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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