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Bye Bye 'Cadillac' Tax? (National Journal)

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highplainsdem Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-13-10 01:35 PM
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Bye Bye 'Cadillac' Tax? (National Journal)

Bye Bye 'Cadillac' Tax?
Marilyn Werber Serafini
Wednesday, January 13, 2010 10:02 AM

As congressional negotiators wrangle this morning over whether to soften the potential blow of the so-called "Cadillac" tax or kill it altogether, health care insiders on National Journal's Health Care Expert Blog are discussing the plan's effect on controlling skyrocketing costs.

When congressional Democrats meet with President Obama today, the prospect of cutting the tax outright is likely to come up. Another idea under discussion is for the House to accept the Senate's tax on high-end insurance plans (the House doesn't have it), but raise the threshold so that it would apply to higher premiums.

Paul Fronstin, senior research associate at the Employee Benefit Research Institute, says that raising the thresholds of the Senate bill would reduce the number of people affected by the excise tax, but that future health inflation "could push more into its clutches." The unanswered question, he adds, is "whether a tax on high-cost plans (driven more by incidence of disease than plan design) that reduces the comprehensiveness of plan design will reduce spending on health care services among the chronically ill. If a person with diabetes does not change his or her use of health care as a result of the excise tax, health care costs will not be affected, and the long held hope of economists that taxing high cost plans will reduce total health spending, and increase wages, could be proven wrong."


Jason Rosenbaum, deputy director of online campaigns at Health Care for America Now, argues that while taxing health care benefits is designed to get employers to spend less on health care, "that policy will directly shift costs to you, and that means higher deductibles, less choice of doctors, and worse health benefits." The theory is that taxing health care plans will cause employers to cut heath care and increase wages, he says, but he cites an Economic Policy Institute report rebutting that claim. Health care costs "are not large enough to substantially move wages," it says, and "examination of actual wage and benefit trends confirms that changes in the trajectory of health care costs did not materially affect wage trends over the last 20 years."


Sally Pipes, president and CEO of Pacific Research Institute, further argues that "massive new taxes" won't control costs. "The House doesn't even head fake in this direction. It offers pure wealth redistribution, raising its money through general taxation on high earners."

And John Goodman, president and CEO of the National Center for Policy Analysis, warns that because the tax isn't indexed to medical prices, "eventually it will reach everyone. It's also very regressive, applying a 40% rate to everyone, regardless of income. Minimum wage workers will be taxed as though they were millionaires."


I hope they will cut the tax from the HCR bill completely. But I've been seeing some news stories saying President Obama wants it in there, even if it's pared down by raising the threshold at which it would apply.

I'm also seeing some news stories suggesting there's a very cynical attempt to win union leaders over by offering to exempt unions from this tax. But there have been some statements from unions making it clear they don't think this tax should be imposed on any workers, whether or not they're unionized. It will not help the unions' image if their leaders cave in to a divide-and-conquer approach by Dem leaders who want to tax those health plans.

And I find it disgusting that any Democratic leaders are trying to make this tax acceptable, choosing it over a tax on the wealthy.

By the way, who came up with the "Cadillac" name for this tax? That misleading label for it is obviously a very cynical attempt to con people into thinking it would be a tax on the wealthy.
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