In their latest attack on Obamacare, congressional Republicans are targeting the so-called “Cadillac tax.”
“We’ve wanted to repeal it since it was passed. We’re all ready,” House Budget Chairman Tom Price, R-Roswell, told National Journal last week. “All the taxes in Obamacare are destructive, so anything we can do in the direction of repealing is a wise idea.”
And what’s the Cadillac tax? It has nothing to do with Cadillacs, except metaphorically. Right now, Americans aren’t taxed on the amount that their employers spend to give them health insurance — it’s treated as tax-free income, so to speak. But beginning in 2018, that would change for those who enjoy top-end health-insurance policies.
Here’s how it works:
In general, if you and your employer spend less than $10,800 on individual health-care coverage, or less than $27,500 to buy family coverage, the benefit would remain tax-free. However, any amount spent above those ceilings would become taxable.
The change is designed to achieve two goals. One is to raise revenue to help offset other Obamacare costs. Perhaps more importantly, the tax is meant to discourage gold-plated health-care plans that require no co-payments or have low or no deductibles.
According to health-care experts on both the right and left, such plans encourage people to overuse the health-care system. If you require co-pays and deductibles for things other than annual physicals and basic tests, etc., people will be a little more thoughtful about going to the doctor, usage will drop, costs will drop, etc. In conserva-speak, the approach “enlists market forces” to lower costs.
But here’s the strange part: Earlier this month, Price introduced the latest version of his “Empowering Patients First Act”, which he bills as a conservative replacement for Obamacare. Here’s how Section 131 of that bill is described in an analysis posted by Price’s own office:
“Sec. 131. Limitation on Employer-Provided Health Care Coverage: Allows for the employer exclusion of health care coverage up to $20,000 for a family and $8,000 for an individual, with any additional funds used to be taxable dollars.”
Translated into English, Price’s plan would impose its own “Cadillac tax.” Under his bill, as described by his own office, any amount spent on health insurance above $8,000 for an individual and $20,000 for a family would be taxable as income. Price’s version kicks in earlier — 2016 instead of 2018 — and because it sets a lower dollar amount than under Obamacare, it would affect a lot more middle-class Americans and would raise considerably more revenue.
In short, Price condemns Obama’s “Cadillac tax” as “destructive,” then includes an even more onerous version in his own bill.
Oh, and it’s now late May. We are roughly a month from a Supreme Court ruling on whether Obamacare survives in states such as Georgia that refused to establish their own insurance exchanges. If it does not, some 430,000 currently insured Georgians would lose the subsidies that make their coverage affordable. Yet I see no sign that Republicans are building a consensus about how to respond. I see no leadership, no action, no committee hearings on the Price bill or other proposals. Nothing.
It could be an interesting summer.
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