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Life Health > Health Insurance > Health Insurance

Budget Hawks: Increase The Cadillac Plan Tax

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To make health reform fiscally sound, Congress should give Medicare cost-cutters sharp scissors and raise a proposed tax on high-cost health benefits packages.

The Concord Coalition, Arlington, Va., a group of Democrats and Republicans who want to reduce the size of the U.S. budget deficit, has published those recommendations in a commentary on the major House health bill, H.R. 3962, and the major Senate health bill, H.R. 3590.

In 2019, when the programs proposed by each bill would be up and running, the House bill would spend $207 billion per year on coverage expansion, and the Senate bill would spend $199 billion, the coalition says.

Bringing uninsured people into an unreformed, unsustainable health finance system could make the situation worse, and there is no guarantee that Congress could offset the proposed spending increases by making proposed cuts in Medicare and Medicare Advantage funding stick, the coalition says.

But doing nothing would be irresponsible, because “virtually all analysts and policymakers, regardless of ideology or partisan affiliation, agree that national health care costs are on an unsustainable track,” the coalition says.

The coalition says the best solution would be to let the cost controls in the health bills take effect, then see if the cost controls worked before expanding coverage.

“Expanding coverage first means adding more than 30 million people to a system that is not assured of improving value or outcomes and is fiscally unsustainable already,” the coalition says.

If policymakers have to stick to working with the bills already approved, then, according to the coalition, policymakers should:

- Kill off the proposed Community Living Assistance Services Support long term care benefits program. (The coalition believes the proposed program to be unsustainable.)

- Strengthen the Independent Payment Advisory Board proposed in the Senate version of the bill. The board would make binding recommendations on reducing Medicare spending and could make non-binding recommendations on reducing other health care spending.

- Expand the “Cadillac plan” excise tax provision in the Senate health bill. The Cadillac plan provision would make insurers pay a 40% excise tax on high-cost health coverage.

“The biggest problem with the Senate’s proposed excise tax is probably that it is not large enough or comprehensive enough,” the coalition says. “Health care economists on either side of the partisan divide have often argued that the tax-free nature of employer-provided health insurance drains federal revenues and encourages higher spending on health care.”

Imposing the excise tax directly on the individuals with the high-cost coverage, rather than the insurers “would be more transparent and also more easily targeted to households at certain income levels or with certain characteristics,” the coalition says.


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