People are saying that the so-called Cadillac tax "might fall flat" and "has real problems." And those are its defenders. I can't remember any new policy in recent history whose own advocates had so many complaints with its design.
Not that we're "Ezra Klein Watch" around here, but Ezra's become the locus and the spokesman for the pro-tax contingent. He's mounted a yeoman's defense, using a broad (if what occasionally seems to be a shifting) array of arguments. Not that all of his points are without merit, by any means. He and other tax proponents have raised compelling arguments that merit serious discussion. Unfortunately, they don't have much to do with this tax.
The debate shifted after studies (by Gabel et al. and the Milliman actuarial firm) showed that "richness of benefits" is not what would place most health plans into the tax. It mainly targets benefits for older, sicker people, those who live in the wrong part of the country, or those in the wrong industry. Then we learned that yes, employers will cut benefits if the tax is passed, but no, workers won't get the money their employers save as wages. Two consulting firms (Towers-Perrin and Mercer) confirmed overwhelmingly that companies intended to keep the money instead.
Sure, reducing overall health costs would free up more money for wages in the future. But nobody's explained how this tax would reduce overall costs. All we know is that these workers, whose coverage would be cut now, would get nothing in return. Meanwhile there would be a lot of unfair suffering - suffering to which the tax's defenders seem uncharacteristically indifferent. "No one should be under the illusion that this tax will not cause some pain," writes Ezra. "Everything has losers."
So if your coverage gets cut because you or your co-workers are too old or too sick, buck up: Everything has losers.
Ezra acknowledged the problems during an online exchange we had recently. "My argument is not that the excise tax is without problems, or sure to work," he said then, "(a)nd I don't deny that (it) might fall flat." But he's still pushing for it.
"The excise tax is a tax that's meant to change behavior," he writes, "much like a cigarette tax." But a cigarette tax taxes cigarettes. This tax doesn't target inappropriate or excessive use of health services. It taxes everything. It's like cutting working families' grocery budget with the rationale that "some of them might buy cigarettes with that money." It's a blunt instrument where we need a scalpel.
A "cigarette tax" approach to benefits would require a national discussion of "basic" vs. "optional" coverage - i.e., is vision coverage obsolete? - or some other creative ideas. Maybe we should tax services that fall outside of accepted medical practice standards, or tax providers if they deviate too often from best practices. (I'm not endorsing these ideas, merely listing some alternatives.)
Ezra also voices an argument I've heard privately from some health economists: "(A)ll employer-based insurance, right now, is exempt from taxes - a regressive and cost-increasing decision that this barely begins to redress. This is a tax that should already exist, and it should exist on every dollar of health benefits, not just every dollar above $23,000."
It's a legitimate point. Our employer-based system is an historical anomaly, one that treats some forms of employee compensation differently from others. That's inherently unfair. But the wage levels we have today are the product of this system, too. They've grown up together with these benefits, like tangled vines. If we were to make a national decision to tax health coverage - an idea that was mocked when Republicans suggested it - we would need to have a well-thought-out transition plan. Otherwise we'd have an enormous de facto wage cut for our already-beleaguered middle class.
If we're not willing or able to do that for the country as a whole, why select a portion of the insured workforce - on a discriminatory basis, no less - and do it to them?
Paul Krugman endorsed the tax - while, like other backers, simultaneously criticizing it: "A flat dollar limit to tax deductibility has real problems. At the very least, the limit should reflect the same factors insurers will be allowed to take into account in setting premiums: age and region." He's right: The Senate bill allows insurers to charge up to three times as much for older people's coverage, but raises the tax's trigger point by only 13% for workers over 55. (Update: And, to clarify, that's for retired workers. An active workforce with a a higher percentage of older employees will still be unfairly hit.)
Prof. Krugman insisted that "the final bill should address the criticisms." Amen. But that would need to go beyond Prof. Krugman's proposed modifications to the tax's design. While they would relieve the most egregious discriminatory effects of the bill, they still wouldn't address the fundamental problem: This tax doesn't target excessive care.
That gets us to the last line of defense: that this tax, however flawed, is a first step toward genuine cost containment. But insurers have always responded to increased expense by shifting costs back to patients - not by getting smarter. Why does anyone think a badly designed tax causing indiscriminate pain will evolve into something better? The most likely outcome is a backlash that makes genuine cost containment impossible for a generation.
There are good proposals, there are bad proposals, and there is the proposal on the table today. The tax's defenders have come up with some interesting ideas - or at least the germ of some interesting ideas. But those ideas aren't the table: this tax is.
It's encouraging to hear the President say he wants to "make this work for working families." It's time for some new thinking about an idea that's already grown old.
Richard Eskow is currently working with the Campaign for America's Future to stop the health excise tax. He blogs at:
No Middle Class Health Tax
A Night Light
The Sentinel Effect: Healthcare Blog
Website: Eskow and Associates
Follow Richard (RJ) Eskow on Twitter:
www.twitter.com/rjeskow
Drew Westen: Why President Obama's 'Taurus Tax' Is the Wrong Medicine
This is where you are wrong sir, this tax taxes the one thing its backers find most innapporiate, private insurance. This tax is meant to force people in to a single payer, universal coverage, government run health care. This is the holy grail, the end state of American liberals.
I am an Ezra Klein and a Krugman reader. I find their thoughts well argued and convincing.
But I always like to hear well reasoned critiques.
What I hear is that we have a method that needs refining.
If not a Cadilac plan, how about a Masarati plan?
But what I really care about is passing even this merely OK bill.
We can tweak it later.
A great indication that we now have more people in the wagon than outside pulling it, where government is concerned.
They're already paying for what they get: they could negotiate for wages or benefits, and they choose benefits to a large extent. The employers (despite what they tell pollsters) don't really care whether the cost of hiring people goes to paychecks or benefits. They just want to minimize the cost while avoiding strikes and retaining employees. So every dollar of employer contribution to health care is, at least to a reasonable approximation, a dollar of pay the workers could have gotten but didn't -- just as though they had paid it themselves. Economic incidence is independent of nominal incidence.
They would lose some ground temporarily, until near-equilibrium is restored. That's what they object to. The tax is there to create incentives, not to pay for health care.
The people whose current plans are directly affected by the tax will benefit along with everyone else.
This bill really is a disaster. It will have to be undone before we get real health care reform.
National HC does not work without a mandate.
EVERY nation that has nationalized HC has a mandate.
As for taxing the middle class to get to health care reform, it is a terrible concept. The American middle class was promised that should we come out and elect Obama there would be no tax increases hitting people making less than $250,000 dollars. This is obviously no longer the case and so it means that unions and non union workers alike should remember that in 2010 and 2012. I know I won't forget it and I have let my elected representatives know it as well.
I am thinking about writing in Ed Schultz or Rachel Maddow at the polls instead.
This excise tax is supposed to change behavior? How absolutely ignorant it is to think they are going to change the behavior of a 25 year old by taxing a 55 year old for their health insurance plan. If someone is over-weight at 55, that's generally a health condition they've wrestled with their entire lives. So you tax them for their indiscretion 30 years later. That's not preventative, that's punitive.
R.J. is right, tax all plans regardless of cost...but at a much lower rate so that it is not so punitive.
Kill this bill. Now.
But this isn't it. This taxes the middle class and hands it over to the insurance industry.
I apologize for the mixed up anomalies, er analogies. Dem chess masters, Americans on the hook----what was I thinking!
If the Dems are master chess players...I'm the Queen of England.
Stop this madness before it goes any further !!
And then those who recieve the money from the tax can use it to buy their own health insurance, but if they buy a plan that cost more than 23 K per yr., say they have a pre-existing condition and the least expensive plan they can buy cost 40 K (there is no limit put on what insurance co.s can charge for plans that cover pre-existing conditions), then they themselves will have to pay a 40% tax on the extra 17 K they have to spend on the plan that covers their pre-existing condition, which comes to an extra 6,800 dollars. Is that about right?
Gee...maybe we should just forget about this whole god d@mn stinking mess of a so called healthcare plan and let it die a needful death.
It is mostly just an attempt to reign in wasteful spending and undo demand on healthcare which is a common with these types of plans.
Lambourghini plans.
That is well known.
The problem is how to get our government to make it law.
Got anything that will work?
1. A national health CARE program (which is sacrilege to speak of in America, unfortunately).
2. A national health INSURANCE program (single payer or public option).
3. Keep things the way they are until we get a truly progressive government, which would at least allow some people the coping methods they've already developed, while getting more and more people to realize how truly bad their insurance is so they won't be hoo-dooed by right-wing media blitz.
Instead we will get the Senate bill, with the worst parts of the House bills tacked onto it, which the insurance companies could have written - a total disaster designed to satisfy Beltway 'conventional wisdom' without actually affecting any major federal change (thus dumping most of the real costs onto states and the people).
This is the end of the Democratic Party; and since we already know that the Republicans can't govern without destroying America, this may be a sign of our endtimes. This is a left-center country governed by a right-center elite, this disparity making it impossible to promote the general welfare or common good of the people.Our claim to 'world leadership' now rests entirely on our massive military machine, and even that is now getting drawn that out beyond the capacity of our resources.
We're a banana republic, not a democracy.