receiving tax deductible health benefits with the immediacy of higher wages and agrees to abide by the agreement for several years.

Without an exemption period, the excise tax would change the rules midstream. Non-union workers with expensive health care benefits could change their compensation package in anticipation of the new tax, but unions with health policies of above $24,000 would pay higher taxes until their contract expires. The temporary exemption still accomplishes the goals of the excise tax — pushing people into lower cost health care plans — but gives unions more time to change their behavior and switch to cheaper policies.

Still, some progressives are not amused. Over at FireDogLake, Michael Whitney argues that “if unions take this ‘deal,’ if the labor movement decides to fold and exempt themselves from the excise tax, they fulfill one of the worst of stereotypes of labor unions: blind self interest. By abandoning the nonunion middle class and protecting only their own, the labor movement is throwing any hope of future relevancy out the window.” On the call, Trumka argued that “we were able to do something that will help everyone out there.” “We’ve increased the threshold for everybody. The age and the gender adjusts for everybody taking out vision and dental out of threshold is for everybody,” he argued.

The New York Times’ Adam Nagourney is reporting that Majority Leader Harry Reid (D-NV) felt that Sen. Joe Lieberman (I-CT) had “double crossed him” after he publicly rejected the Medicare buy-in compromise on CBS’s Face the Nation. “Reid had spoken with Lieberman two days earlier, and one of Lieberman’s top aides participated in the Saturday-afternoon conference call that Reid orchestrates for Democratic senators who will be appearing on the Sunday talk shows. ‘He double-crossed me,’ Reid said stiffly, associates later recounted. ‘Let’s not do what he wants. Let the bill just go down.’”

Lieberman disputes Reid’s characterization and has taken the “extraordinary step of providing a copy of a private letter written from Lieberman to Reid on Dec. 10, three days before the CBS appearance.” In his letter, Lieberman “voices objections to the deal, but stops short of explicitly saying he would vote against it”:

“Regarding the ‘Medicare buy-in’ proposal, the more I learn about it, the less I like it…There are also concerns about what impact this Medicare buy-in idea would have on Medicare solvency and Medicare premiums,” he added. “I have a feeling I will not be the only member of our Caucus who will not want to see this Medicare buy-in proposal adopted.”

Lieberman pretended to consider the proposal publicly, but it’s unlikely that he ever did. “I’ll take a look at [the Medicare by-in],” he told reporters on December 8th, shortly after Reid had announced that Democrats had reached an agreement to scrap the opt-out public option and replace it with a national exchange of nonprofits and a Medicare buy-in for Americans between 55 and 64 years of age. “I don’t know how anybody can decide [on the Medicare buy-in] until you see the actual language of these compromise proposals,” Lieberman told Fox News.

But during his December 13th appearance on Face the Nation — in which he insisted that “you got to take out the Medicare buy-in” — Lieberman admitted that he wasn’t familiar with the proposal. “I don’t know exactly what’s in it, from what I hear I certainly would have a hard time voting for it because it has some of the same infirmities that the public option did,” he said.

Regardless of what Reid thought Lieberman had agreed to, however, Lieberman rejected the proposal before the Congressional Budget Office analyzed it or lawmakers finalized it. As a result, he was arguing against a straw man, apparently unaware that Democrats had already agreed to protect traditional Medicare premiums by placing the new population into a separate risk pool, for instance. Lieberman didn’t attend the original negotiations or seriously consider the proposal he once enthusiastically embraced. Instead, he spewed his cost-shift/Medicare bankruptcy nonsense to avoid real discussions. He wasn’t interested in compromise.

Today, Reid issued a statement today, softening his criticism. “Senator Lieberman and I have a very open and honest working relationship. On issues ranging from foreign policy to health care, even when we disagree, he has always been straight forward [sic] with me,” Reid said.

“Should someone in Idaho or Nevada have significantly different health care coverage from someone in Massachusetts,” Reed Abelson asks in today’s New York Times. “That, essentially, is one of the biggest questions Congress will be wrestling with” as it tries to reconcile the House bill’s national exchange with the Senate bill’s state-based approach.

The Senate health bill would exacerbate the regional differences in health coverage by requiring all 50 state legislatures to pass separate legislation establishing 50 new health insurance exchanges. “The same state officials who now oversee the insurance market with varying degrees of intensity” would also be responsible for regulating the new insurance marketplaces.

Meet Florida’s State Sen. Don Gaetz. Under the Senate bill, Gaetz and other state lawmakers across the country would help implement the new exchange and regulate insurers. On Monday, Gaetz pledged to “resist making other changes required to implement the reforms.” “We are not trying to figure out how to lay down with this,” Gaetz told a crowd of state legislators. “I think we are going to look for ways to roll back provisions in this bill and try to get more state choice and more flexibility and more local business control of health care options.” Gaetz predicted that in 2010, candidates opposed to the federal reform would win election, setting off a protracted fight. After the bill is signed into law, “the fight just moves to a different venue,” Gaetz said. “And by the way, I welcome the fight.”

A number of Republican gubernatorial candidates have already announced their desire to repeal reform. Attorney General Bill McCollum, who is running for governor in Florida signaled that “he would challenge the legality of any federal legislation that forces individuals to buy coverage.” Yesterday, South Carolina Attorney General Henry McMaster, also running for governor in his state, appeared in Washington to rally support for his campaign to challenge the constitutionality of reform. More than 14 states have already announced that they would put the question of repealing reform on the ballot and top Republicans have pledged to run the 2010 Congressional elections on rolling back the measure.

For reform to work, lawmakers who have pledged to “roll back provisions” of reform should not be responsible for implementing it. House and Senate negotiators must adopt the House bill’s more centralized approach or develop a compromise that establishes a national exchange but allows states a certain level of flexibility. States should be able to respond to local needs and conditions without dragging their feet on insurer oversight and regulation. After all, reform’s success or failure will be determined by the implementation process. And if the final health care bill outsources these tasks to Don Gaetz, this whole effort was for naught.