Ezra Klein: Attacking the excise tax -- and cost control

[SpartanDem]

Bob Herbert's column today isn't so much a good argument against the excise tax as it is an example of why cost control will be virtually impossible, and thus national bankruptcy -- a real decrease in wages -- is a near-certainty.

Herbert argues that the excise tax will push people toward less expensive insurance premiums and begin to tax some portion of some health-care plans. Both are true. I'd say this is a good thing. He says it's a bad one. Distilled to its essentials, Herbert is arguing that, even at the high end, more expensive insurance policies are better insurance policies, and that the government should be subsidizing their purchase. Does that sound like a world in which we're going to control costs?

Cost control is based on precisely opposite premises, in fact. First, more insurance is not always better. Health-care outcomes in Canada and England -- both of which have strong pressures against overuse -- are not worse than those in America.

(snip)
But putting that aside, the government has given employers a $250 billion annual subsidy to purchase health-care insurance. That's a big subsidy. It's much more than the bill spends to provide subsidies to low-income people, for instance.

And the people who receive that subsidy like receiving it. But the unemployed don't get any of that money, nor do people whose employers don't offer them insurance. The tax preference is huge, regressive, and encourages more spending on health-care insurance. And beyond all that, it separates workers from the cost of their health-care insurance, which is one of the main drivers of our cost problems.

http://voices.washingtonpost.com/ezra-klein/2009/12/attacking_the_excise_tax_--_an.html#more

[Cha]

1. Thanks, Spartan Dem.

[Beetwasher]

2. Excellent And Substantive Debate Going On!

This is so wonkish and I love it.

[flpoljunkie]

3. And, we definitely have a healthcare cost problem in this country.

http://voices.washingtonpost.com/ezra-klein/2009/11/an_insurance_industry_ceo_expl.html

[Armstead]

4. Using "market pressure" is not the way to curb overuse

Saying that it is good to make healthcare more expensive for people in order to curb overuse is a shell game or misguided.

It leaves too much leeway to penalize people for trying to get needed care.

[IndianaGreen]

7. Reaganism has infected the Democratic political elites

I expect a sugar coated effort to privatize Social Security to be next on the agenda.

[ProSense]

5. There is nothing wrong with an excise tax. And both Herbert and Klein fail to mention

that the CBO's conclusion doesn't assume that 19 percent of workers will be affected in the end:

The reductions in premiums described above also exclude the effects of the excise tax on high-premium insurance policies offered through employers, which would have a significant impact on premiums for the affected workers but which would affect only a portion of the market in 2016. Specifically, an estimated 19 percent of workers with employment-based coverage would be affected by the excise tax in that year. Those individuals who kept their high-premium policies would pay a higher premium than under current law, with the difference in premiums roughly equal to the amount of the tax. However, CBO and JCT estimate that most people would avoid the cost of the excise tax by enrolling in plans that had lower premiums; those reductions would result from choosing plans that either pay a smaller share of covered health care costs (which would reduce premiums directly as well as indirectly by leading to less use of covered medical services), manage benefits more tightly, or cover fewer services. On balance, the average premium among the affected workers would be about 9 percent to 12 percent less than under current law. Those figures incorporate the other effects on premiums for employment-based plans that were summarized above.

link

The statement about the 19 percent is an estimate based on a trend in cost, and there is no reason to believe the trend will play out given the caps and other cost controls. In other words, there may not be that many plans in that category. Also, the CBO doesn't take into account the other protections in the Senate bill for plans that the unions may be concerned about.

The Truth on Health Care Reform and Taxes

Second, the excise tax levied on insurance companies for high-premium plans, the so-called "Cadillac tax," will affect only a small portion of the very highest cost health plans – a total of 3% of premiums in 2013. The vast majority of health plans fall below the thresholds set in the Senate plan and would be completely unaffected by the provision. And those that are above the threshold would only face an excise tax on the generally small portion of the plan that exceeds the threshold. As a result, based on analyses by the Joint Committee on Taxation, only about 3% of premiums will be affected by this provision in 2013. In addition, the Senate plan provides special protections to plans held by workers in high-risk professions – like police and firefighters – as well as by those over 55.

Also note that above the CBO states that premiums on those plans are expected to drop 9 percent to 12 percent.

On edit: One way to address some of these concerns would be to raise the threshold, but the excise tax should be effective.

[Armstead]

9. In other words, p[eopel will opt for higher co-pays and/or less care

From that analysis:

"However, CBO and JCT estimate that most people would avoid the cost of the excise tax by enrolling in plans that had lower premiums; those reductions would result from choosing plans that either pay a smaller share of covered health care costs (which would reduce premiums directly as well as indirectly by leading to less use of covered medical services), manage benefits more tightly, or cover fewer services."

IMO Doesn't seem like having to go for inferior insurance that will cover less and cost more if care is needed is an appropriate solution.

[ProSense]

10. You're using the point I refuted as a rebuttal? n/t

[Armstead]

11. Could be

I fail to see anything that is going to put downward pressure on overall rates, which is the bottom line.

I do realize that is not cut-and-dried because some people -- like younger with pre-existing conditions -- may come out ahead. But in the bigger picture, the bill relies too much on "market forces" instead of good old direct regulation of rates and, of course, a public insurance alternative.

[Hello_Kitty]

18. Well yeah, because like Ezra says:

Workers are too "separate" from the costs of their health plans. They need to be cozier with them, as in paying more of them out of their disposable income. :puke:

[flpoljunkie]

6. Our employer based system encourages ever increasing health insurance premiums.

But, we seem to be stuck with it at this point. Something must be done to drive down healthcare costs. We pay too damn much to healthcare providers--altho since most of us get our insurance tax-free through our employers, we don't complain. It's people who don't get this special tax treatment, and pay much more in after tax dollars for their health care and health insurance, who ought to be in the streets complaining.

[SpartanDem]

8. I don't think people realize just how regressive the current system is

you have people with good benefits that are by subsidized by those without or lesser benefits because they get more of their compensation tax free.

[Oregone]

13. Its a right-wingers wet-dream

Clearly, Im not a big fan on any "reform" that allows the overall structure to basically remain in place

[Oregone]

12. Subsidies don't decrease the per capita health care costs

They pass em around in a shell game. If you don't like who they are passing em to, shouldn't you question the value of this reform (which isn't really addressing the reduction of costs and who should pay em best)

[mcablue]

14. Contact him at [email protected]

There's nothing or next to nothing this guy doesn't like about LieberCare.

[SpartanDem]

15. Thanks for that great factual analysis you provided

:sarcasm:

[Hello_Kitty]

16. Is he seriously comparing our system to Canada's and England's to justify his argument?

Does he seriously think the only reason they deliver health care cheaper is because they stem overuse? Seriously, Ezra? We have an overuse problem in the US? Right. We have a "profit driven health care system" problem, which neither Canada nor the UK have.

Oh and I love how he thinks that taxing $8000 plans will cause insurance companies to start issuing $5000 plans with the same coverage. No real basis for him to think that, just pure speculation. It's true that more insurance doesn't necessarily equal better insurance but all things being the same, there's a pretty good change that an $8000 policy offers better coverage than a $5000 one.

And the people who receive that subsidy like receiving it. But the unemployed don't get any of that money, nor do people whose employers don't offer them insurance. The tax preference is huge, regressive, and encourages more spending on health-care insurance. And beyond all that, it separates workers from the cost of their health-care insurance, which is one of the main drivers of our cost problems.

Jesus H. Christ does this little boy ever listen to himself? Hey, workers, it's YOUR fault health care costs are so high!

Honestly, those of you rec'ing this and thinking Ezra is the bee's knees, I want you to take that last paragraph and really think about how he's trying to pit one group of working Americans against another.

[TheKentuckian]

17. Reducing premium costs by forcing people into worthless policies is missing the point

The Max Tax squeeze play is not a path to improved access to and higher quality health care. We could also reduce health care costs by closing the hospitals and clinics and letting people die but that's not why we are having this conversation.

This is the kind of bullshit that comes from cost containment efforts that make the first priority be that no corporation in the system losses any profits.