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Dems Enhance Cadillac Tax--Will Labor Unions Defect From Health Care Reform?
Richard Trumka, AFL-CIO President
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Yesterday, Rep. Rob Andrews (D-NJ) told me and several other reporters that the long wait for CBO numbers had a lot to do with making sure the final language would survive the constraints of the budget reconciliation process--and that required tweaking some of President Obama's proposed changes to the Senate health care bill. One of the tweaks Democrats have had to make, according to lawmakers, has to do with the excise tax on high-end health care plans--the so-called "Cadillac tax."
The change is technical, but important, particularly because labor unions still don't like the Cadillac tax and don't want to see it enhanced. In the Obama proposal, the Cadillac tax was designed to impact high-end health insurance policies--$27,500 per year policies for families, and $10,200 per year policies for individuals. Those thresholds were to be indexed to the Consumer Price Index plus one percent. In order to get the CBO scoring right, Democrats had to drop the additional one percent, meaning the threshold for those insurance plans subject to the Cadillac tax will rise more slowly over time.
Why is that important? Because health care inflation is so high, insurance premiums tend to rise more quickly than CPI-plus-one-percent, meaning that, over time, more and more high-end plans would be subject to this tax. That results in major cost savings, but it also means more employer-provided benefits will be taxed as time goes on. Now that they've lowered the index to general CPI, the incidence (and the savings) will be even greater still.
That's part of the reason why AFL-CIO President Richard Trumka went to the White House yesterday for an unscheduled meeting, and why he's meeting with his AFL's executive council later today. However, this change is not expected to upend AFL's support for the legislation.
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mans_best_friend
March 18, 2010 11:28 AM
$27,500??? Really?? I have a pretty decent policy and it costs half that. And the tax doesn't kick in for years, so there's plenty of time to make adjustments. Besides, by bending the cost curve, the cost of those policies should come down. I'm soooo tired of ME ME ME ME.
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KY Yellow Dog
March 18, 2010 12:16 PM in reply to mans_best_friend
Really? I have an employer-provided individual plan that's bare bones and costs $8,000 per year. At current health care inflation rates, I'll be paying a tax on my plan next year.
Or rather, my employer will reduce my coverage to something that costs less than 8K and is actually worth about 8 cents.
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Why oh why
March 18, 2010 12:17 PM in reply to mans_best_friend
Obama killed the public option, killed drug re-importation, and is now busting unions to finance his hand-out to the health care industry, rather than raising taxes for the rich like the House wanted to. As for costs, only single-payer would really cut them.
Most progressive president ever!
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Cal Gal
March 18, 2010 1:23 PM in reply to mans_best_friend
How old are you? Where do you live?
One thing that could be troublesome about the tax on health plans is that unless health insurance rates are regulated, the insurance companies themselves could make it impossible for older people, especially those in the individual market, to get NON Cadillac plans.
Between 60 and 65, it's pretty hard to get a low cost policy, no matter how high your deductible and copays.
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rosebowl
March 18, 2010 11:38 AM
Hey, Brian Beutler, give it a rest already, ok? Stop with this constant negativity and fear-mongering headline. Two hours haven't even passed, and yet another attempt on your end to sow doubts and insecurity.
Why do you always have to be TPM's resident bedwetter?
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Joekuh
March 18, 2010 11:42 AM in reply to rosebowl
It's a legit question.
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mcc
March 18, 2010 12:13 PM in reply to rosebowl
Actually I think this is a really important bit of news and I haven't seen it reported elsewhere yet.
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Brian Beutler
March 18, 2010 1:29 PM in reply to mcc
I agree with Joekuh and mcc :)
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JadeZ
March 18, 2010 11:56 AM
This place does not report the news or report progressive issues. It tries to anger the readers but never questions the truth of the argument.
Example.
Republicans will never support Obama health plan!
OK fine we know all that.
But tell us why democrats should support it and where are the voices of progressives who also oppose it?
You will never see the liberal/progressive voice on TPM.
Why haven you seen a real discussion here of kucinichs bill?
This is a liberal site(HAHA) where's the (archives)fight for progressive health care reform?
That's the point everyone here misses.
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Peter Principle
March 18, 2010 12:10 PM in reply to JadeZ
Why haven you seen a real discussion here of kucinichs bill?
Um, maybe because Kucinich's bill hasn't got even a remote prayer of passing -- and Kucinich himself now supports the bill that does have a chance to pass?
And if by progressive you mean pie-in-the-sky infantile ultra leftism, then no, I suppose you're right: This is not a progressive site.
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DA in LA
March 18, 2010 12:54 PM in reply to Peter Principle
I look forward to your anger in November because we you kids behind.
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Capn Chucky
March 18, 2010 1:13 PM in reply to DA in LA
What?
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mcc
March 18, 2010 1:37 PM in reply to Capn Chucky
You are on your way to destruction.
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Numbersguy
March 18, 2010 1:40 PM in reply to JadeZ
What are you, Ripette von Winkel? For the last year, progressives have been trying, pretty much unsuccessfully, to get more progressive stuff in the bill.
It has been, for 20 reasons, a total failure.
What we have is what we are going to get.
It's like, GET A FUCKING CLUE.
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eclecticbrotha
March 18, 2010 12:02 PM
Labor unions will NOT torpedo health reform because they know skyrocketing health costs are the single biggest drain on real wages. If you contain costs, fewer union members need the higher end health plans.
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mcc
March 18, 2010 12:23 PM in reply to eclecticbrotha
I think you have it right. If health care costs continue to rise faster than inflation, the unions will have a big problem whether the bill passes or not. The unions need health care costs to STOP rising faster than CPI.
What this really underscores is that Congress will HAVE to return to the cost issue. This bill lays good grounds for a future hypothetical bill to rein in health care costs but this is not by any stretchable cost control bill. It never was, that just wasn't the goal the Democrats started with (the goal was coverage). Of course the excise tax is itself a cost control mechanism but that will be not much comfort to anyone whose coverage falls under it...
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mcc
March 18, 2010 12:27 PM in reply to mcc
"any stretchable". I meant "any stretch a"
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Joekuh
March 18, 2010 12:28 PM in reply to mcc
The goal was coverage.
Exactly.
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Measure for Measure
March 18, 2010 2:34 PM in reply to mcc
Yes, democrats will have to return to the cost issue (and probably the coverage issue as well). But the plan has lots of cost control measures. See the wsj article by health expert David Cutler:
http://online.wsj.com/article/SB10001424052748703936804575108080266520738.html
For completeness, here's a firedoglake critique of the Cutler's column. He doesn't dispute that the Senate bill contains costs: he just adds a handful of things that it doesn't do:
http://fdlaction.firedoglake.com/2010/03/10/former-obama-aide-david-cutler-ignores-proven-cost-control-ideas-to-inflate-grade-on-president%E2%80%99s-health-care-plan/
With respect, mcc overstates his case by a notch.
This health care bill is not a final fix and to think that it could be is naive. But it's truly an excellent start and it's the most serious attempt at medical cost control in US history.
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Lalo35adm
March 18, 2010 12:15 PM
So basically the Cadillac tax is going to be a version of the AMT and will creep to affect more and more people because the real costs of health care will rise faster than inflation.
Wow, thanks for the gift....
But I know that the unions are not any more charm-proof than a lifelong progressive sellout Kucinich was.
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Tony Harkney
March 18, 2010 1:48 PM
Nice to know that while America's labor unions paid lip service to supporting the public option, when it really came down to it, their priority was to protect the benefits of their most highly paid members. What inspiring leadership.
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waltersobchak
March 18, 2010 2:10 PM
I think everything we've seen in the past year from labor comes from a belief that they figured they were going to be screwed here, and so they needed to just help get a bill passed that offered near universal coverage and then move on to making life hell for those who backstabbed the unions and killed the public option (and EFCA, etc). Look at what they're doing to Blanche Lincoln.
They don't want to be blamed for killing the bill, because the right would have a media field day, and know they have eight years to get a fix done. Their strategy seems to be pressuring the Dems who always take them for granted, and hoping down the line something can be worked out, especially if they strike fear in wayward Dems. It seems to have worked on Arlen Specter, actually.
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gracious
March 18, 2010 2:30 PM
My husband is in his early sixties and already pays the$10,000 per year premium since he has a "preexisting condition" and we are a small group. We also have a $2000.00 annual deductible and a $4000.00 "out of pocket" cost> In addition he already can only get 50% of his drugs paid for and he has a $1000.00 per month drug expense. So I have to wonder exactly what we are getting. By 2014 he at least will be eligible for Medicare, what about the rest of the country?
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AnonymousCoward
March 18, 2010 8:33 PM in reply to gracious
The rest of the country will be protected from that kind of gouging since discrimination on the basis of pre-existing conditions will be illegal.
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Badger51`
March 18, 2010 3:04 PM
Re: Comments that threshold numbers are "high" enough
Keep in mind that many unionized firms tend to have older, long term employees. Insurance for a group with an average age of 50 or 55 is going to be much more expensive that a group with lower average ages.
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Weiwen Ng
March 18, 2010 7:17 PM in reply to Badger51`
Also keep in mind that now, the threshold will be modified according to industry and (I believe) average workforce age. The deal that the President struck significantly improved the Cadillac tax - I would still have supported it before, but it was definitely a blunt instrument.
Excluding health insurance from income tax costs the government $200-250 billion PER YEAR. in contrast, the subsidies are only going to total $100-150 billion per year to start. It is very hard to pay for health reform without touching that subsidy. You can pay for it by upping taxes on the rich, but then that takes away tax dollars we could have used to shore up the Medicare trust funds and Social Security, to invest in education and infrastructure, to expand the earned income tax credit and other anti-poverty measures.
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gracious
March 18, 2010 3:09 PM
Badger 51: That was my point. For many older workers,that $10,000.00 for an individual cut off has already been reached. Blue Shield of California raised our small group rates by 57% last November. I can't imagine what they will do by 2014.
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AnonymousCoward
March 18, 2010 8:36 PM in reply to gracious
Unless their costs actually go up by that much, they'll have a hard time doing that without running into the ceiling on overhead and profits.
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