Congress Repealed Major Elements of Obamacare and Almost No One Noticed

The elimination of three health care taxes will increase the deficit by $373 billion.


You can be forgiven for not having noticed, but at the tail end of 2019, Congress repealed three significant components of Obamacare. 

The three repealed provisions were all taxes, each of which was included in the initial legislation as a way of raising revenue to pay for the hundreds of billions in spending the law called for. By far the biggest of the three was the so-called Cadillac tax, which was expected to raise about $197 billion over the next decade. Congress also nixed the law's health insurance tax, projected to raise $150 billion over 10 years, and the medical device tax, projected to raise $25.5 billion. All three taxes were eliminated as part of a $1.4 trillion year-end budget bill that President Trump signed at the last possible minute in order to keep the government open. 

The repeal of these taxes was predictable, as all three were marked for death from the outset because of the interest groups lined up against them. The Cadillac tax had already been delayed, thanks to pressure from unions, among others, who worried that it would hit their high-priced health benefits. The health insurance tax faced relentless opposition from the health insurance industry, and the medical device tax was the target of heavy oppositional lobbying from the industry it taxed. 

You may be wondering: What is the problem with the repeal of a bunch of taxes no one ever really liked? That is probably what the lawmakers who voted to end the taxes were thinking too. 

The main effect of eliminating these taxes will be to increase the deficit by a little more than $373 billion over the next decade—and, in the process, to further weaken a central argument made by supporters of the law. 

Obamacare was passed on a promise that it would be deficit-neutral, or even reduce the deficit slightly, with spending cuts to existing health care programs and tax hikes falling heavily on health care industry groups to offset the nearly $1 trillion in additional spending the law would require during its first decade. And, indeed, the Congressional Budget Office estimated that the law would reduce the deficit during its first decade, provided that all of its provisions were enacted as the statute called for. 

But over the years, many of those pay-fors have been whittled down; not only this trio of taxes, but also the CLASS Act, a long-term care program that was packaged with Obamacare largely to goose the deficit estimates. That program was eliminated after it proved fiscally unsustainablemore budget gimmick than substantive policy.

It's difficult to track the specific budgetary effects of a piece of legislation this far into its life, but it's safe to say that the actually existing Obamacare of 2020 is less fiscally responsible than the Obamacare of 2010, which only ever existed mostly on paper. 

The elimination of these taxes also serves as a broader lesson in the limits of American health care policy and the ways in which promises of fiscal responsibility tend to fall by the wayside as political considerations take center stage. 

The repeal of the Cadillac tax is particularly notable. The provision, which imposes an excise tax on high-cost health plans, was intended not only as a revenue raiser but as a way to hold down health care spending and mitigate the negative effects associated with the tax carve-out for employer-sponsored health insurance. As The New York Times noted last summer, the Cadillac tax "was expected to be a key cost-containment provision in President Barack Obama's signature health law and one of the main ways it was supposed to pay for itself.

One can certainly argue about whether the Cadillac tax was the best mechanism by which to hold down health care spending, or whether even in a stronger form it would have done much to de-link health coverage from employment. But what's clear, in retrospect, is that even if it wasn't the best policy, it was the best policy that could pass, in part because it was an indirect attack on employer-sponsored insurance rather than a full-frontal assault. And yet, over the course of a decade, it was delayed and ultimately repealed—a failed policy, not because it didn't work, but because politics wouldn't even let it try. 

One might argue that taxing individual health insurance was always political folly, and that the health law should have leaned more heavily on industry taxes, but the repeal of both the health insurance tax and medical device tax offer reminders of the power of industry-specific lobbying. Nor can one really argue that tougher, more principled legislators would have helped—the medical device tax was opposed by a bipartisan group of legislations, including, notably, Sen. Elizabeth Warren (D–Mass.). Massachusetts, the state she represents, is home to a thriving medical device industry. 

There are obvious lessons here about what we might expect from various plans to "pay for" Medicare for All and other expansions of government-provided health coverage; about the shameful and predictable ways that interest group lobbying on both the right and the left interact with lawmakers' what-me-worry approach to spending and deficits; and about how little public attention these issues command. The history of American health policy is a history of ambitious ideas watered down and undermined by the predictable forces of politics. 

If nothing else, it's a reminder that this is how Washington lawmaking often works: One Congress passes a law setting up an expensive new program—in this case, an expansion of Medicaid and subsidies for private health insurance—along with a system to pay for it. Years later, amidst a bipartisan spending binge, those taxes are repealed while the rest of the program remains on the books. The public barely notices, and the lawmakers involved simply shrug and move on. The result is legislation that is fiscally ruinous, but also more popular. There is a reason that debt and deficits have continued to climb ever upwards: That is what the public wants.