We refer to the bill’s permanent repeal of three key funding sources for Obamacare: a 40 percent excise tax on the value of relatively high-cost “Cadillac” employer-paid health insurance plans; an annual tax on premiums collected by health insurers, allocated according to each insurer based on market share; and a 2.3 percent excise tax on the value of medical devices sold within the United States. Taken together, the elimination of these revenue-raisers will cost roughly $373 billion over a decade, of which $197 billion comes from repealing the “Cadillac tax,” $151 billion from ending the fee on health insurers and $25 billion from the tax cut for medical device-makers, according to the Joint Committee on Taxation.
Compounding the damage is the fact that each tax also served legitimate health-market policy goals, in addition to helping pay for expanded coverage. By reducing incentives for excessive consumption of services, the Cadillac tax would have helped slow the overall growth of health costs. As for the health insurance tax and the medical device tax, those are the rough equivalents of partial rebates to the government for the expanded business those firms enjoyed because of Obamacare.
Of course, repeal is a bit redundant in that Congress has delayed or suspended each of the taxes at least once; indeed, the Cadillac tax has never been imposed, because of repeated “postponements.” Yet permanent elimination represents a final capitulation to the interest groups that opposed them. Both the GOP-aligned U.S. Chamber of Commerce and pro-Democratic labor unions waged a relentless campaign against the Cadillac tax, the former because it was hostile to Obamacare and taxes generally; the latter because union contracts often call for lusher-than-average health benefits. Among the leading Democratic presidential candidates, Sens. Elizabeth Warren (Mass.) and Amy Klobuchar (Minn.) have been particularly dogged foes of the tax on medical devices, in deference to home-state industry. Something to remember as they, and their rivals, promise tax hikes to pay for health-care expansion.
Obviously, there are policy downsides to the Obamacare taxes; less device innovation, say, or slightly higher insurance premiums. At least they address the truth that there is no free lunch; when government expands services, it should find a way to pay for them and make reasonable choices as to distributing the costs. Bipartisan comity, so rare in Washington, has been achieved in the abandonment of that elementary proposition.