Who says there’s no bipartisan consensus in the United States? Based on their campaign promises so far, if any of the leading contenders for the Republican or Democratic presidential nominations actually wins in November 2016, Obamacare as we know it is doomed.
The Republicans, of course, pledge to repeal the whole thing. The Democrats, by contrast, merely want to hollow it out, by removing a crucial systemic reform, the absence of which will make the Affordable Care Act less able to meet its twin goals of curbing costs and expanding coverage.
Specifically, Democratic front-runner Hillary Clinton has just joined her main rivals, Sen. Bernie Sanders, I-Vt., and former Maryland governor Martin O’Malley, in calling for the repeal of Obamacare’s excise tax of 40 percent of the value of employer-paid health insurance plans that exceeds $10,200 for individuals and $27,500 for families; the tax takes effect in 2018.
Clinton calls for repeal of health care law’s ‘Cadillac tax’
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Health-care economists universally praised this feature of Obamacare because it attacked the wasteful and regressive tax exclusion for employer-paid health plans, a $250 billion-plus annual item, 35 percent of which accrues to the top 20 percent of the income distribution scale.
Reducing the value of that tax break would help slow health-care cost growth, because it encourages many employers to pay employees not higher wages but generous “Cadillac benefits,” prompting the recipients, in turn, to overutilize medical care.
As it happens, the mere anticipation of the tax has already caused employers to right-size their benefits packages, just as Obamacare’s authors intended. This is one reason, among many, that health-care cost growth has remained moderate even as reform has brought millions of new consumers onto the insurance rolls.
Indeed, the latest numbers on coverage are encouraging, with the uninsured having fallen from 13.3 percent of the population in 2013 to 10.4 percent last year, according to the Census Bureau. And paying for this expanded coverage over the long run, without increasing the deficit (another Obamacare tenet), depends in no small part on revenue from the tax, projected to be $87 billion between 2018 and 2025, according to the Congressional Budget Office.
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So if the law is achieving its goals, cost containment and broader coverage, thanks to a key provision that President Obama and his advisers fought hard to include in the law, why would Clinton and other supposed “progressives” join with Republicans in condemning that provision?
There’s a smidgen of a genuine policy concern here: To avoid the tax, some employers are providing workers plans that rely on higher deductibles and co-pays to hold down health-care consumption and, accordingly, costs. For some low-wage workers, the additional out-of-pocket expense can be burdensome. A case can be made for adjustment of the tax to account for the specific characteristics — age, overall chronic disease prevalence — of a given employer’s workforce.
But the main consideration for Clinton and her fellow candidates, by far, was politics. To wit: The labor unions weigh heavily in internal Democratic Party deliberations, and the unions hate the Obamacare excise tax.
The reason is obvious: Collective bargaining in this country developed under a system of employer-based health insurance, subsidized via the tax exclusion. Dickering for health benefits is much, if not most, of what unions do in return for member dues. By and large, union health plans enjoy low co-pays and deductibles, especially those in the taxpayer-funded public sector.
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Limit those benefits by limiting the tax subsidy for them, and how will unions justify their existence, both to current members and to new ones they seek to recruit?
To the extent that the Obamacare tax on employer-paid plans funds Obamacare exchanges, where individuals can shop for affordable plans, often subsidized through an individual tax credit, it erodes the entire job-based model of health insurance; that can’t be good for a set of institutions, unions, that are also job-based.
So labor leaned heavily on Clinton, and the other Democrats. She caved; it’s no accident that the first indication she would call for repeal came in a message to Randi Weingarten, the president of the American Federation of Teachers, according to The New York Times.
Clinton promises she’ll come up with new ways to reduce costs via “delivery system reform,” and to offset the $87 billion in lost revenue — which should be interesting. The best hope to save the excise tax, in fact, may be congressional resistance to the tax increases it would take to pay for a repeal.
Bottom line: To the list of threats to the Affordable Care Act we must now add, next to right-wing politicians, self-serving labor unions and the Democratic presidential candidates who pander to them.
Follow Mr. Lane on Twitter @ChuckLane1.