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Will the excise tax survive?

Robert Pear reports that it's in danger. House Democrats never liked the tax, unions always hated it, and neither group is feeling like taking a hit right now. On the other hand, most agree that the health-care reform process is too unstable to completely rework the legislation (removing the excise tax entirely would change the bill's CBO score, for one thing).

Having talked to some people about this, I'd say the likeliest outcome is that the compromise over the excise tax -- remember that? How young we were! -- becomes a compromise of the compromise of the excise tax. The result could be that the excise tax will hit fewer people and not be really relevant to the system till some time further in the future. But that's just informed speculation, not hard information out of the compromise talks.

By Ezra Klein  |  February 16, 2010; 2:07 PM ET
 
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Comments

The question should be: will democrats survive the excise tax?

Posted by: obrier2 | February 16, 2010 2:26 PM | Report abuse

"Having talked to some people about this, I'd say the likeliest outcome is that the compromise over the excise tax -- remember that?"


Well sure I remember. That's the one that the American public in general hated along with the Cornhusker Kickback that was one of the "side deals" that helped usher Scott Brown into office and increased the contempt of the American public towards politicans tenfold. Do they really want to go there? Good luck with that one.

Posted by: visionbrkr | February 16, 2010 2:27 PM | Report abuse

Funny story...to improve the CBO Score, Democrats went to their usual bag of tricks, raise taxes on the rich.....but this needed to have a limited scope to healthcare...Fine! They said we'll raise taxes on the best healthcare insurance policies---to raise public awareness on how evil these insurance plans are, we'll refer to them as "Cadillac" insurance plans.....


The problem was a big bulk of these Cadillac insurance policies were owned by Union members who bullied private corporations into giving them to their members....

Suddenly Democrats had a real problem.

Posted by: FastEddieO007 | February 16, 2010 2:32 PM | Report abuse

I got an idea, lets just let government run all of our healthcare?

Posted by: FastEddieO007 | February 16, 2010 2:33 PM | Report abuse

Ezra, when are you going to run a correction on the post about Anthem? It was a 25% rate increase, not 40%.

Posted by: ab13 | February 16, 2010 2:38 PM | Report abuse

"I got an idea, lets just let government run all of our healthcare?"

*sigh*

If only!

Posted by: adamiani | February 16, 2010 2:47 PM | Report abuse

If government ran OUR healthcare...


Three thousand needless deaths every year in hospital as watchdog fails to spot poor standards
http://www.dailymail.co.uk/news/article-1231559/Figures-reveal-3-000-needless-deaths-year-hospital-scandal-deepens.html

Eleven more NHS hospitals at centre of safety scandal
http://www.guardian.co.uk/society/2009/nov/29/nhs-hospitals-safety-report

Posted by: FastEddieO007 | February 16, 2010 2:56 PM | Report abuse

If government ran OUR healthcare...


Hundreds of patients died needlessly at NHS hospital due to appalling care
http://www.telegraph.co.uk/health/healthnews/6661925/Hundreds-of-patients-died-needlessly-at-NHS-hospital-due-to-appalling-care.html

Question a doctor and lose your child
http://www.timesonline.co.uk/tol/life_and_style/health/article6823345.ece

'Doctors told me it was against the rules to save my premature baby'
http://www.dailymail.co.uk/news/article-1211950/Premature-baby-left-die-doctors-mother-gives-birth-just-days-22-week-care-limit.html

Posted by: FastEddieO007 | February 16, 2010 2:57 PM | Report abuse

If government ran OUR healthcare...

Daughter claims father wrongly placed on controversial NHS end of life scheme
http://www.telegraph.co.uk/health/healthnews/6156076/Daughter-claims-father-wrongly-placed-on-controversial-NHS-end-of-life-scheme.html

NHS is paying millions to gag whistleblowers
http://www.independent.co.uk/life-style/health-and-families/health-news/nhs-is-paying-millions-to-gag-whistleblowers-1812914.html

Father of Baby RB fights hospital’s decision to turn off life support
http://www.timesonline.co.uk/tol/life_and_style/health/article6898708.ece

Posted by: FastEddieO007 | February 16, 2010 2:57 PM | Report abuse

Why does the excise tax even matter at this point? HC reform is still dead.

Posted by: MBP2 | February 16, 2010 3:01 PM | Report abuse

Ezra, the votes are NOT there in the House to pass HCR. Republicans will not be signing on, and there aren't enough libs to do it without at least 15 or so Blue Dogs.

Not gonna happen, but your optimism is very cute.

Posted by: cpurick | February 16, 2010 3:12 PM | Report abuse

getting rid of the excise tax is like having your family car careening towards a cliff and instead of hitting the brakes you hit the gas pedal. Completely idiotic. Its amazing Ezra that at times you wish for the lack of politicization (all your talk of the filibuster etc) but at times like this you totally forget that in favor of partisan democratic talking points and their groups of financial interest (unions and lawyers). Just disgusting. I can't wait for the CBO score on this one.

Posted by: visionbrkr | February 16, 2010 3:15 PM | Report abuse

An agreement to tax high-cost, employer-sponsored health insurance plans, announced with fanfare by the White House and labor unions last month, is losing support from labor leaders, who say the proposal is too high a price to pay for the limited health care package they expect to emerge from Congress. [...]

But labor leaders have backed away from the proposal in the wake of the special Senate election in Massachusetts.

“I do not believe there will be an excise tax enacted,” said Larry Cohen, president of the Communications Workers of America. “It appears that the administration and Congress will be taking a much more modest approach to health care reform. The cost and value of such reform would not justify using an excise tax.”
But as a practical matter, labor leaders said, the excise tax was killed by the election in Massachusetts, where the Republican candidate, Scott Brown, won the Senate seat long held by Edward M. Kennedy.

“Fully 42 percent of voters believed the health care bill would tax employer health benefits, and these voters supported Brown by two to one,” Mr. Podhorzer said.


Posted by: obrier2 | February 16, 2010 3:19 PM | Report abuse

"The result could be that the excise tax will hit fewer people and not be really relevant to the system till some time further in the future."

The excise tax was never going to be relevant until some time in the non-immediate future and it's impact was never going amount to much because it has nothing to do with either reducing the cost of actual care or improving health outcomes.

To review: The excise tax was promoted to do two things -- raise money for subsidies to buy more insurance and to reduce total spending by avoiding "unnecessary" treatment. It's a losing proposition on both points.

The amount the tax would raise for the first purpose was always fuzzy because it was believed that most employers would reduce benefits rather than pay for plans with inflated prices. Theory suggests that the reduced expenditure on insurance would result in wage increases that would generate more income tax but almost all of the tax advocates admit that, while the cost of benefits does suppress wages, most workers covered by these plans are unlikely to see any sudden rises in salary. Workers with generous plans then, are likely to see higher out-of-pocket expenses with little or no take home wage increases. Unions have been most clear-eyed about this but it would in fact affect all kinds of employees in high-cost demographic groups across the country.

Experts are generally divided about the effect of the tax on cost of care too. It's generally agreed that overtreatment is a problem in the US and that the higher the actuarial value of a given plan, the more likely it is that some patients will seek treatment. For that reason, the tax could reduce total expenditures somewhat.

Given that health costs in this country (and elsewhere) are not determined by demand though, there is no evidence that the actual cost of a particular procedure would fall if fewer people demanded it. In fact the evidence is that while overall spending might decrease, the cost to an individual patient would increase and that some patients would avoid needed treatment because of that cost. Having avoided treatment, those patients would then present with even more serious (and costly) problems later on. In other words, it could be an example where control of insurance rates could lead to increased spending on deferred care and demonstrably poorer health outcomes.

This is another example of the fallacy of focusing on insurance costs rather than the cost of care. Whatever the fate of the excise tax; it won't help us get onto a sustainable financing model that ensures every U.S. citizen has access to needed care without bankrupting himself, his employer, or his government.

Posted by: Athena_news | February 16, 2010 3:39 PM | Report abuse

Athena_news,

"Given that health costs in this country (and elsewhere) are not determined by demand though, there is no evidence that the actual cost of a particular procedure would fall if fewer people demanded it. In fact the evidence is that while overall spending might decrease, the cost to an individual patient would increase and that some patients would avoid needed treatment because of that cost."

I completely agree that lowering demand (i.e. lowering total health care spending & reducing the volume of care provided) as a strategy to lower the cost of care (as some of the more extreme commenters argue for) would be an unsuccessful and almost certainly counterproductive strategy to push down the cost of care.

I sincerely appreciate your calm and thoughtful arguments here and elsewhere on the blog, and I am curious to know what your own strategy to lower the cost of care would be ... increase the supply, creating more competition among providers with more doctors, nurses, facilities, competing device manufacturers, etc.?

Can lowering the cost of care be done at all, or do you believe that it is entirely hopeless to craft public policy that successsfully "bends the cost curve?"

Posted by: Patrick_M | February 16, 2010 6:19 PM | Report abuse

This health care "reform" bill is becoming a sad joke. Every notable item that could actually start reforming our broken system is being stripped, and all thats left is an expansion via gov't subsidies of the current system. A sad, sad joke.

The unions are destrying this country bit by bit. We already gave them a car company, why not let them screw us over on this one too? I mean after all, they are like 8% of the population.

Posted by: truth5 | February 16, 2010 6:19 PM | Report abuse

"Funny story...to improve the CBO Score, Democrats went to their usual bag of tricks, raise taxes on the rich.....but this needed to have a limited scope to healthcare...Fine!
Posted by: FastEddieO007"

Actually, Democrats didn't limit themselves. The bill includes 7 billion dollars of the expected savings to the deficit come from a revision of the tax credits for biofuel. Democrats found it necessary to include to bring down the costs to meet the $900 cost requirement and hopeful deficit neutralizing measures, it was one of the items they asked the CBO to score!
What hubris!

Posted by: cprferry | February 16, 2010 6:34 PM | Report abuse

Unions killed health care reform.

Posted by: HuckFinn | February 16, 2010 6:48 PM | Report abuse

"Given that health costs in this country (and elsewhere) are not determined by demand though, there is no evidence that the actual cost of a particular procedure would fall if fewer people demanded it."

Whoa. That's a pretty big and unsubstantiated "given".

Lasik surgery. High demand, low cost and trending downward. Why? Not covered by insurance, that's why.


Posted by: bgmma50 | February 16, 2010 6:56 PM | Report abuse

bgmma50,

oh and just wait if HCR ever happens and people get subsidies for EVERYTHING they could ever want. My God that would be great. And then we'd have to pay the bill, UGH.

Posted by: visionbrkr | February 16, 2010 7:25 PM | Report abuse

visionbrkr,

Subidies for EVERYTHING is indeed a nightmare. Nancy Pelosi has promised low copays, low deductibles, low out of pockets, no annual or lifetime limits, preventative care, the whole gold plated package that Americans have been conditioned to expect from health insurance by taxpayer subsidized corporate plans. All to be funded by OPM (other people's money).

Posted by: bgmma50 | February 17, 2010 9:52 AM | Report abuse

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