In their latest attack on ObamaCare, congressional Republicans are targeting their repeal efforts on the so-called “Cadillac tax.”
What’s that, you ask?
Well, it has nothing to do with Cadillacs, except metaphorically. Right now, Americans aren’t taxed on the amount that their employers spend to give them health insurance — it’s treated as tax-free earned income, so to speak. But beginning in 2018, that would change for those who enjoy the more expensive health-insurance policies on the market.
Here’s how it works:
In general, if you and your employer spend less than $10,800 on individual health-care coverage, or less than $27,500 to buy family coverage, the benefit would still be tax-free. However, any amount spent above those ceilings would become taxable.
That is designed to achieve two goals. One is to raise revenue needed to help offset other ObamaCare costs. But perhaps more importantly, the tax is designed to discourage employers from offering gold-plated health-care plans that require no co-payments or have low or no deductibles.
According to health-care experts on both the right and left, such plans encourage people to overuse the health-care system. If you require co-pays and deductibles for things other than annual physicals and basic tests, etc., people will be a little more thoughtful about going to the doctor, usage will drop, costs will drop, etc. In conserva-speak, the approach “enlists market forces” to lower costs and make consumers more responsible.
But congressional Republicans aren’t buying it. They don’t like it, and they want to repeal it.**
“We’ve wanted to repeal it since it was passed. We’re all ready,” House Budget Chairman Tom Price, R-Ga., told National Journal. “All the taxes in Obamacare are destructive, so anything we can do in the direction of repealing is a wise idea.”
But here’s where it gets interesting:
Earlier this month, Price introduced the latest version of his “Empowering Patients First Act”, which he bills as a conservative replacement for ObamaCare. I may come back later with a more comprehensive analysis of the bill, particularly if it gains any traction, but for now I’d like to point your attention to Section 131.
Here’s how it is described in an analysis that was posted by Price’s own office:
“Sec. 131. Limitation on Employer-Provided Health Care Coverage
- Allows for the employer exclusion of health care coverage up to $20,000 for a family and $8,000 for an individual, with any additional funds used to be taxable dollars.”
Translated into English, Price’s plan would impose the very same “Cadillac Tax” approach that he condemns as “destructive” in ObamaCare and is trying to repeal. Under his own bill, as described by his own office, any amount spent on health insurance above $8,000 for an individual and $20,000 for a family would be taxable as income.
Yes, the details are slightly different. Price’s approach kicks in earlier — 2016 instead of 2018 — and sets a lower dollar amount than under ObamaCare, which means a lot more middle-class Americans would pay the tax. Overall, according to a quite-friendly analysis of the Price plan by a conservative group, his version of the Cadillac tax would raise considerably more revenue ($130 billion by 2023) than the Obama version ($87 billion by 2025).
This is why it’s hard to take conservatives seriously on such matters. They viciously condemn ObamaCare, even though it is a product of conservative think tanks and was long championed by conservative politicians before Obama embraced it. Likewise, they bitterly condemn provisions such as the Cadillac tax, even while they themselves propose legislation that would impose an even more onerous version of that very same tax.
Oh, and it’s now May 20. We are now roughly a month away from the Supreme Court ruling on whether ObamaCare survives in states such as Georgia that refused to establish their own insurance exchanges. Yet I see no sign that Republicans are building a consensus among themselves about how to respond if that happens. I see no sign of leadership, no sign of action, no sign of committee hearings on the Price bill or other proposals. Nothing.
In short, it could be a very interesting summer.
** Labor unions that have negotiated so-called “Cadillac plans” for their membership have lobbied hard for an exception to the tax, both in the 2009 drafting of the bill and later in requesting a waiver from the Obama administration. They have been unsuccessful in both efforts. As a result, some labor-friendly Democrats may also be willing to vote in favor of repealing the tax. That would be extremely foolish, because as Price’s bill makes clear, what comes next would be even worse.