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Richard (RJ) Eskow

Richard (RJ) Eskow

Posted: December 10, 2009 04:29 PM

Blowback: New Evidence The Health Tax Is Unfair, Unwise ... and Could Be Political Suicide

What's Your Reaction:

First they came for the Cadillac plans and I didn't speak out, because I don't have a Cadillac ...

A flood of new information has been released in the last several days which demonstrates that the proposed excise tax on high-cost employer health plans is unfair, won't accomplish its purported goals, and -- perhaps more importantly for the legislators who will be voting on it -- is wildly unpopular among voters. Can you imagine the political ads we'll see in 2010 if this thing passes?

Let's dispense with the idea that this tax only affects a few rich, so-called "Cadillac" benefits. First we were told that the tax targeted luxury "executive" plans -- presumably the kind that rich CEOs have, with no-wait "concierge medicine" and lots of other perks. Then we were told that lavish union benefits were the problem, conjuring images of a blue-collar worker somewhere enjoying a free massage while Deepak Chopra whispers meditation instructions in their ear.(1)

But the fact is that most people in costlier-than-average plans are in them because they or their fellow employees are sicker than average, or because of other factors they can't change. That was demonstrated by a comprehensive review of employer benefits published this week in the respected journal Health Affairs. The study found that only a tiny portion of the difference between a costlier plan and a less-costly one (3.7%) can be explained by benefit design.The authors concluded that "a simple cap" on cost, like the one in the excise tax, "may exacerbate rather than ameliorate current inequities."

In plainer language, that means the excise tax will make things less fair than what we have today. (We discuss the the report here.)

Then they came for the Buick plans and I didn't speak out, because I don't have a Buick ...

But this plan will affect other people's health coverage, not mine - right? Wrong. The Mercer consulting firm surveyed 3,000 employers and found that 19% of all health plans would be affected the first year the tax goes into effect (three years earlier than the CBO predicted). And since larger plans will be affected more than smaller ones (they tend to have more coverage), it's wrong to say that "one employee in five will be affected." It's actually more than that.

What will employers do? 75% of them will make employees bear more out-of-pocket medical costs, according to another Mercer survey. Others will just raise the employee share of premiums to cover the tax.

If more than one person in five with health insurance will be affected, we're not talking about a few "Cadillacs". That's a lot of people - tens of millions of them. And more will be affected every year, since the cap is set to rise much more slowly than the skyrocketing cost of health insurance.

The silver lining, according to many economists who support the tax, is that employers will then take the money they're not spending on health care and give it to their workers as wages. That's also probably wrong. In another Mercer survey of employers, only 16% said they would raise wages if they cut benefits as a result of the excise tax, while another 65% said they were "unlikely" or "very unlikely" to do so.

Besides higher out-of-pocket costs for medical care, plans that help employees pay for dental and vision care could also be hard-hit.

Then they came for the old-VW-bug plans and I didn't speak out, because I don't have a an old VW bug ...

What about the politics of the excise tax? A new poll released today showed that lawmakers who vote for a bill that includes this tax could face serious blowback in the 2010 elections, particularly in the ten battleground states surveyed. 70% of respondents said they opposed the tax, and 63% said they were less likely to vote for President Obama or their Representatives in the Senate and Congress if they support the tax.

Can you imagine the TV ads that will run in 2010 if this excise tax passes?

ANNOUNCER: Did you know that (Your Name Here) voted to tax working Americans for their healthcare ... in the middle of the worst recession we've had in years?

WORKER #1 (male): We were just barely making ends meet as it is.

WORKER #2 (female): I had to take a second job.

CHILD (offscreen): Mommy, Daddy ... my tooth hurts!

And when they came for my health care, there was nobody to speak for me ... because they were all sick.

There is conclusive new evidence that this tax will cost people money, affect people unfairly, fail to meet its policy objectives, and carry severe political penalties for those who support it. So why is it still in the bill?
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(1)We used the "massage and Deepak Chopra" imagery in another post (we recycle imagery to protect the environment) and received the comment, "We should tax any benefits that involve people getting massages while listening to Deepak Chopra tapes." (Actually I meant the real guy, the doctor, in person.)

Someone replied, "Nah, go right to the source of the trouble: Tax Deepak Chopra!" Sorry, Dr. D: The people have spoken.


RJ Eskow blogs when he can at:

A Night Light
The Sentinel Effect: Healthcare Blog

He is currently conducting a blog effort at Campaign For America's Future to stop the middle-class health tax.

Website: Eskow and Associates

 

Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow