Imposing a 40% excise tax on relatively high-cost, “Cadillac” health plans might be fairly effective at holding down health care spending, a government forecaster says.
Richard Foster, chief actuary for the Centers of Medicare and Medicaid Services, includes a discussion of the Cadillac plan tax in an estimate of the financial effects of H.R. 3590, the Patient Protection and Affordable Care Act bill.
The bill, created by Senate Majority Leader Harry Reid, D-Nev., would add new health insurance purchase subsidies for small businesses and low- and moderate-income individuals; create a health insurance exchange purchasing system; impose penalties on some individuals who fail to buy coverage and many employers that fail to offer coverage; restrict the growth of spending on Medicare Advantage programs; establish a new long term care insurance system; impose underwriting and pricing restrictions on private health insurers; and enact changes meant to increase the quality and affordability of health care, such as new health information technology, medical worker education and comparative effectiveness research programs.
The CMS actuaries looked at the original version of the bill introduced in November, and not a Democratic alternative version now being reviewed by the Congressional Budget Office.
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Foster estimates the provisions of the bill that his team studied would increase federal costs by about $366 billion from 2010 to 2019, with the annual costs increasing from $16 billion in 2010 to $71 billion in 2019.
Foster repeated an earlier assertion that the Community Living Assistance Services and Supports Act section of the bill, the section that would create a voluntary worksite LTC benefits program, appears to be flawed.
“We believe that there is a very serious risk that the program, as currently specified, would not be sustainable, because of adverse selection,” Foster writes in a report on CMS actuaries’ findings.
The initial take-up rate for the CLASS Act LTC insurance program probably would be just 2%, compared with 4% for comparable private LTC benefits programs, in part because of a relatively high premium for most participants, Foster writes.
Only the sickest participants who could not get private coverage would be likely to stick with such an expensive program, Foster writes.