I’ll dive right in, with the stipulation that this blog is initial reaction in a very fluid, unprecedented and soon-to-be even-more-intense political environment.Fasten your seat belts!
The ACA.Replace is the critical word in “repeal and replace.”Consensus is already emerging that Trump and the Republicans will indeed repeal the ACA in early 2017, via the reconciliation process Congress used earlier this year.That resulted in the Senate’s first an only full ACA repeal vote.Obama vetoed the bill, of course. But Republicans demonstrated the do-ability of the reconciliation process. Lacking 60 votes in the Senate, they’ll very likely try repeal again that way.Continue reading…
Beginning in 2018, high-cost, private sector health plans will be subject to a special levy, popularly known as the “Cadillac plan” tax. Under a provision of the Affordable Care Act, health plans must pay a tax equal to 40 percent of each employee’s health benefits to the extent they exceed $10,200 for individual coverage and $27,500 for family coverage
In many ways, the Cadillac Plan tax is a stealth tax. It doesn’t even become effective until eight years after the Affordable Care Act passed Congress. And back in 2008, the thresholds were so high that it must have seemed like the tax would apply only to a handful of employers. But health care inflation has a way of escalating base line costs through time.
So much so that a Kaiser Family Foundation study estimates that the first year it is applicable, one in four employers will be subject to the Cadillac plan tax unless they change their benefits. Going forward, the thresholds are indexed to the rate of general inflation – which historically is well below the rate of medical cost inflation. As a result, the study estimates that the share of employers potentially affected could grow to 30 percent by 2023 and 42 percent by 2028.
“You think healthcare is expensive now? Wait until it is for free…” PJ O’Rourke
In early 2011, The Boston Globe shared the findings of a 20-page report from the Boston Foundation and Massachusetts Taxpayers Foundation, a report that somberly concluded that cities and towns must substantially increase the amounts their employees are required to pay in out-of-pocket expenses for services and to significantly increase their deductibles. Jeffrey D. Nutting, Franklin, MA. town manager, complained his town was still facing costs that wildly outpaced declining tax revenues or even the CPI. “Every dollar we spend on health care insurance is a dollar we don’t spend on jobs,’’ he said. “This is all about saving jobs. When insurance costs go up I have cut police, firefighters, or teachers.’’
Nutting said about 10 percent of the town’s $88 million budget now goes to health care costs, and he was facing a double-digit increase for next year. That was 2011.
In 2014, the healthcare conundrum is worsening. Despite the passage of the Affordable Care Act, the average per capita cost to provide health benefits for public employees is averaging as much as $ 20,000 per worker. This is almost twice the national average of most health plans – even higher than private sector bargained plans. The mounting evidence is irrefutable – low co-pay plans with maximum amounts of reimbursement do little to improve health or mitigate chronic illness — and often times lead to overconsumption of services, poor consumerism and limited accountability for personal responsibility around healthcare.Continue reading…
Beholding David H. Howard’s rendering of the crazy-quilt of financial sources that have been tapped by the designers of the Affordable Care Act of 2010 (hereafter ACA ’10) to finance the new entitlements they put in place – a little nuisance tax here, a little nuisance cut in other federal spending there – reminds me once more of the sincere, indeed touching, naiveté with which Democrats tend to go about enacting new entitlements.
It is a totally counterproductive and inelegant approach. To be sure, none of the added taxes or spending cuts in the bill seriously disrupt anyone; but they do spread a little pain all around. Therefore, it seems almost deliberately designed to maximize opposition to it from many quarters.
It also leads to acute embarrassments, such as having to postpone by a year (and perhaps more years) the unseemly penalty imposed on employers with 50 or more employees each working 40 your or more etc etc, even at the appearance of having broken the law – or so we are told.
Welcome, students, to our special combined 9th grade math and civics class. Today, we’re going to look at the “Cadillac tax” in the Affordable Care Act.
Yes, Mitt, you have a question already? No, no, “Cadillac tax” is just an expression. No one is going to tax your family’s cars, Mitt, I promise.
Paul, you also have a question? I’m sorry, Paul, but if you had done the reading, you would know that the “Affordable Care Act” and “Obamacare” are the same thing. And yes, it is still the law, as I must have told you and your friends 40 times. Now can we get on with the class?
As those of you who did do the reading know, most American workers get their health insurance through their employer. The company, in turn, is allowed to deduct the cost of that insurance from its taxes. If the insurance for workers is very generous, it can encourage people to use too much medical care. This not only drives up costs, but we all pay for it a second time through the tax code. The Affordable Care Act addresses that problem by placing an excise tax on rich benefit plans starting in 2018, which is informally known as the “Cadillac tax.”
Economists of all viewpoints generally agree that an open-ended tax deduction for health insurance encourages overconsumption. What do we call that kind of agreement? Michelle?
No, Michelle, I’m afraid, “liberal conspiracy” is not the answer I was looking for. “Bipartisan consensus” was the correct response.
Rand, you seem quite agitated. Yes? “Government intervention in markets is never the right answer.” OK. Well, Rand, let’s talk about that another time and move on from civics to the mathematics part of today’s lesson. We’ll start with a word problem from the New York Times.
The Times quoted a study from a health policy journal as saying that 75 percent of health plans could be affected by the Cadillac tax over the next decade. That’s a big number, isn’t it? And the tax itself is 40 percent – another big number. No wonder the story was on the first page of the Business section.
But here are a few other numbers from the same study: just 16 percent of plans are likely be affected by the tax when it starts in 2018 – a much smaller number. And the “next decade” the study is talking about starts in 2018. What the study actually says is that by 2029 the tax could reduce benefits for affected plans by 3.1 percent. That’s an even smaller number and even further away.
Class, why would the New York Times emphasize the biggest numbers they could find?