The White House embraced this idea for two reasons. One was to raise money; the other was to reduce costs. As President Barack Obama himself has recognized in his most recent version of the bill, there are much better ways to raise the funds to subsidize expanded health-insurance coverage. Obama's new proposal to raise Medicare taxes on high-income families is a fairer way of generating revenue than taxing premiums, many of which would fall on families with incomes of well under $100,000 a year.
The premise of "Cadillac" insurance, as even Paul obliquely recognizes, is partly a canard. Many premiums are very expensive not because workers have gold-plated policies but because they happen to work for employers with aging work forces. Because of the inefficiency and profiteering of the private insurance industry, many Chevrolet policies have Cadillac sticker prices.
Paul's premise that an excise tax on high-quality insurance is a good way of reducing costs over time is also debatable. The effect, more likely, would be to shift costs. If employers responded to this tax by moving their employees to lower-quality policies, the result would be higher deductibles, higher co-pays, and failure to cover medically necessary procedures and treatments. The affluent would simply pay out of pocket. The middle class would go without. This is less a case of "bending the cost curve" than it is another form of assault on ordinary Americans who have already taken a financial beating. A recent report by Citizens for Tax Justice concludes:
The Congressional Budget Office has concluded that neither the House nor the Senate bill would significantly change the trajectory of health costs over time. If we are serious about containing costs without cutting care, the only remedy is a single-payer system. Either we will eventually find our way to that true reform -- or find ourselves with a system that costs more and covers less.
After 14 months of buildup, this bill is a 50-50 proposition at best in the House for one big reason: It is filled with provisions that are dubious politics and not necessary policy. Citizens, and their elected representatives who must face the voters in November, do not like the mandate, they do not like the tax on premiums, and they don't like the diversion of Medicare funds.
Once the administration opted for subsidizing the existing insurance industry rather than promoting Medicare-for-all, the logic seemed relentless. You had to have a mandate with fines to prevent free riders, and you had to get a handle on the rising costs as well as find a lot of new money. At the time the early bills were being drafted, there seemed no alternatives to mandates, excise taxes, and Medicare savings. But as Paul has written elsewhere, a period of exclusion for people who refused to sign up is preferable to a mandate. And I think the evidence is overwhelming that taxing high-income households is preferable to an excise tax on the premiums of the working middle class, both as politics and as policy.
I did not support this path to health reform. But since it's the only one we're on, let's at least make it more attractive to the voters as well as more defensible policy.
