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If viewers were hungry for a little health care info yesterday from the talk shows, they wouldnât have learned much from George Stephanopoulosâs interview with Christina Romer, chair of the White House Council of Economic Advisers. Stephanopoulos began by saying that the president now supported taxing benefit-laden health insurance plans as a way of raising money to subsidize the uninsured, who will have to buy their own coverage. And while theyâre at it, the taxes on these so-called Cadillac plans will ostensibly reduce the cost of medical care.
The taxes will will force employers to offer workers cheaper plans not subject to the tax, with fewer benefits. Without the richer benefits, the theory goes, workers will think twice about going to the doctor. So if these Cadillac plans become more expensive because of the tax, then not as many people will choose them. Instead, they will choose plans with fewer benefits. Eventually, with fewer health services being used, the total amount the country spends on medical care will drop. The cost curve will be bent. That point is contentious, and so is the idea of taking good benefits away from union workers who sometimes gave up higher wages for better health benefits. That made Stephanopoulosâs interview with Romer really timely.
Stephanopoulos noted that some labor leaders call the Cadillac tax a middle-class tax increase that could hit up to 40 percent of union workers. Romer tried mightily to dodge Stephanopoulosâs question about how many union workers the tax would ultimately affect, and instead said âthe important thing the president has said that he thinks that this excise tax on Cadillac plans is importantâ and has been convinced by experts all over the ideological spectrum that this âgenuinely slows the growth rate of costs.â
âEven if itâs a middle class tax increase?â Stephanopoulos pressed.
Said Romer:
You know I think that the numbers that you were hearing, you know, that the levels where this is being setâI think the current number is something like $23,000 for a plan, a family plan—thatâs a very high levelâand exempts an awful lotâŚ
Her answers got more confusing as the interview went on. Stephanopoulos tried to challenge her, asking if she was willing to raise the exemption level from $23,000, which he said affected one in four union members, to $27,000, which could affect one in fourteen. Romer replied:
No, youâyou absolutelyâI think youâve got to be very careful on the numbers. Theyâre actually, as itâs being developedâtheyâre being, you know, changes made to make sure that, if youâve got just older workers and thatâs why your costs are higher, or things like that, if youâre a first responder, so weâve been very receptive toâyou know, arguments like that, and also, theâyou know, sort of theâlevel at which you set. I think the important thing is theâyou know, the incentives that it provides to genuinely slow the growth rate of costs. If this thing works just right, nobody hits it, right, becauseâprecisely because it slows the growth rate of costs.
No, Ms. Romer. The public doesnât know. I, for one, didnât know what you meant by older workers and higher costs. Did you mean that insurance provided by companies with lots of older employees should be subject to the tax or not subject to the tax, or something else? And the comment about first responders really puzzled me. I thought of 9/11.
Stephanopoulos acknowledged that slowing down the cost of care could mean that âinsurance plans might be dropped.â And then he turned to an increase in medical costs predicted by Medicareâs actuary. The conversation got muddy. It is unlikely that most of ABCâs viewers understood that slowing the cost of medical care in employer-based plans might reduce the cost of Medicareâa big chunk of the federal budget and a contributor to the deficit, which Romer said would shrink because of the excise tax. Whew!
For readers who want a fullerâand clearerâexplanation of the excise tax on the Cadillac plans, Campaign Desk recommends Saturdayâs story in The New York Times. The piece was a good blend of explanation and politics. The explanation part gave the rationale for the taxâthe Senate probably would not go along with the Houseâs plan for funding subsidies, an income tax surcharge on rich people. An aide to Senate Finance Chairman Max Baucus said the tax would also incentivize employers to find the best possible cheaper plans. She didnât mention what benefits would look like under a less expensive plan; that would have been a good point for the Times to make.
The paper did let the unions push back on other arguments made by economists, including one by the ubiquitous Jonathan Gruber from MIT, who predicted that the excise tax might just raise workersâ wages from 2010 to 2019. Balderdash, countered the president of the United Steelworkers, Leo Gerard.
The people who are promoting this tax say companies will make up for this with higher wages. These people who say that have never been at the bargaining table. It doesnât work that way.
It does kind of call into question Mr. Gruberâs experience with the nitty-gritty of collective bargaining.
The political part examined what might happen to Democrats in the fall elections if they support a tax that affects workers and the middle class. Ron Gay, an AT&T repairman in Ohio who urged co-workers to vote for the president, told the Times: âIf this passes in its current form, a lot of working people are going to feel let down and betrayed by our legislators and president.â
The story lede did mention another important political point: When John McCain talked about taxing health insurance benefits during the campaign, and many union workers were thinking about voting for him, the labor unions steered them back to Barack Obama, repeatedly saying McCain wanted to tax their health benefits. Later in the piece, the Baucus aide said there was a difference between what McCain wanted to do and what Obama supports. McCain wanted to eliminate all tax breaks for employer-provided plans, and the president just wants to tax policies that fall above a certain threshold. Some experts view Obamaâs approach as a way to ultimately end the tax breaks. The finer points of all this are the subject of another post. Still: Is that the reason Christina Romer had so much trouble finding the right words to say?
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