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Deficit-reduction plan fails to win needed votes

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WASHINGTON—A high-profile presidential commission failed Friday to come up with enough votes to back wide-ranging recommendations—including medical malpractice reforms and phasing out the tax-favored status of employer-provided health care benefits—in a comprehensive plan to reduce the federal budget deficit.

Eleven of the 18 members of the bipartisan National Commission on Fiscal Responsibility and Reform backed the plan, short of the 14-vote supermajority needed to send the plan to Congress under terms of President Barack Obama’s executive order that established the commission.

Among other things, the commission recommended several medical malpractice report reforms, including modifying the collateral-source rule to allow outside sources of income that are collected as a result of an injury, such as workers compensation, to be considered in determining awards and imposing a statute of limitations on medical malpractice lawsuits. The commission’s report also calls for establishing special health courts to hear medical malpractice cases.

Although the commission did not specifically endorse statutory caps on punitive and noneconomic damage awards in medical malpractice cases, a commission report notes that many commission members support such caps and “we recommend that Congress consider this approach and evaluate its impact.”

The commission report, in what it calls an “illustrative proposal,” suggests that gradually, employees would be taxed on employer health care plan contributions starting in 2014. By 2038, all employer health care plan contributions would be added to employees’ taxable income.

The report also recommends giving the board of the Pension Benefit Guaranty Corp. authority to raise premiums that employers with defined benefit plans pay the PBGC. The base annual premium is $35 per plan participant, and sponsors of underfunded plans pay an additional premium of $9 per $1,000 of underfunding.

Under current law, except for an automatic adjustment based on the growth in wages, only Congress has authority to boost PBGC premiums.