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Excise tax changes in the Senate bill

In the Senate Finance bill, the excise tax was a 35 percent surtax on employer-sponsored health-care premiums that cost more than $21,000 for families and $8,000 for individuals. Reid's bill has an excise tax that lays down a 40 percent charge on premium dollars beyond $23,000 for families and $8,500 for individuals. The threshold is higher for people in high-risk jobs, people who are older than 55, or people who are in high-cost states, though the allowance for states ratchets back after three years. It raises about $150 billion, as opposed to the $200 billion raised by Finance's proposal.

By Ezra Klein  |  November 19, 2009; 11:00 AM ET
 
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Comments

i've gotta give the Democrats credit on this one because unions can't be happy with this and I expected Reid to cave to Trumka, Stern et al. I'm sure they're all at this point jumping through hoops to lock up CBA's wherever they all can to get in under any pre-set deadline.

Posted by: visionbrkr | November 19, 2009 11:23 AM | Report abuse

what of any inflation indexing?

If there is no indexing, let's hope this is a position meant to be negotiated away from.

I think the tax playing field should ideally be somewhat progressive (instead of regressive!), but in practical terms the in-between solution that is also somewhat more palatable to those accustomed to "cadillac" plans is for the marginal tax on premiums to be at a lower rate than 40% *or* have inflation indexing. Yes, I'm quite aware of the presumed cost-control benefit. ("presumed" = the nation pays for the amount of total services it uses over time, which depends on health levels and preventive efforts, regardless of what portion of costs are out-of-pocket)

I think any mention of this tax should always be accompianied with a discussion of various types of indexing or the lack thereof.

Posted by: HalHorvath | November 19, 2009 12:32 PM | Report abuse

Taxing benefits is bad policy and even worse politics. At $23,000 and $8,500, there will be many millions of people in the middle class hit with taxation.

The cost of their plans will increase, and their employers will then cut their benefits. The establishment loves to call these "Cadillac" plans, but they're not.

Cutting people's health care and raising their costs is the opposite of the entire purpose of reform. It will not make health care plans more efficient - it will just reduce the health care benefits that people get as part of their jobs.

It's also electoral suicide for democrats. Meanwhile, taxing the rich and requirements that employers pay for health care... well, that's just crazy talk! Another winner from inside the Beltway.

Posted by: PeteSikora | November 19, 2009 1:30 PM | Report abuse

Hal,

are they going to index allowances for FSA's, deductibles and maximum out of pocket costs and everything else under the bill?

They should. If you do for one you should do for all.

Posted by: visionbrkr | November 19, 2009 2:26 PM | Report abuse

visionbrkr, those gimmicks you mention don't matter to people. Indexing the surtax on plan costs to inflation or wage growth is the most important.

Of course, this tax is an awful idea to begin with. This plan is the dream of every beltway pundit and "serious thinker" making $150k/yr who has never had to worry about health insurance.

Posted by: constans | November 19, 2009 2:34 PM | Report abuse

But Obama said he wouldn't raise taxes on anyone makeing under $200K? He must have meant $20K.

Posted by: obrier2 | November 19, 2009 3:04 PM | Report abuse

Are these people aware that Medicare pays HMOs across the country much more than $8500/yrfor Meicare Advantage? Even if the rates were reduced by 14% excess over standard Medicare, Medicare Advantage premiums would still be buying "gold-plated" coverage for seniors.

I'm still waiting, for a cogent explantation of how this tax is supposed reduced net spending on healthcare? I understand that premiums will be reduced but how will that result in lower overall spending?

If indeed you think that $20 premiums encourage individuals to over consume over priced care, why is it okay for CMS to pay for Medicare Advantage programs that offer $5 co-pays? Is there some sort of data somewhere that say seniors are less likely to go to the doctor than say a 45-year old father of 4?

Posted by: Athena_news | November 19, 2009 4:04 PM | Report abuse

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