Why President Obama's 'Taurus Tax' Is the Wrong Medicine

03/18/2010 05:12 am ET | Updated May 25, 2011
  • Drew Westen Professor, Departments of Psychology and Psychiatry at Emory University

As someone who once enthusiastically supported this President and would like nothing better than to do so again, I've been pleased to see a change in the last couple of weeks in his willingness to step into the fray. On health care, for example, his modus operandi during his first year in office has been to exhort the Congress to pass legislation broadly described as reform but to express seemingly little interest in what form that reform was taking, leaving it to legislators and lobbyists to work out the details. For example, in a widely reported meeting with Congressional Democrats, he emphasized the importance of getting a bill through Congress, but he didn't mention--let alone take a stand on--the two issues that have driven a wedge between Democrat and Democrat: abortion and the ill-named "public option."

Weeks earlier, when immigration reared its ugly head (no offense intended to the mug of Congressman Joe Wilson), the President ducked and ran for cover. Instead of taking a stand, he took off the table even the most inoffensive proposal: letting illegal immigrants pull their own weight by buying insurance on the health care exchange--a position, by the way, much more popular with the American people (and far more principled) than the alternative, which is to wait until they or their children are in so much pain or are so sick that they have no choice but to come in for care in clinics and emergency rooms--courtesy of the American taxpayer--or to let them die for fear of deportation if they seek care.

So, like many Americans who have been following the health care saga, I was surprised to see the President recently take a clear stand on how to pay for the expansion of health insurance coverage to millions of working Americans who can't afford it. The House took the position that after a decade of redistribution of wealth from the middle class to the upper 1%, we should let the people who make a million a year or more contribute to the health care of their nannies, cleaning people, and the mechanics who fix their BMWs. The Senate took the position that we should tax the better health insurance plans that American workers can choose to buy from their employer if they have the income and the option. The idea of taxing these plans was to make them unattractive to health insurance companies, employers, and employees alike, which at first would discourage people from opting into them and would shortly thereafter eliminate them in favor of more "sensible" plans with better cost controls.

The President sided with the Senate, calling for a tax on what he called "Cadillac plans."

It was nice to see the President make a decision. But it would have been nicer to see him make a good one, particularly when faced, as he has been so many times this year, with the choice between the interests of big business and the interests of working and middle class Americans--in this case, middle class Americans who just want to be able to choose the health insurance plan that's best for themselves and their families and workers whose unions had negotiated good health care plans in lieu of pay increases.

Although the same President who vigorously attacked the same plan on the campaign trail when John McCain offered it has described these "Cadillac plans" as if they are perks provided to Wall Street bankers (whose bonuses, last I looked, the President hasn't similarly decided to tax out of existence), the "Cadillac plans" the President is referring to are nothing of the sort. No one knows exactly how many millions of working and middle class Americans will be affected by this new tax, particularly as health care costs continue to rise and more and more plans price into the range defined as "Cadillac." A few nights ago I was having dinner with three professors of public health at a prestigious university, and I asked them whether the plan they had selected for their own families would fall under the category of a "Cadillac plan" whether they worried that it would eventually be eliminated if this legislation were enacted. None of them knew, but the sheepish consensus was, "I sure hope not."

What is clear is that some and eventually all PPOs (preferred provider organizations) will fall prey to the tax, and PPOs are the primary alternatives to the cheap, bureaucratic plans that most people get out of as fast they can if they've ever been in one and can afford to escape it. The advantage of a PPO is that it allows people to see a doctor "out of network" if their network doesn't have good care or has long waits. It allows them to call a specialist because they've already had three bouts of kidney stones and don't want to waste their time--and weeks of agony--waiting for their primary care physician to make the inevitable referral--for which they'll have to stand in line again.

Throughout the President's first year in office, many in the chattering class have suggested that the White House is probably doing something right if it's drawing fire from both the right and the left, as it is on health care reform.

From a policy standpoint, that is sophistry. Last I looked, the "golden mean" between the public interest and the interests of the health insurance and pharmaceutical industries was called corruption. FDR didn't stand equidistant between Wall Street and Main Street during the Great Depression.

And from a political standpoint, it is equally sophistical--and disastrous for Democrats--for two reasons.

First, George W. Bush won his first election (or came close, anyway) by appealing to people in the political center. He won his second by bringing out his base. No one has ever won an election by bringing out the other side's base.

You don't win elections by standing equidistant between what is being called the far right and the far left. You win elections by standing for something--a set of principles that voters clearly understand, strike them as sensible, and can either accept or reject.

But the second reason this new tax would be disastrous from a political standpoint is that it isn't drawing fire primarily from the right or the left (although the left isn't fond of it). It's drawing fire from the center. And if Democrats enact this new tax on working and middle class Americans, they will spend years once again on the outside looking in.

There's a reason labor leaders like President Richard Trumka of the AFL-CIO are warning the President that if he goes this route, he won't be able to convince his members that the President or his party have their interests at heart. It's not just that they gave up wages for benefits and now they're losing those benefits, which they would be. It's that they've spent a decade getting outsourced, downsized, laid off, and undercut, and they're tired of seeing their interests sold out to big business. Working and middle class Americans have had enough of this kind of medicine.

The "Cadillac tax" is a bad idea, both as policy and as politics, for one simple reason: because it isn't a Cadillac tax at all. It's a Taurus tax. Quality health insurance plans that give people genuine choices are not a luxury for the rich (although most people who can afford them elect them when given the chance--which perhaps should tell us something). They are the plans business owners and university benefits officers choose for themselves if their organizations can afford it, and they are the plans workers negotiate if they have a union behind them. Why? Because Americans want choice, and they want good care, and the only way to get good care is to be able to choose where you go for that care. And that's precisely what this tax is designed to take away.

On that point the White House is clear. Last Sunday on This Week, Christina Romer, one of the President's chief economists (and probably his best spokesperson other than his affable press secretary, Robert Gibbs), explained the President's position this way: "[T]he president has said that he thinks that this excise tax on Cadillac plans is important. He's been convinced by experts across the ideological spectrum that say this is one of those things that genuinely slows the growth rate of costs, and anybody that's worried about the budget deficit knows that we've got to -- to do that."

Of course, we could cut costs any number of ways. We could, for example, allow Americans to reimport drugs from Canada. We could make insurance companies compete with a plan they don't control.

But the way the Taurus Tax cuts costs is by eliminating choice. If we tax high-quality health plans, insurance companies and employers won't offer them. We'll effectively have a single-payer system--except that the single payer will be the health insurance monopoly. If you currently have two options at your workplace, you'll have one. And you'd better hope that whoever sets the minimum standards for what health insurance plans can and can't do is insulated from the health insurance industry--and that Republicans never gain power again and appoint the regulators, because last I looked, they weren't so big on regulation.

The irony is that the whole health care debate began with two simple premises and two simple promises. The first was that the key to quality care and cost-containment is choice and competition. If you don't like the insurance you have now or you don't have access to affordable insurance, health reform was supposed to offer you a range of new choices. Under the proposed plan if you have no insurance you'll be able to buy it on an exchange if the Democrats get re-elected twice before 2013, and if you have employer-based insurance and don't like it, tough break. Choice is now for people who have no other place to turn. The second was that if you like your doctor or your current insurance, no one is going to take it away from you. Oops.

The regulatory reforms the President has championed and both the House and Senate bills offer are sound policy. Someday (whenever they take effect), pre-existing conditions will be a thing of the past. That will be a good thing. But at this point, not even Republicans would dare vote against a simple regulatory bill on health insurance. The question is who should pay for insurance for the forty-plus million people who can't afford it.

President Obama promised that there would be no middle class tax hikes on his watch. Apparently he's changed his mind. Hopefully he'll change it back. There would no better way to alienate the middle class in the midst of a severe recession than to raise their taxes while cutting the quality of their health care.