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More Problems Than Solutions
Taxing "Cadillac" health insurance creates more problems than solutions.
Let's follow the "rationale":
--The president says that runaway health-care costs are destroying American businesses.
-- Some American businesses offer health insurance with high benefits. Presumably, this approach has a sound business rationale in recruiting and retaining the workforce.
--Despite "free market" economics, the government taxes these benefits. This action will then provide revenue as well as disincentives to these "Cadillac" plans.
There are many problems with this proposal:
1. It is inequitable. Retiree benefits earned over decades could be savaged by high taxes. Americans with self-funded insurance plans would have the same vulnerability.
2. It will not reduce health-care costs. The generous plans are not the problem. Among the many factors driving up cost are: poor consumer price sensitivity; no curb on technology or pharmaceutical costs; no incentives for providers to practice cost-effective care. Medicare is not a "Cadillac" insurance plan and yet its costs are running out of sight.
3. High-benefit plans are self-correcting. With global competition and escalating medical costs, such benefits are disappearing. The auto companies and their unions were the first victims and municipalities with their rich benefits will be next.
4. What is the real goal? If the "Cadillac" plans are taxed, why not tax all the other plans? Most health insurance exists because of employer tax advantages. Is this proposal a signal that this tax advantage will end? Or is this just an expedient way to secure revenue?
Americans want health-care reform with understandable solutions. If we must raise taxes to provide appropriate health care, let's not disguise that reality with proposals like this.
By
Mark Kelley
|
September 21, 2009; 9:39 PM ET
| Category:
Health Care Reform
,
Taxes
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Posted by: zosima | September 23, 2009 3:07 AM
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Let's just sign over our paychecks to His Royal Highness. Then, we can go to the White House with our begging bowl and ask, as we bow low and kiss his feet, that we just need a little bit so we can eat. We all know that His Royal Highness has all the answers and knows what is best for us! After all, he has been telling us that now of months.
I can hardly wait to sign over my next paycheck. Just seeing His Royal Highness eyes light up when he sees that I gave my all, will be reward enough.
Posted by: PalmSpringsGirl | September 22, 2009 6:26 PM
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Four wrongs don't make you right.
Your point #1 is just wrong. No one is proposing a tax on benefits already paid for. I'm willing to bet you can't articulate a clear story how this would retroactively "savage" retiree benefits that are contractually agreed upon .(p.s That said, I'll admit it is inequitable in the same sense that a progressive tax system is inequitable.(ie in a fair and just way)
Your point #2 is almost certainly wrong. (At least the CBO thinks so.)
Generally, what makes a plan a 'Cadillac' is the guarantee of 100% or near 100% compensation for the cost of medical procedures, hospital stays, and diagnostic tests.
This is a broken incentive. If consumers end up with plans where they have to pay a reasonable percentage of the cost, they'll be much less likely to get unnecessary procedures. (This is much like Medicare/Medicaid, actually, where the people receiving benefits aren't actually paying much for them. )
Your point #3 is beside the point. They are self correcting over scales of twenty to fifty years. Union industries like automobiles are failing today because of bad promises on health benefits made by their fathers. A functional system needs feedback to be more immediate, because business just doesn't plan for a half century in the future.
I'll answer your #4. Incremental reform, a small step in the correct direction. Yes, a Wyden style proposal is closer to ideal, but conservatives are trying their darnedest to make it improbably that more sweeping reforms will be successful.