No Ezra, the excise tax is not a "good thing"

[marmar]

from Health Care for America Now!:



No Ezra, the excise tax is not a "good thing"

Posted on October 16th, 2009 by Richard Kirsch, National Campaign Director in Solutions that Work


Ezra Klein at the Washington Post takes issue with Health Care for America Now's stance on the excise tax.

I appreciate Ezra saying he has a lot of respect for HCAN. We continue to differ on the policy issues around taxing higher cost health benefits, whether doing it head-on as was proposed in the past, or through the back-door, as is the case with the 40% excise tax on high cost plans in the Senate Finance bill.

First, Ezra claims that the excise tax is isn't really a tax on the middle class:

The ad says the excise tax is "a 40% tax on health-care benefits of middle-class workers." It isn't. It's not even a little like that. It's a 40 percent tax on employer-provided health-care benefits above $21,000 for a family, and $8,000 for an individual. If your family's health-care premiums cost $23,000, then there's a 40 percent tax on $2,000 of your premiums. It's inconceivable that anyone's full health-care policy would be taxed at 40 percent.

Moreover, your family's health-care premiums probably don't cost $23,000. The average employer-provided health-care plan cost $13,375 in 2009. There are some middle-class workers with uncommonly generous health-care plans, but they're not the norm. This isn't as progressive as a tax on millionaires, but it is, in general, progressive. Goldman Sachs traders, for instance, have health-care plans valued around $40,000 a year. Wal-Mart employees don't.

But income and the value of people's health care plans do not correlate. The Communications Workers of America, using data from the Joint Committee on Taxation (JCT) and an analysis by Citizens for Tax Justice (CTJ), concluded that 40% of health care plans will be hit by this excise tax by 2019.

Second, as Ezra notes, the excise tax "isn't as progressive as a tax on millionaires. " Yup. Health Care for America Now is for progressive financing, which is why our new ads push for having people who earn more than $250,000 pay their fair share. That's what the House bill does and it's what the President's initial proposal to fund health care through lowering tax deductions for people who earn more than $250,000 does too.

Ezra goes on to support employers buying less generous health care plans for their employees:

The argument against the excise tax is that it cuts the deficit by encouraging employers to shop for cheaper plans. The Joint Committee on Taxes suggests that the tax won't raise money because people will pay it. It will raise money because it will encourage employers to purchase cheaper plans for their employees and divert money they've saved into wages, which are taxable income. That means that a number of very generous plans will become more like middle-range plans. They'll have deductibles if they don't already, tighter networks, tiered drug formularies and so forth. Any plan that's lavish enough to even near the tax is going to remain a very generous plan, but it will become less so on the margin.

Some people, myself included, think that's a good thing.

I don't.

The problem here is confusing cutting costs with shifting costs. Cutting costs means finding ways to make health care more efficient and to provide better care for the same or less money. But shifting costs is different. By incentivizing employers to offer less generous health care benefits, which means higher deductibles and the like, "costs" may go down, but in reality the policy simply transfers these costs to the worker. Moreover, higher out-of-pocket costs can discourage people from getting the care they need.

Cutting a "generous" benefit like dental care just means more cavities and poorer health. The U.S. already has much higher out-of-pocket costs than other developed countries, which of course spend much less on health care. Let's control costs by developing the right incentives for providers of care, not the wrong incentives for consumers. ..........(more)

The complete piece is at: http://blog.healthcareforamericanow.org/2009/10/16/no-ezra-the-excise-tax-is-not-a-good-thing/

[Hello_Kitty]

1. I could only see an excise tax on "Cadillac plans'

As they extend for the coverage of non-essential services like elective cosmetic surgery. Dental coverage is NOT an "extra", it is vital to the maintenance of good health, as the two threads on the Greatest Page right now about teeth so amply illustrate.