Clinton and Sanders opposing "Cadillac tax" on healthcare

Permabear

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Victor

Other employees get reduced tax because they structure part of their pay as a bonus, common for management and professional services. In such cases, work is taxed more than wheel-dealing. If a tax is to be imposed on the whole package of union-grade employees, then how about imposing tax on the whole package of wheel-dealers?

Of course, in Ireland, you can write off all health insurance and many health costs against income tax - but only if you earn enough. A nice little perk for high earners (and the insurance companies).

I think there is a little bit of hypocrisy all round.

Overheal

Sanders said his bill would “strike the excise tax while demanding that repeal be paid for." He proposed generating the revenue through “a surtax on the wealthiest people in this country,” which had been included in the House version of the Affordable Care Act.

http://thehill.com/policy/healthcare/254842-sanders-top-dems-urge-repeal-of-cadillac-tax

“What was true then is true now,” Sanders said in a statement Thursday. “Imposing an excise tax on health insurance plans would be a disaster for millions of middle class Americans. Some have said that this tax only falls on ‘Cadillac’ health care plans, but the reality is that the plans this bill will tax are more like Chevrolets. Workers have fought hard to negotiate decent healthcare benefits, often in exchange for lower pay. This excise tax unfairly punishes them. The tax not only punishes hard working Americans, it is simply bad policy. We should make sure that all Americans receive affordable, high quality health care.”

The Affordable Care Act imposes a 40 percent non-deductible excise tax on health plans with values exceeding $10,200 in coverage for individuals and $27,500 for families. The provision is indexed to inflation and will rise automatically over time, with the potential to eventually affect all employer-sponsored plans.
The bill would strike the excise tax while demanding that repeal be paid for. According to the Congressional Budget Office, this provision would generate $87 billion over 10 years. Sanders contends the revenue should instead be raised through a surtax on the wealthiest people in this country, a provision that was included in the House version of the ACA. At the time, that provision was estimated to raise $460 billion over 10 years, more than five times the amount raised by the excise tax.

http://www.accountingtoday.com/news/tax-practice/bernie-sanders-senate-democrats-repeal-tax-cadillac-health-plans-75910-1.html

Also a really good piece of journalism here that breaks down the entire issue from all sides: https://www.bostonglobe.com/news/politics/2015/10/20/obama-clinton-fight-over-tax-cadillac-health-plans/dTvop9wPpREq2630vsdUFL/story.html

The tax, Altman said, would hit low-income workers and the chronically ill the hardest because it encourages companies to increase deductibles and copays, which are already rising rapidly. Furthermore, predictions by economists that reducing generous insurance packages will lead to higher wages are unlikely to happen immediately and may not be distributed equally among workers, he said.

A group of 101 leading health economists and policy analysts this month sent a letter to Congress urging members not to weaken or delay the tax — support that the White House has highlighted.

David Cutler, a Harvard economist who advised Obama’s campaign on health policy in 2008, said the tax is the best option on the table to make employers and workers see more of the cost of health care so they have an incentive to push for lower prices.

Unions denounce the tax as punitive because it would erode the generous health benefits many members enjoy. Others say the tax is unfair because companies in regions with high health care costs, such as New England, are subject to the tax even if the benefits offered are just average.

But many health care economists contend generous insurance plans lead to wasteful, unnecessary care. Imposing the tax should encourage employers to make coverage less generous, which means workers will be hit with more costs in the form of deductibles and copayments.

And that, in theory, will force those consumers to become more discerning, skip wasteful care and duplicative tests, and drive stronger competition in the medical marketplace.

Permabear

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Overheal

Permabear, see my post above:

Sanders contends the revenue should instead be raised through a surtax on the wealthiest people in this country, a provision that was included in the House version of the ACA. At the time, that provision was estimated to raise $460 billion

In short, it takes the tax of the healthcare plans because depending on the state, that's not a 'Cadillac' plan (a problem in itself, but hey); the revenue for the ACA that is lost by repealing this would be replaced with an income tax increase for wealthier Americans and would generate even more money.

Permabear

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Overheal

What do you say to critics who argue that imposing a tax on such plans will only 1) place an artificial cap on policy costs and subsequently 2) force people of all walks into plans with larger co-pays to offset the fact that the premiums will be lower?

Permabear

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Overheal

I suppose if you kept the tax and in turn gave a tax break to those who spend over X amount on copay per the year, and live under X income level, it would allay the issue raised by Sanders/co and their bill.

Permabear

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Overheal

Are you then rejecting the idea that the tax as it is might not have any significant drawbacks? I like the Bern, don't get me wrong, but it's an interesting issue, I'm looking at it on its own merit. Both corporations and unions support it the repeal.

Permabear

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Overheal

I could see how, if you're taxing the top tier plan and in turn subsidizing the lower tier plans, in effect you're really not taking money out of the healthcare/insurance system, you're just pushing it around. And that will bring parity to the price of plans (which could be a good thing) but wouldn't really address the costs of healthcare because healthcare will just be drawing from essentially the same net pool of money.

In turn, by not taxing plans, and using a subsidy derived from wealth in excess of $150k or whatever bracket, you're also not addressing the cost of healthcare. You're in fact injecting even more money into the healthcare system, which healthcare services will seek out and claim as revenue.

This possibly just extends the argument for a nationalized healthcare system, given that if the provider of care is also burdened with its cost, it will seek out cost effective means of doing so.

What suppose is the net effect if all consumers of healthcare (in the current market system) have the same levels of coverage versus leaving a few at the higher end? Do we see more price competition for homogeneous services, or less.

Permabear

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