Health-care reform bill's proposed tax on high-cost plans raises questions

A Rand study from the 1970s found that higher co-pays and deductibles led patients to limit medically necessary care as much as wasteful care, possibly leading to more costly health-care needs later.

"The consumer-directed-health-care crowd argues that with high cost-sharing, patients will do the only legitimate . . . cost-benefit calculus -- but that surely is nonsense," said Princeton economist Uwe Reinhardt. "None of these proponents has ever shown that patients are even capable of evaluating the clinical merits" of treatment options.

Opponents of the tax say the case for it assumes that the country's high health-care costs are the result of patients' overuse of care. But, they note, the country's usage of medical care is by many measures lower than in other developed countries; it is the price that is so much higher here.

"The biggest problem we have isn't that we're demanding so many services, but it's that the type of services we're providing are so expensive," said Thomas Rice, a UCLA health-care expert.

Some economists also doubt that employers would shift savings from health care into wages, given how slack the labor market is likely to be for the foreseeable future.

Jonathan Gruber, an MIT economist and a leading proponent of the new tax, dismisses these concerns. Even if the tax hit some high-cost plans that are not particularly lavish, it would still goad employers generally to seek lower-cost plans, he contends. "The argument that because it won't cause efficiency in every case, we should therefore not do it, is a dumb argument," he said.

Bringing the plans below the tax threshold would require only slightly higher deductibles, he said, enough to make people more cost-sensitive but not enough to make them skip necessary care. "If you take people at the level where they're spending $23,000, that's not skimpy insurance, and . . . if you raise their co-pays or deductibles, that's not going to adversely affect their health," he said. "There's literally no evidence out there that people are going to suffer."