AFTER DECADES of intolerable coverage gaps and seemingly uncontrollable cost increases, the country’s health insurance system is moving toward resolving both issues. Thanks in part to the Affordable Care Act, only 11.6 percent of adults lack insurance, according to the Gallup Organization, as compared with 14.6 percent before the Great Recession. Health spending as a percentage of the economy, meanwhile, held steady at 17.5 percent from 2009 through 2013, according to the federal government. Cost-growth resumed in 2014 , driven partly by expanded coverage and partly by short-term drug-price hikes, but the increase was in line with forecasts and even a tad more modest than expected.
You’d think there’d be no way the Senate would even consider doing away with a law that would help keep the favorable momentum going. You would be wrong: On Thursday, 90 of 100 senators voted to repeal the Affordable Care Act’s most important coverage-expanding, cost-controlling provision. We refer to the 40 percent excise tax on the value of employer-paid health plans that exceeds $10,200 for individuals or $27,500 for families, which is scheduled to take effect in 2018.
Current law provides a tax exclusion for employer-paid insurance. This is how nearly half the public gets insurance, but the exclusion subsidizes overutilization of health care, causes “job lock” by linking work and insurance, and redistributes income upward because tax breaks increase in value for higher income brackets. According to the Congressional Budget Office, 34 percent of the benefits go to the top 20 percent of income earners.
Repealing the exclusion would have been a progressive way to curb health-care costs and raise revenue for coverage expansion. Taxing high-value plans was a second-best solution that would claw back $87 billion in revenue between 2018 and 2025, according to the CBO.
Corporations and labor unions hate the tax, however: the former because it’s a tax (and hits high-paid executives); the latter because union plans are generally lusher than those of other workers. With both the U.S. Chamber of Commerce and the AFL-CIO lobbying for repeal, it’s a miracle the Senate vote wasn’t 100-0. All three Democratic presidential candidates have capitulated to labor on the issue, and of course all the Republicans oppose the tax because they oppose Obamacare, of which it is a part.
Hypocrisy reigns in both parties. On the Republican side, the tax, or something like it, has formed a part of past health reform proposals and would probably be part of future ones as well (former Florida governor Jeb Bush includes a version in his Obamacare replacement idea). As for the Democrats, opposition to the tax belies their professed commitment to progressive taxation — to say nothing of loyalty to President Obama and his signature domestic policy achievement.
The only good news is that the Senate vote was mainly symbolic, on a bill that Mr. Obama will surely veto if it reaches his desk. The ultimate fate of the tax probably won’t be settled until his successor takes office in 2017. We already knew that person would be someone who opposes it. The vast majority of the next Senate is now on the record in favor of doing the wrong thing, too.
Read more on this issue: