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ACA Agonistes
Will Democrats Sink the ACA?

Among Democrats, there’s at least one part of the ACA that’s unpopular: the law’s so-called Cadillac tax. This provision, which is supposed to take effect in 2018, taxes plans offered by employers that pass a certain threshold: individual plans that cost over $10,200 annually or family plans that exceed $27,500. The total amount that a company pays over those thresholds for is taxed at 40 percent. Hillary Clinton—as well as some unions—have come out against this tax.

In Bloomberg, Peter Orszag, a former director of the Office of Management and Budget, argues that this Democratic opposition to tax is the “biggest legislative threat the Affordable Care Act has faced in the past five years.” More:

The health legislation was built on three pillars: It was to expand insurance coverage to more Americans, have at least a neutral effect on the U.S. deficit, and contain health-care costs […]

The Cadillac tax, which is to be imposed on high-cost employer-sponsored health insurance plans beginning in 2018, reinforces the ACA’s second and third pillars. In 2025, it is expected to generate more than $20 billion in revenue — or about 15 percent of the net budget cost of expanding coverage that year […]

By encouraging employers to avoid high-cost plans, the tax encourages them to find insurance of better value for their employees, and it helps offset some of the excessive spending that economists attribute to the longstanding tax preference for employer-provided insurance. The Congressional Research Service has estimated that, by 2024, the tax would reduce health spending by $40 billion to $60 billion.

Why are Democrats opposing it, then? Orszag argues that the opposition springs from short-term thinking. In the immediate future, the tax could result in more health care costs being shifted directly on to the worker (there are other concerns, too). But Orszag thinks that will eventually pass, and in the long term, the total cost of health care will come down thanks to the tax.

It would be deeply ironic if a Democratic initiative were to so deeply undermine the ACA. We don’t know whether Orszag is correct that the tax would successfully bring down costs, nor do we know whether eliminating the tax will sink the law. It’s certainly true, at the very least, that Democrats would need a clear way to make up the revenue lost by the tax, and the debate over the best place to find that money would likely be contentious. And, of course, it’s by no means guaranteed that those Democrats who oppose the tax will manage to undo it, even were Clinton to become President.

But regardless of how that all shakes out, this story shows that a big and controversial provision of the ACA has yet to implemented, and that stakes around its implementation are high. The debate over the ACA—no less over American health care as a whole—isn’t over. By a long shot.

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  • Andrew Allison

    It would be extremely foolish for Democrats to introduce legislation amending ACA in a Republican-controlled Congress. Can you imagine the additional amendments. As an aside, doesn’t the reasoning that a tax on “Cadillac” plans will reduce healthcare costs argue for taxing all employer-provided plans, i.e., eliminating the tax deduction altogether? At the end of the day, those who are insured through employers are receiving tax-free compensation.

    • CosmotKat

      The Democrats were foolish to bring this excrement into law. start there and then perhaps we can find a workable solution for everyone. Single-payer by the way is not it.

      • Andrew Allison

        As you are probably aware I (along with all the other OECD countries) think that single-payer (NOT single-provider) is the only way to go. It solves the “Cadillac” employer tax subsidy and risk pool problems, among other, at a stroke.

        • Jim__L

          Everyone else (other OECD contries) are jumping off a bridge demographically because their tax, social, and business regulations are destroying families.

          We should not look to these fools for solutions.

        • CosmotKat

          Following WWII the OECD nations were all in dire economic straits and in the grip of socialism. The move to single-payer was drive by left wing politics, not well thought, rational, and effective policies. All nations are, like our social programs, faced with exponentially rising cost, declining incomes and stagnant economic growth and inability to provide reliable, cost effective and advanced medicine without resorting to rationing and raising even more taxes to pay for them. You are delusional if you think single-payer makes any sense at all.

        • Dale Fayda

          The First World’s experimentation with Social Democracy is exploding into its face with the force of the nuclear bombs Iran will soon have, thanks to our Dear Leader. Demographically, economically, fiscally, socially, culturally they’re all in various stages of implosion – some more, some less, but they’re all waning, not waxing. Fact.

          Single payer, single provider – tomato, tomato (with the stress on the “a’). It’s all government-controlled healthcare and there is no way to make it “work”, regardless of who runs it – Democrats, Republicans, anarchists, Mensheviks or space aliens from Mars.

          You want less expensive, relatively responsive healthcare? Get the government OUT of it as much as possible.

    • azt24

      Right there you have the reason why it is counter-productive to jam major social legislation through on a party-line vote. When you need to fix it, you can’t fix it because the other party has no stake in it.

  • Boritz

    Lower cost plans universally have higher deductibles.
    If people are paying more out of their own pockets because their cheaper coverage pays less for their treatment how is that lowering health care costs? This will save money if people forgo treatment. You can also reduce costs by watering down antibiotics to stretch them further.

    • Andrew Allison

      They are NOT lower cost plans; they are lower cost to the 87% of insured who receive taxpayer-paid subsidies and, as TAI has pointed out, the “insured” are foregoing treatment due to the high deductibles. But the answer to your question is that it does NOTHING to lower health care costs..

      • Jim__L

        Did he edit to add the last sentence, “This will save money if people forego treatment” after your reply?

        • Andrew Allison

          The savings from foregoing unnecessary treatment are outweighed by the increased costs resulting from deferring necessary treatment.

          • Jim__L

            What basis do you have for that claim?

  • CosmotKat

    When you write a fundamentally flawed health care law you are going to get a fundamentally flawed outcome that is detrimental to all. Progressives are so blinded by their fantasy ideology they are incapable of seeing how absurd and harmful this law is. Repeal and replace is the only way to go.

  • Jim__L

    Tragically, the most probable result of a Hillary presidency would be the tax would be repealed and the rest left in place, saddling our government with YET ANOTHER another totally unaffordable entitlement.

    Hillary would try to solve this problem by trying to throw doctors in jail for doing any procedures not approved by Hillary, like she wanted twenty years ago with HillaryCare.

    Democrats are a disaster, ACA is a disaster, and America’s problems will continue to get worse until it is REPEALED.

    • D B

      Naturally, the stupid party is going along to kill the Cadillac tax – rather than try to get rid of the whole ACA – thinking that’s a good idea. All it will do is give relief to the unions and high-tech people (who are overwhelmingly Democrat), while making it even more difficult to eventually repeal the whole thing. It makes it much more likely that the costs of the program – without even the small offsets of the Cadillac tax and the medical equipment tax (another thing the GOP wants to get rid of, the idiots) – will skyrocket even faster, leading sooner rather than later to single-payer. The GOP should ensure the pain for this 100% Democrat fiasco is high high high, but no, they want to “govern”. Morons.

      • Rick Caird

        Well, you are right about the Cadillac tax. It is a Democratic tax and it affects primarily the Democratic constituency, the unions. There is no way Republicans should bail out Democrats. Nor is there any way the Republicans should help make ObamaCare look more favorable particular when there is no place the additional revenue is coming from.

        However, the second tax, the medical device tax is a massive mistake. For one thing, it is levied on company revenue, not profit. Second, it is on American companies rather than on the devices. So, it will encourage companies like Medtronics to move offshore. The medical device tax is a prime example of the stupidity of Harry Reid and the Democrats and why Pelosi should have been stomped, spindled, and mutilated for saying: “we have to pass it to see what is in it”. Dumb is forever.

        • D B

          Rick – I totally agree the medical device tax is a colossal mistake and an excellent way to kill the golden goose. I just think it needs to be kept as part of the Obamacare package so that (at least some segment of) the business community feels the pain (and anticipates further pain) as well as us health insurance “consumers”.

  • FriendlyGoat

    It’s hard to imagine how anyone estimated that this tax might raise $20 billion revenue per year in 2025 or any other year. Even it if is not repealed, virtually no companies plan to pay the 40% tax. They would modify plan benefits downward so as to have their plans not hit the stated cost thresholds. This was the whole point and Democrats are wrong to oppose it taking effect.

    • azt24

      So the cunning plan was to make employers offer lousy insurance? Thanks, Obama!

      • FriendlyGoat

        Most workers in the USA have never been offered sweet plans from their employers which cost their companies anywhere near these dollar amounts. Those levels of “Cadillac” for a select few while most people have far less—–or nothing—-are ridiculous. The reason why they are ridiculous is that the very same people who are already well-compensated enough to be able to well afford employee premiums, high deductibles and co-pays are the people being shielded from those out-of-pocket costs that other more-ordinary workers are stuck with.

        Ted Cruz, I believe, has admitted that his and his family’s health insurance was coming—–until quite recently—- from his wife’s high-level job at Goldman Sachs in the Houston office. I suspect that it is, or might be, one of these Cadillac plans. Why are conservatives so excited about being sure that Ted and his wife have “the finest” in health care plans WHILE he is on the side of denying ANYTHING DECENT to working people? The whole concept stinks.

        • Anthony
          • FriendlyGoat

            Thanks, but site reported error trying to find this.

          • Tom

            And I’ve been wondering for two decades how Evangelicals could be with Democrats at all. It seems we are at an impasse here.

          • FriendlyGoat

            Of course you are.

        • Jim__L

          Um, the reason Democrats could be trying to sink this is that “Cadillac” plans are a favorite of unions.

          Why are you of all people arguing against one of the real union gains of the last decades?

          • FriendlyGoat

            Because I don’t believe most people in unions actually have Cadillac plans.

  • ljgude

    Are Democrats going to sink the Titanic? No, the iceberg is already in. At conception the ACA did not contain costs – it capped increases form 16% of GDP to 17.5% of GDP by 2017. According to many posts on AI we have reached 17.5% of GDP and ain’t no one going to admit it may have blown the cap already. The OECD average for the same health outcomes is about 10% of GDP. America does medicine very well despite not covering everyone, but it is a financial disaster.

  • MarkJ

    The Democrats collectively remind me of a guy on a window ledge screaming at the police, “It’s your fault I’m out here and now you’ve got to save me!”

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