Public ponders fairness of 'Cadillac' tax, affordability issues

Nov 24 2009

BusinessWeek: "In chasing revenue to help pay for health-care reform, Democrats have managed to rally two groups that tend to oppose each other—unions and Big Business. The focus of their ire: a proposed 40% excise tax on high-premium or so-called Cadillac health plans." Some union leaders say the tax "could lead to steep reductions in benefits or exorbitant cost increases" for union members who, over the years, have given up wage increases in return for more comprehensive benefits as health-care costs outpaced inflation. The Chamber considers it "irresponsible and dangerous" and warns that employers will bear the brunt of the burden. Those who advocate the tax say "it will help curb soaring health-care costs by forcing consumers to recognize their medical spending and that it will discourage insurance companies and employers from offering excessively rich plans." The tax is projected to raise $149 billion over 10 years (Deprez, 11/23).

The Chicago Tribune/Tribune Newspapers reports that "(o)rganized labor wields significant influence, but any reduction in the tax ... would likely have to be offset with another tax in order to replace the revenue the 'Cadillac' tax would have raised" (Levey, 11/24).

The Associated Press explores a related question by asking: "Is tax on "Cadillac" plans fair?": "The tax on high-dollar health plans would hit only a few very wealthy Americans and many more in the middle class, experts agree. But it also might bring down health care costs by discouraging companies from offering coverage with so many benefits." The tax would be a levy of 40 percent on premiums above $8,500 for an individual and $23,000 for a family. The article cites findings from a recent poll and also uses a school teachers and her health coverage as as an example of how the Cadillac tax triggers debate about reform and fairness (Johnson, 11/23).

NPR reports that for the public, keeping health care reforms affordable for them is key to their support. "(I)n the end, whether or not people can afford health insurance may have a bigger impact on the bill's political popularity than whether the final price tag exceeds a trillion dollars." Economists "have different ways of defining exactly what is and is not affordable for people. One way is by looking at disposable income, or whether people have money left over after paying for other necessities ... Another test is whether people would buy something voluntarily. ... But there's also a third test — and it's that affordability is in the eye of the beholder" (Rovner, 11/24).

Related previous KHN story: Chasm In Congress Over How Much Individuals Should Pay For Health Care (Rau, 9/17)

The New York Times reports in the meantime that a government-run public option is not the public's priority in health care reform. A "new poll by the Kaiser Family Foundation suggests that even as the public supports a public option, they have other, higher priorities for the health legislation." Number one on Democrats' list was "making sure affordable health insurance plans are available. ... Among Democrats surveyed, the second priority was insuring as many of the currently uninsured as possible. Third was requiring insurers to cover people with pre-existing conditions. And the public option? It ranked seventh (with 59 percent listing it as extremely or very important)" (Seelye, 11/23).

The Los Angeles Times has a graphic on specific provisions in the Senate health care reform bill on the public option, abortion, "Cadillac" plans, medical malpractice lawsuits and prescription drugs (Levey, 11/24).

The Cleveland Plain Dealer has a Q&A on the Senate bill and why a proposed government-run public plan would cover fewer people than previously envisioned (Koff, 11/23).