What Is This ‘Cadillac Tax’ Health Insurance Thingy?

You may have heard about the “Cadillac tax” health insurance thing. As with so much else involved with the health care/insurance discussion, policymakers have chosen wording that causes most people to tune out. Terms like “Cadillac tax” have little meaning to regular people because they convey very little information – or they evoke an image that masks its true impact.

When policymakers talk about a “Cadillac tax” on health insurance plans, what they are referring to is an upcoming tax on employers who provide really good health insurance plans that cover lots of things without requiring employees to pay large co-pays and deductibles when they get medical care. These plans cost more, so they are compared to luxury cars that cost more, hence “Cadillac.”

The tax was written into the Affordable Care Act with the consent of the Obama administration, which saw it as a way to limit federal government spending on health care reform. There are people who thing this tax is a good idea, and people who want the tax repealed.

Arguments In Favor Of The Tax

Those in favor of the tax are “market” economists who believe that people’s decisions, even about health care choices, are mostly driven by economic motives. They believe that people are “homo economicus” – a species of people who have good information and make rational decisions based on what will make them (or save them) the most money. These people are seen as “consumers” who respond to prices over other priorities in their lives.

They claim that with good health insurance, “consumers have little incentive to insist on cost-effective care and providers have little incentive to provide it.” The idea is that a tax on employers who offer good health insurance will benefit the country and:
1) create market forces that will reduce the country’s health care costs over time, and,
2) Translate as higher pay to employees because the employers are spending less on health insurance.

These economists believe that the better the health care plan, the more people will go to doctors and specialists when they don’t really have to. They believe people use high-cost medical procedures and drugs because they do not shop around for the lowest-priced alternatives. They believe that making people pay higher co-pays and/or deductibles and limiting which doctors they can see will cause them to “consume” less and stop “overutilizing” expensive medical care.

They say that setting high co-pays and deductibles, and limits on doctors, will make people put “skin in the game” and:

1) Stop knowingly using medical services needlessly. People know when they don’t really have to see a doctor but do so anyway because they don’t have to pay too much.
2) “Shop around” for the lowest-cost doctors (of those offered) when they do need medical care.
3) “Shop around” when a drug or procedure is needed, whether it’s for fixing a broken arm or treating cancer, and will choose the lowest-cost options.

The Argument For Repealing This Tax

That was the market economist side of the “Cadillac Tax” argument. They want the tax to take effect starting next year, as planned. The other side is people who want to repeal the tax. They want citizens to have more access to good health care, with low co-pays and low deductibles and a wide choice of doctors and care options.

On a conference call Thursday, Economic Policy Institute (EPI) Research Director Josh Bivens and Senior Economist Elise Gould outlined arguments against this tax. They explained that research (and basic common sense) shows that consumers are not equipped with information and knowledge that enables them to cut back only on unnecessary or ineffective care. In other words, people go to doctors to find out if they need medical care, because the doctors are the ones trained in medicine, not regular people.

With high deductibles and co-pays, people cut back on health care across the board. They don’t see a doctor when they need to, which can cause them to be sicker when they finally do see a doctor (which is more expensive and undoes the money-saving efforts) or just suffer, which should not be a policy goal (unless you are a conservative or a psychopath).

In EPI’s “Tax on Expensive Health Insurance Plans Could Cut Care Along With Costs,” Bivens and Gould write,

Evidence shows that making health care more expensive does induce people to consume less of it. But the same evidence shows that people do not cut back only on care that is ineffective or somehow luxurious; instead, they cut back across the board. Expecting sick Americans to decide on the fly in an opaque and uncompetitive marketplace what health care is cost-effective–and what is not–is an unrealistic and unfair approach to containing costs.

While overall costs may be pushed down by the excise tax, this is a good outcome only if one believes that the health care squeezed out is merely the ineffective kind. But a lot of welfare-improving care may also be a casualty, and for some patients, cutting back on medically indicated care because of the increased cost-sharing could increase their overall spending. For example: some patients who cut back on low-cost pills to contain cholesterol end up in emergency rooms.

Cutting utilization is also a limited cost-containment strategy…

One more thing: the market economists claim that employers will pass along savings from lower-cost plans to employees as higher pay. What is the fat chance of that? What world do they live in? World economicus? I mean, really.


This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary and/or for the Progress Breakfast.

Warning: Insurance Companies Scamming Obamacare Policyholders

Warning: If you have an insurance policy purchased at an Obamacare “exchange” last year and the price is going up you should shop around for a new one. If you just let the plan renew your insurance company might be screwing with you.

Don’t be fooled, prices are not going up much under Obamacare. If you go to the exchanges and shop around you’ll see that.

But if you just let your insurance company renew your existing policy they will scam you with a price increase as much as 20% — even more.

See How To Avoid Paying More For Obamacare Next Year.

Consumer advocates and Obamacare officials are urging the more than 7 million people who enrolled into health insurance for this year using one of the health insurance exchanges created by the Affordable Care Act to come back and look for a better deal.

… Why bother if you like your health plan? Because there’s a pretty good chance keeping your current policy will squeeze your budget, even though premiums nationwide are rising by a small amount on average.

[. . .] In 48 cities, the cost of the benchmark plan is actually going down next year by 0.2 percent before subsidies, according to data analyzed by the Kaiser Family Foundation.

Also see Cost of Coverage Under Affordable Care Act to Increase in 2015,

“Consumers should shop around,” said Marilyn B. Tavenner, administrator of the Centers for Medicare and Medicaid Services, which runs the federal insurance exchange serving three dozen states. “With new options available this year, they’re likely to find a better deal.” She asserted that the data showed that “the Affordable Care Act is working.”

Of course, if they had included a “public option” where you can just buy into Medicare, none of this would be happening. But We the People are not allowed to do that, because capitalism.

Republican Cuts Kill

‘Republican Cuts Kill,’ which was produced by the Agenda Project Action Fund, mixes disturbing footage of the Ebola outbreak—including images of body bags, hazmat suits, and corpses—with clips of Mitch McConnell, Pat Roberts, Rand Paul, and Republicans in some of the most competitive races around the country demanding more spending cuts. The demand for cuts is juxtaposed against testimony from top CDC and NIH officials detailing how budget cuts substantially hampered their ability to address the crisis.

Please support the mission of the Agenda Project Action Fund by clicking on the link and donating here! http://apaction.com/

Why Are Planes Leaving Liberia?

Dr. Tom Frieden, Director of the Centers for Disease Control, speaking on the newshour:

“We have two things in this country that they don’t have and they need in West Africa. One is good infection control in health care facilities so it doesn’t spread there. And the second is good, core, tried and true public health, find contacts, trace them, monitor them, if they’re sick isolate them. If you do those two things you can stop ebole.”

Exactly. We have that, they don’t. So why are people getting on airplanes there, in a country that does not have the ability to stop the spread of this disease?

Frieden says if flights are stopped more people will want to leave. I don’t get that. Imagine what happens when someone gets off a plane in … pick your poor country with poor infection control.

One thing he says — to keep safe we have to help stop the outbreak there. Of course.

What Are We All Supposed To Be Afraid Of This Week?

Is it still ISIS? It’s not Syria anymore … right … it’s the other side now.

Previous weeks’ scare stories: Children coming from Central America? Ebola? Black mobs playing “knockout game”? Remember the smallpox scare? Remember the fear during the “runup” to the Iraq war?

Remember that fear causes people to be more conservative.

For some perspective (before we start bombing someone) on things to be afraid of, tobacco kills more than 480,000 Americans each year. And you don’t have to be the one smoking to be hurt or killed by the smoke.

One More Complete Media Fail: Health Insurance “Deadline”

How many news stories have you seen telling people that the Obamacare “deadline” has passed? For example, this from AP,

The deadline has passed, and so too the surprise grace period, for signing up for health insurance as part of the nation’s health care law.

How can you avoid thinking, “Wow, I missed the ‘deadline’ and now I can’t get insurance!”?

Here’s the deal: You can still get insurance, it just won’t start on Jan. 1. That’s it. Big deal.

Yes, you haven’t been able to get insurance until now and you really want to be covered. Yes you wanted to start on the very first day. But don’t worry, you can still get insurance. And you may have heard that there is a penalty for not having insurance? This is how that works: If you are uninsured for 3 or more months in a year you have to pay a penalty of $95 this year, more in following years. So get your insurance by the end of March to avoid the penalty.

Don’t let stories like this trick you into thinking you missed out and can’t get insurance.

Was YOUR Health Plan Cancelled?

Do YOU actually know anyone who had a health insurance plan that was cancelled because of Obamacare (not because the insurance company decided to) and who went to the health care exchange and did not find a better plan for less money?

It turns out no one actually knows anyone this actually happened to. One more made-up propaganda story from the corporate/conservatives.

Now compare this with the MILLIONS of people who are getting health insurance now, who couldn’t before.

Don’t Cut — Lower the Retirement Age and Open Up More Jobs

I have a post up over at Bill Moyers’ website: Don’t Cut — Lower the Retirement Age and Open Up More Jobs. The main points are:

1) Lowering the retirement age opens up jobs and,

2) Lowering the Medicare eligibility age takes the most expensive people out of the private insurance pool, which lowers everyone else’s premiums, and these people then become the lease expensive people in Medicare, which lowers the cost-per-person.