Repeal of Cadillac Tax, HIT Tax and Medical Device Tax Part of Budget Deal
Source: Associated Press, by Ricardo Alonso-Zaldivar
The bipartisan budget deal announced in Congress protects access to health care under the Affordable Care Act but it also ditches one of that law’s main cost controls.
The deal would repeal a cost-control measure in “Obamacare” known as the Cadillac Tax, an unpopular levy on benefit-rich health insurance plans scheduled to take effect in 2022.
That means Congress is upsetting the balance between expanding access and controlling costs that former President Barack Obama tried to strike in his signature law, said Kathleen Sebelius, who served as his health secretary.
“President Obama thought it was very important to have additional access paid for,” said Sebelius. “This just takes a big step backwards.”
The deal was reached in late stage negotiations between congressional leaders and Treasury Secretary Steven Mnuchin as part of a broader agreement to keep the government operating past this weekend. As part of the package, the Trump administration would be barred from using its rule-making authority to take certain actions that would destabilize the ACA’s health insurance markets.
But it punts on the two biggest consumer health care issues this year: curbing prescription drug costs and ending surprise medical bills. Lawmakers will try again early next year — when another round of budget legislation is due.
The Cadillac Tax was intended as a levy on the most generous plans, pegged at 40% of the value above a certain threshold. In 2022 that threshold would have been $11,200 for single coverage and $30,100 for a family plan, according to the nonpartisan Kaiser Family Foundation. One in five employers would have been affected.
The tax was widely supported by economists and health policy experts, who argued it would help confront the problem of high U.S. health care spending. That’s because employers were expected to scale back their plans or shift costs to workers to avoid paying. Many employers and labor unions opposed it from the beginning.
“It could have meant higher deductibles for employees or less choice,” said Cynthia Cox, who leads research on the Obama health law at the Kaiser Foundation. Repeal will “have a positive effect on a lot of people with health insurance coverage.”
But critics said taxpayers will be on the hook for more debt, since repeal of the Cadillac tax and two other unpopular “Obamacare” levies is estimated to add about $400 billion to the federal deficit over 10 years.
“The Cadillac tax may have resulted in some modest cost increases when it took effect, but what it was actually going to do is reduce health care costs, which would have raised wages,” said Marc Goldwein, of the nonpartisan Committee for a Responsible Federal Budget, which advocates for reining in the nation’s $1-trillion deficit.
Here’s an overview of some of the other major health care components of the budget deal:
— Also repeals the health law’s health insurance tax and its sales tax on medical devices. These taxes were intended to help pay for the cost of expanding coverage under the health law, which currently provides insurance to about 20 million people. Even without these taxes, most of the law’s financing stays in place.
—Blocks the Trump administration from issuing regulations that would end the health law’s automatic re-enrollment provision, or from shutting down a state-level workaround called “silver loading,” which has helped stabilize “Obamacare”premiums.
—Extends and increases Medicaid funding for U.S. territories, including Puerto Rico.
Filed Under: ACA/Health Reform