03/18/2010 05:12 am ET Updated May 25, 2011

'Cadillac Tax' Debate Shows We Don't Understand the Problem

The effort to expand health care coverage by enacting a so-called "Cadillac Plan Tax" is in some aspects contradictory. While such effort enables greater access to care for some, it effectively limits access through taxation for others. These measures are not quite in the same continuum.

The "Cadillac Tax" is, logically, a progressive tax, never mind that it is regressive in a practical sense. The expansion of health care coverage through a government mandate is both progressive and regressive, depending on where the most people fall in terms of qualification for subsidy. But both make the same chronic misinterpretation of the underlying problem.

The problem is not the consumption of healthcare. Some aspect of consumption is consistently and wrongly blamed for the cost of it to society. The "Cadillac Tax" and expanding access through a mandate intersect in the dimension of consumption with the overworked notion that expanding access will reduce costs through prevention. If expanding health care access for more people will reduce costs to society, then how does reducing access for some help with the objective of reducing overall healthcare costs?

The salient and utterly ignored point about this is that the nations in which health care is "free", paid indirectly and uniformly by all, still spend half of what we do on health care. How then, if care is "free" for the asking and still cheaper under other systems than ours, can reducing consumption, either through taxation or, ironically, expansion of coverage, be a consideration in calculating means by which we may reduce societal costs?

We are enmeshed in a system that has reached a maturity in disgraceful exploitation such that it is far too late to do anything incremental about it, as is now being attempted. Estimates of cost savings from prevention are pixie dust layered on wishful thinking by self help gurus, and then exploited by interests vested in obscuring the real source of the medical cost explosion. Prevention will never come close to reducing the cost of American health care to that which is enjoyed in the more fiscally sober societies of Europe with their single payer variant systems.

If prevention is a remedy for escalating costs, then how is curtailing the best possible prevention, out of pocket cost free access, consistent with promoting prevention as a cost containment? It makes no sense except for as yet another rotting red herring heaped on the health care miasma.

"Cadillac Plans" are paid for by private interests and are no burden on society except in the sense that they are a capitulation to the voracious appetite of the health care industry for "profit". They are partially subsidized by tax writeoffs. Had the monetary benefit of them been in cash instead of the indirect benefit of a higher level of health care access, the costs to a company providing them would be the same, but the tax bill of the employees receiving that cash would be higher. If an employee in a high paying union job that commanded the benefit of a "Cadillac Plan" received an extra $8,000 a year instead of a "Cadillac Plan," his/her taxes might be $3,000 more. So it is closing a tax loophole on labor and not industry, and a laborers' hand is the hand into which we most desperately need to put money in a "Great Recession."

To evade examination, the medical establishment has produced a multitude of red herrings. They are things like the poor relying on the ER for primary care, the common state mandate that hospitals must treat the indigent, the burden of medical records and billing, the cost of facilities, the cost of personnel and any other reasonable sounding thing they could think of to hide the fact that they are a cabal, a new health barony bent on breaking any American unfortunate enough to come through their doors with some money.

A hospital building costs about $25 a square foot. A functional hospital room and the attendant support for that bed, treatment facilities and surgeries, once accounted for, somehow result in a convenient industry rule of thumb of about $1 million per bed. Hospitals charge out a bed for about $1 thousand a day. Any way you cut it, the building can be amortized in 1000 days of occupation discounting occupational and service overhead. The highest recurring cost in U.S. hospital is nursing, everything else is near zero cost for labor and the equipment cost is amortized at some unknown rate. Hospitals average about 1 nurse per 5 patients, so 24 hrs times $50/hr (burden rate) times .20 = $240/day for nursing per bed. Guess at attendant costs (real and not exploited) equaling another $240 a day and you can still completely amortize a $1 million dollar hospital "bed" in about 6 years. Then, of course, you must analyze why a $25/square foot for a 10'x16' room does not equal $4000 instead of $1 million. Conclusion, the building is free, the nursing is 25%, and the true cost has to do with equipment and other mystery overhead, probably much of it in the cost of mergers and acquisitions. Mergers and acquisitions in health care are undertaken for exactly the same reason they are in for profit business, to increase profitability, either through efficiencies of concentration of labor or in order to consolidate markets in order to fix pricing. There has been a bonanza in merger and acquisition activity in hospitals and other providers for a decade. If it all had been for efficiency, the cost of health care should be lower, not higher.

This fish stinks to the heavens, and it seems that heaven is the only power that is formidable enough to take on a system so corrupted by the false countenance of good doing that they can pretend, in bald face, to uphold the oath of a profession that proscribes harm to patients. A misplaced cut or a missing suture are accidents, but one billing specialist per hospital bed is not and is, or should be, foresworn.

The courts and legislatures acknowledge this, that modern "piecework" medicine is nearly impossible to account for by reason of its complexity. This invites corruption in detail in proportion to its ever growing complexity. Medicare, for instance, averages the costs "caused" by a particular patient across a spectrum of non Medicare patients in order to address the solvency of a hospital, buying in, as it were, to the whole expanse of excuses for ridiculous charges like a $7 aspirin. Private insurance is, if anything, even more corruptible as they have not incentive whatsoever to contain costs, being co-governed by the medical business ruling elite. And the elite of the business carefully calculate that prices can go up as long as there are those sufficiently rich to pay. This is the one argument for taxing the "Cadillac Plans".

In short though, taxing the health benefits of a few tens of thousands of union workers is nonsensical given the overriding objective of the health care reform, that of increasing access. All as if increasing access were a solution absent controlling costs. But more seriously, the whole pathetic discussion on health care misses the mark by a country mile. It is neither the union workers nor insurers that are responsible, in the most, for the increase of health care cost. Its the summation of ten thousand cuts, from every supplier or vendor or hospital board member, from the pie that we must all purchase. It all culminates in exploiting you over the hospital bed that you, I and every other American will occupy in some future of our utmost vulnerability.

Not to take the side of those that would refrain from trying to reform it all, but it is hugely complex. It is complex in sourcing and in accounting. However its very complexity reflects the recalcitrance of an enterprise bent on hiding rather than revealing any truth. It is an irony that the clever minds that created this hurricane of economic destructive power, and fit it with the sheep's clothing of health care, cannot see the cataclysm that it portends for the America that indulges them to do such a thing. You would think there would be some that would seek redemption for responsibility in creating the loathsome criminal enterprise that it has become.