Today on As Health Care Reform Turns, we are treated to yet more musings of MIT economist Jonathan Gruber. This is the same fellow who analyzed the proposals currently before Congress and decided people would, on the whole, benefit under the HCR bill as we know it. He has also tackled the question of mandates.
Today's musings, though, are on a subject more near and dear to my heart, since it underscores points I've been making here and there regarding the tax on "Cadillac" insurance plans: it's much less a tax than it is the end of a tax subsidy.
Gruber starts off with this food for thought regarding the tax:
The Senate assessment on high-cost insurance plans has much to recommend it, which is why it is almost universally favored by health policy experts. It would reduce the incentives for employers to provide excessively generous insurance, leading to more cost-conscious use of health care and, ultimately, lower spending. In other words, it "bends the curve." It would also be progressive, in that it would take from those with the most generous insurance to finance the expansion of coverage to those without insurance.
Then he gets into some more detailed analysis, supporting his arguments way better than I ever did:
The assessment proposed in the Senate is not a new tax; it is the elimination of an existing tax break that is provided to exactly these firms. Under current law, if workers are paid in wages, they are taxed on those wages. But if they receive the same amount of compensation in the form of health insurance, they are not taxed. As a result, the tax code has for years provided a large subsidy to the most expensive health plans -- at a cost to the U.S. taxpayer of more than $250 billion a year. To put this in proportion, the cost of this tax subsidy to employer-sponsored insurance is more than twice what it will cost to provide universal health coverage to our citizens.
The tax bias already exists; this "excise tax" would eliminate it by partially ending the subsidy to excessive insurance plans, of which Gruber says:
Taxpayers are literally sending twice as much money to the second firm [with a very generous Cadillac plan] simply because its insurance is more expensive -- regardless of the reason.
The main point, though, is that this excise tax is a funding mechanism; I really think that gets overlooked in a visceral reaction to the notion of a new tax. We all say we'd be happy to pay additional taxes for coverage. We all say that it's perfectly reasonable to tax those who won't miss it as much to level the playing field for those who have so little. And as Gruber points out, the bill does just that -- funds basics off the back of excesses. It is progressive, despite being a tax. Unless it suddenly became impossible to have a progressive tax and I just missed the memo.
Whatever your thoughts on the excise tax, I hope we can all agree to keep hounding our congresscritters for the best bill possible!
Keep up the pressure on leadership and conferees to wrangle whatever improvements we can get.
Please keep calling Olympia Snowe (I know...I know...believe me). Remind her that history is indeed calling and she really needs to answer the damn phone. If we can get her on board, we can tell Nelson and Stupak to take their woman-hating claptrap and stuff it. Her pet idea of a triggered public option might even be better than what the bill currently contains. Encourage her to reclaim her chance to influence this legislation.
And please join me in my Quixotic quest of calling senator Voinovich. He is retiring and will no longer have use for street cred among the GOP. Appeal to his sense of legacy.
; P
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