It’s unusual when Democratic presidential candidates Hillary Clinton and Bernie Sanders are on the same page. It’s even more unusual when labor unions and the U.S. Chamber of Commerce are singing the same song.
But the Affordable Care Act’s so-called “Cadillac tax” is bringing these and many more disparate political bedfellows into unison. And people complain President Barack Obama’s policies are divisive.
Ordinarily, a coalition this diverse might be on to something. If so many people from so many perspectives hate this tax on high-cost, high-benefit health plans, the policy must be misguided. Right?
Not really. Not if facts matter more than politics. Health care economists and policy experts think the tax is one of the most important pieces of the Affordable Care Act — not so much for the revenue it raises but because of the market behaviors it encourages, and discourages.
They argue the tax will lead to reductions in health care costs in two ways. First, by encouraging employers to exchange higher-cost health benefits for higher wages. Second, by reducing overall demand for health care services.
And then, there’s the revenue the tax generates. The latest estimate by the Joint Committee on Taxation is the tax will raise $91 billion throughout the next 10 years. That’s hardly chump change.
But that amount pales in comparison to the savings in health care costs the tax could generate by reducing the number of high-priced, comprehensive health plans and the high-cost, low-value use of the health care system they encourage.
A recent report by the Congressional Research Service says those savings could reach $40 billion to $60 billion a year by 2024. The tax could significantly decrease the rate of health care inflation — indeed, some economists argue it already has.
So, why so much opposition from such a diverse group if this policy would do so much good? Because while the good it does is spread across the nation and the economy, the costs are concentrated among a powerful few: unions, corporations, health insurance providers and the rich.
The tax would be a hefty 40 percent on the value of employer-sponsored plans that exceed current thresholds: currently $10,200 for individual coverage and $27,500 for family coverage. Only the portion above those thresholds would be taxed, so for instance, only $200 of a $10,400 individual plan would be subject to the tax.
Very few households would be hit by the tax — about 6 percent, according to a study by the Tax Policy Center. Whether the thresholds increase or decrease depends on health care inflation. …
Though Democrats have gone to great lengths to defend the Affordable Care Act against Republican attacks, the Cadillac tax is a tough political sell in light of union opposition. Democrats are not immune from feathering their own nests. Sanders and seven other Democratic senators introduced legislation to repeal it.
Before Democrats make common cause with the Chamber of Commerce and health insurers, though, they need to make sure they understand what experts say the tax will accomplish, and what getting rid of it could do to health care costs in the United States.
— St. Louis Post-Dispatch
