Has the bud­get pack­age to­taled the Cadil­lac tax?

Modern Healthcare - - NEWS - By Shan­non Much­more

The tem­po­rary freezes on three Af­ford­able Care Act taxes ap­proved by Congress last week won’t have an im­me­di­ate im­pact on the law’s cov­er­age ex­pan­sions, but could dam­age its fi­nanc­ing if the taxes are in­def­i­nitely sus­pended or re­pealed, ex­perts say.

Congress ap­proved the tax de­lays as part of a sweep­ing pack­age of tax cuts worth more than $600 bil­lion. Law­mak­ers also ap­proved a $1.15 tril­lion spend­ing pack­age.

The tax leg­is­la­tion in­cludes de­lay­ing for two years im­ple­men­ta­tion of the ACA’s so-called Cadil­lac plan tax, which was sched­uled to go into ef­fect in 2018. It also freezes for two years the law’s 2.3% ex­cise tax on med­i­cal de­vices that be­gan in 2013, a big win for the de­vice in­dus­try that’s ex­pected to boost prof­its. And it de­lays the tax on health in­sur­ance pre­mi­ums by one year, which could lower pre­mi­ums.

Those changes are pro­jected to cost

more than $30 bil­lion over two years, ac­cord­ing to Congress’ Joint Com­mit­tee on Tax­a­tion. The White House said the pres­i­dent will sign the tax and spend­ing bills.

The pack­age in­cludes a $2 bil­lion fund­ing in­crease for the Na­tional In­sti­tutes of Health, and a con­tin­ued re­quire­ment that the ACA’s risk-cor­ri­dor pro­gram, which com­pen­sates health in­sur­ers that sign up sicker-than-ex­pected pop­u­la­tions on the in­sur­ance ex­changes, be deficit-neu­tral. That pro­vi­sion has been blamed for fi­nan­cial losses among many in­sur­ers sell­ing ex­change plans.

Not in­cluded in the leg­is­la­tion was a pro­vi­sion hos­pi­tals sought to ex­empt those cur­rently build­ing out­pa­tient fa­cil­i­ties from re­cent Medi­care siteneu­tral pay­ment rules.

The de­lay of the three ACA taxes was the cul­mi­na­tion of sev­eral years of in­tense lob­by­ing by la­bor unions, em­ploy­ers, med­i­cal-de­vice makers, and health in­sur­ers to roll back those levies. It re­sulted from a deal be­tween Democrats, who sup­port the ACA but want to please their la­bor union al­lies who hate the Cadil­lac tax, and Repub­li­cans who op­pose the en­tire ACA and need Demo­cratic sup­port to roll back other fi­nanc­ing mech­a­nisms as well. Some ob­servers see the deal as a shrewd way for House Speaker Paul Ryan to chip away at the law’s foun­da­tions with the goal of even­tual re­peal.

Of the three de­layed ACA taxes, there was the great­est con­cern about the Cadil­lac tax, be­cause the Obama ad­min­is­tra­tion and many econ­o­mists ar­gued that it would help con­trol health­care spend­ing.

It im­poses a 40% levy on the value of em­ployer-spon­sored plans that ex­ceed $10,200 for in­di­vid­u­als and $27,500 for fam­i­lies. About a quar­ter of em­ployer health plans would have been sub­ject to the tax in its first year, in­creas­ing to 42% by 2028, ac­cord­ing to the Kaiser Fam­ily Foun­da­tion.

Many em­ploy­ers have been shift­ing more costs to employees through higher de­ductibles and cost-shar­ing, and have cited the loom­ing Cadil­lac tax as a fac­tor.

Loren Adler, re­search di­rec­tor at the Com­mit­tee for a Re­spon­si­ble Fed­eral Bud­get, a deficit hawk ad­vo­cacy group, said if the tax ul­ti­mately is re­pealed, which he thinks is likely, em­ploy­ers will re­duce their ef­forts to

“This is a dan­ger­ous, slip­pery slope to­ward squeez­ing pro­gres­sive and ad­e­quate fund­ing for health in­sur­ance, which will even­tu­ally lead to a re­duc­tion in ben­e­fits.” THEDA SKOCPOL Gov­ern­ment pro­fes­sor, Har­vard Univer­sity

con­trol the costs of em­ployee health ben­e­fits. Congress, he said, is los­ing sight of the im­por­tance of the ACA’s pay-fors and cost-con­trol fea­tures. “It’s ba­si­cally just econ­o­mists and pol­icy wonks push­ing for it,” Adler said. “And econ­o­mists aren’t great at mes­sag­ing, ap­par­ently.”

James Klein, pres­i­dent of the Amer­i­can Ben­e­fits Coun­cil, which rep­re­sents em­ploy­ers, said his group sees the two-year de­lay of the Cadil­lac tax “as a first step to­ward the ul­ti­mate goal of re­peal.”

He said the fed­eral es­ti­mate of how much rev­enue the tax would bring in was greatly over­stated be­cause it as­sumed em­ploy­ers would in­crease wages as health ben­e­fit costs fell, boost­ing fed­eral in­cometax col­lec­tions. “Em­ploy­ers just sim­ply say that that’s not go­ing to hap­pen,” Klein said.

What really mat­ters is how the next pres­i­dent ap­proaches the is­sue of the Cadil­lac plan tax, said Linda Blumberg, a health­care re­searcher at the Ur­ban In­sti­tute.

The three Demo­cratic pres­i­den­tial can­di­dates all have called for re­peal­ing the tax, which la­bor unions hate. Some GOP pres­i­den­tial can­di­dates have called for lim­it­ing the tax ex­clu­sion for em­ployer health plans, but also have de­nounced the Cadil­lac plan tax.

Blumberg said that while there will be an ef­fort to find al­ter­na­tive cost­con­tain­ment tools, pow­er­ful stake­hold­ers will re­sist, making it dif­fi­cult to reach po­lit­i­cal con­sen­sus. “When you say cost con­tain­ment, that means some­body is get­ting paid less on the provider side,” Blumberg said.

Theda Skocpol, a Har­vard Univer­sity pro­fes­sor of gov­ern­ment who stud­ies health­care re­form, warned that re­peal­ing the taxes with­out re­place­ment rev­enue will cre­ate strong po­lit­i­cal pres­sure af­ter the 2016 elec­tions to shrink ACA cov­er­age ex­pan­sions. “This is a dan­ger­ous, slip­pery slope to­ward squeez­ing pro­gres­sive and ad­e­quate fund­ing for health in­sur­ance, which will even­tu­ally lead to a re­duc­tion in ben­e­fits,” she said.

“[We} see the two-year de­lay of the Cadil­lac plan tax as a first step to­ward the ul­ti­mate goal of re­peal.” JAMES KLEIN Pres­i­dent Amer­i­can Ben­e­fits Coun­cil

Mem­bers of Congress and aides walk down the East Front steps of the House of

Rep­re­sen­ta­tives af­ter the last sched­uled vote of the year Dec. 18. The om­nibus bill

to fund the gov­ern­ment passed Congress and now heads to the pres­i­dent’s desk.

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