Hillary Clinton

Hillary Clinton and House Republicans Show Us That Future of Obamacare is Bipartisan Support for Making It Even Worse

The sudden convergence of political interests, at the expense of policy soundness, around Obamacare reveals how shaky the law's foundation remains.

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Whitehouse.gov

Earlier this week, Hillary Clinton—who, despite struggling in some recent polls, is almost certain to be the Democratic party's presidential nominee next year—indicated that she wanted to get rid of one Obamacare's major provisions: the so-called "Cadillac tax," a 40 percent excise tax on high-cost, benefit-rich health insurance plans set to begin in 2018. Clinton's announcement is a reminder of how politically fragile the health care law remains, and how much uncertainty remains about whether the law will achieve its fiscal goals.

The inclusion of the Cadillac tax in Obamacare was a function of two competing imperatives—one policy, the other political.

From a policy perspective, economists have long decried the distortionary effect of the government's decision, around World War II, not to tax employee benefits like health insurance. The result was that the U.S. ended up with a health care system built largely on employer-sponsored insurance, and that employers over the years have tended to pile-on health insurance benefits, which, because they aren't taxed like wages, provide more bang for the buck than cash compensation. The tax exclusion for employer provided coverage has long been enemy number one for health policy wonks.

Politically, however, ending the employer tax exclusion has always been a tough sell, to put it mildly. Indeed, during the 2008 presidential campaign, Barack Obama attacked his Republican rival, John McCain, for proposing to tax employer health benefits. But when it came time to draw up the legislation that would become Obamacare, policy wonks wanted to do something to address the tax exclusion. The law's authors also needed a way to generate revenue to help ensure that the law would score as deficit neutral.

That's where the Cadillac tax comes in. It exists in the form it does in order to tackle the policy problem without technically going against what Obama said on the campaign trail. Because the excise applies to health plans rather than to individual policies, its design gave Obama a fig leaf that allowed him to say that he wasn't taxing anyone's benefits. But the tax on health plans resulted in essentially the same effect; so while it doesn't end the employer exclusion, it does restrain it, at the top end, by adding a significant cost to high-cost plans. The Cadillac tax also had the added benefit of scoring as a significant revenue raiser—one that went a long way toward helping Obamacare to be declared deficit neutral by the Congressional Budget Office.

In the years since Obamacare passed, projections for health care cost increases have flattened out, and expectations for how much money the Cadillac tax would raise have decreased. But it's still expected to bring in a non-trivial amount of money to help offset the health law's spending (about $6 billion a year). Repealing the Cadillac tax without replacing the revenue somehow would render the law less fiscally sound—and more likely to be a net increase in the deficit. Now, Clinton has said that she would replace the revenue, but she has not suggested any policy by which she might do so. At minimum, this tells us that there is no politically easy revenue replacement at the ready.

But even if she does replace the revenue somehow, repealing the Cadillac tax would undermine the provision's larger goal of dampening, even if only slowly and at the margins, the damaging effects of the carve-out for employer-sponsored benefits.

The Cadillac tax may not be the best way to do this, but it is almost certainly better than no way at all, and an alternative does not seem to be on the offer. This is why 101 economists of varying political loyalties recently signed a letter urging politicians to leave it in place, at least until an equivalent measure—not just a revenue replacement—can be put in place.

Clinton is, of course, not the only one seeking a repeal of the tax. In recent weeks, congressional Republicans have put forth proposals to do the same. In each case, the motivation is clearly driven by politics: Republicans are seeking to placate employers who don't like the provision, while Clinton is aiming to please unions, who have over the years negotiated for expensive benefits likely to be hit by the tax. (It is not a coincidence that news of Clinton's stance on the provision broke after her staffers let American Federation of Teachers President Randi Weingarten know of her decision.)

The sudden convergence of political interests, at the expense of policy soundness, around Obamacare reveals how shaky the law's foundation remains more than five years after passage, and how the politics around it may shift in unexpected ways as the law continues to settle into place. The future of Obamacare may turn out to be both parties working together to make it even worse. 

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  1. Hillary is just trying to steal back some union support from Sanders.

  2. Hillarycare is going to be even less fiscally sound than Obamacare? Does that mean Kanyecare will be single payer?

    1. Imma let you finish that operation…

      1. *drops mike in Kanye’s body cavity and leaves OR*

  3. OT: Charles C.W. Pierce is now claiming the Pope was tricked into meeting Kim Davis. This completely ignores the fact that the Pope outright stated it’s a human right for religious government officials to not have to sign gay marriage licenses if it conflicts with their religious values.

    So the Pope explicitly endorsed Kim Davis’ position. Therefore, even if he was tricked into meeting her specifically, he still supports her interpretation of the situation. Leftists will go to some astonishing lengths to defend the progressive honor of Commie Pope.

    1. Vatican spokespeeps are denying an “endorsement.”

      “The pope did not enter into the details of the situation of Mrs. Davis, and his meeting with her should not be considered a form of support of her position in all of its particular and complex aspects,” the Rev. Federico Lombardi, the Vatican spokesman, said in a statement released on Friday morning.

      1. That’s irrelevant. He specifically said what she’s DOING is right with his argument regarding religious freedom of government officials. He can say ‘oh, I don’t endorse her personally’ in an attempt to defuse the backlash, but that does not change the fact that he endorsed her general position in a separate interview.

        1. Well, they’re now saying maybe they’re not 100% into what she’s doing. Supporting conscientious objection does not necessarily mean supporting what she is up to.

          1. So, like most leftists, commie Pope is more concerned with who said or did it than what was done or said?

      2. It doesn’t get more explicit than this.

        While he did not mention the Kentucky clerk specifically, Francis said government officials have a “human right” to refuse a duty if they feel it violates their conscience and that includes issuing gay marriage licenses.
        “I can say the conscientious objection is a right that is a part of every human right. It is a right,” the pope said when speaking to reporters, according to a report from The Washington Post. “And if a person does not allow others to be a conscientious objector, he denies a right.”
        He was asked if he supported individuals who refused to abide by certain laws, and the reporter used issuing marriage licenses to gay couples as an example.

        He supports her completely in her position and if he balked once he realized he’d stepped into a culture war he was unaware of, all that proves is this Pope lacks the courage of his convictions.

        1. If the Pope gave a majority of his support to a majority of Davis’ positions, the best you can say is Davis has a plurality of the Pope’s support. Imma guess about 28%.

    2. I’m making a supposition here, but I think that maybe once he met her in person, he decided that it wasn’t such a good idea to be associated with her.

      1. Well, she’s not Catholic, so her religious opposition is based on the wrong religion, as far as the Pope is concerned. Duh.

    3. Kim Davis and the pope is a big fat dose of DON’T CARE.

  4. You know you’re old when you think “Cadillac” is still synonymous with quality and luxury. Unless you’re using the term “Cadillac plan” ironically as a reference to something that used to be good but is now an ugly, over-priced piece of shit.

    And my bet is still on Joe Biden being our next president.

    And the GOP opposition to Obamacare switched from “repeal it” to “mend it, don’t end it” about 12 seconds after it became obvious the Dems were going to get it shoved through Congress. No matter how terrible the legislation, it’s “doing something” and government simply is never going to stop “doing something”. If the “doing something” is driving off a cliff, they’ll tweak it here and there to hide the fact that it’s driving off a cliff but they aren’t going to stop driving off a cliff just because they’re driving off a cliff.

    1. Cadillac has gone through the valley of the shadow of death. Their current cars are competitive with Mercedes and BMW, and are quite desirable. The damage to their reputation persists.

    2. Cadillac is the right term – poorly designed, tax-payer subsidized, over-regulated, unreliable, piece of shit.

      1. How subsidized? (Excluding claims of not giving being taking).

        1. Not taking being giving I mean.

        2. The UAW bailout.

    3. And my bet is still on Joe Biden being our next president

      I think the odds still favor the Republican nominee to win (though one should never underestimate that party’s ability to fuck things up), but I agree that Biden will likely be the Dem nominee.

    4. Tesla Tax?

  5. employers over the years have tended to pile-on health insurance benefits, which, because they aren’t taxed like wages, provide more bang for the buck than cash compensation

    Imagine how much bang my bucks would have if I could keep those too.

    (No, fuck you, cut spending!)

    1. No, fuck you, cut spending!

    2. It’s almost as if employees respond better to compensation that they get to keep more than half of.

  6. By “Cadillac plan” they mean “A plan that actually like covers stuff, you know?”

    1. But the right stuff? All of the right stuff?

    2. Do Cadillac plans cover things like plaster casts for broken promises, morphine drips for dying dreams, pep pills for faint hopes, anti-psychotic laxatives for crazy shitweasels?

      1. If I ever get a tattoo it may just have to be “I hate crazy shitweasels.”.

  7. HR reports to me, we just sat in another webinar regarding changes coming in 2016. It’s maddening to listen to a nuts and bolts explanation of the definition of a large company (greater than 50 employees as of 1/1/2016) and how to calculate the “affordability” test while thinking all of this was predicted. Good stuff first, bad stuff later after Obama leaves office. And the goal is to fuck up things so badly that the only solution is a complete government takeover. I’m not just watching this slow motion car wreck, I’m deputized by the federal government to help make it happen.

    1. All of this was pointed out by ACA opponents back in 2009-2010. We were told that we just wanted to deny medical services to poor people.

      1. That’s not your reason for opposing it?

        1. I need orphans to stay alive so they can work at my factory and polish my monocle

  8. The insurance companies, big pharma, doctors, nurses, hospitals, etc. all must love forcing someone else to pay for their customers. Government programs are all about force. Make them voluntary and see how many people would participate.
    My ex used to tell me I was a tightwad because I wanted to save for our old age. Her philosophy was to drink and be merry for tomorrow you may die. We did not die. We are old. Now she is living on the production of others because she drank and partied and did not save. As long as you reward the non producers and punish the producers, you will get more of those you reward.

  9. “But it’s still expected to bring in a non-trivial amount of money to help offset the health law’s spending (about $6 billion a year).”

    Why is it not “expected” that employers will simply cancel those Cadillac policies and sign up for ones that won’t be taxed?

    That is exactly what *my* employer is doing.

    1. When companies respond to the incentives by cancelling the Cadillac plans, or dropping medical insurance entirely and sending people to the exchanges, it will all be blamed on corporations and the free market.

      Why is it so difficult for business people to say, we are following your rules. You made the rule, we didn’t. Following your rules isn’t a loophole.

      1. My employer cancelled the PPO and POS, and now we’ve got to choose between Bronze, Silver and Gold. Sucks. Seriously sucks. It wouldn’t be so bad if I had a few grand laying around in case something happens before I can beef up the HSA to the point where I can cover the $4k deductible, but I don’t. So all I can do is hope.

    2. Why is it not “expected” that employers will simply cancel those Cadillac policies and sign up for ones that won’t be taxed?

      Because many of the Cadillac plans are union-negotiated benefits that can’t be dropped without the union’s permission.

      1. I’ve always suspected that the unions were told, don’t worry about this Cadillac tax. It’s just there to make the numbers work for the CBO. 2018 is a long way off, we’ll fix it for you before it ever touches you.

  10. Not the best way of addressing this? This seems to be about the worst way of addressing it. Hiding the tax in the employers expenses, so the employer is penalized for living up to Obamacare mandates for coverage but also for exceeding them. It puts all the power of defining what is acceptable health insurance into DHHS.

  11. I have one of these “Cadillac plans” – it still blows.

  12. For non-mouth breathers this was completely expected. Just like Stuart Smalley will happily vote to eliminate the medical device tax he voted for and claim victory for my fellow northern mongoloids enlightened elite.

    Entitlements always expand. Always.

  13. Obamacare was never meant to be deficit-neutral. The people writing it knew that was a lie from day one. That’s why they intentionally fudged the numbers so the Congressional Budget Office would play ball.

    1. It was never sold as deficit neutral. They gamed the shit out of it to keep the 10 year deficit from ObamaCare under $1TT.

  14. It’s official, Hillary is squarely under the White House bus. The New York Times has it’s marching orders. See NYT: Yes, Hillary Broke The Law.

    1. CORRECTION: The New York Times did not publish the article ‘Yes, Hillary broke the law.’ The article was published by the NYPOST. My apologies to the NYT.

  15. Repealing prescription laws would do far more if we actually want to reduce the cost of American health care and give people the freedom to make their own decisions as to their health instead of limiting people to what doctors want to prescribe. My own personal experience with being limited in my medical costs is the major reason today why I am a member of the Libertarian Party.

  16. So, I just got my companies updated employer-sponsored health plan details, and guess what?
    They are getting rid of the EPO, which covered 100% of costs as long as you stayed in-network, and replacing that with a HDHP with a $4,500 annual deductible. You can still join the PPO but it is 20% co-insurance.

    Thanks Obamacare!
    I suspect a lot of other people who thought that the ACA wouldn’t impact their employer-based plans are about to experience a rude awakening.

  17. ” The Cadillac tax also had the added benefit of scoring as a significant revenue raiser?one that went a long way toward helping Obamacare to be declared deficit neutral by the Congressional Budget Office.” — ??? Isn’t it obvious that these plans will be cut now that the cost has increased?

    I have always hated getting my “insurance” (really pre-paid medical) through my employer. I HATE having to change doctors because either I change employers, or the employers change plans. I HATE it. Getting it from government is the only thing worse.

    Please, just give me the option to buy catastrophic and let me pay cash for everything else.

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