Looming Tax On High-End Health Plans Draws Heavy Fire : Shots - Health News The next fight about the Affordable Care Act unites business leaders, politicians and many unions against leading economists. Will the 2018 tax reduce health costs or just shift the costs to patients?
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Looming Tax On High-End Health Plans Draws Heavy Fire

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Looming Tax On High-End Health Plans Draws Heavy Fire

Looming Tax On High-End Health Plans Draws Heavy Fire

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RENEE MONTAGNE, HOST:

Also, another fight about the Affordable Care Act is underway. Starting in 2018, the so-called Cadillac tax will go into effect. It's intended to rein in health care spending by taxing employer health plans the government deems too generous. From Minnesota Public Radio, Mark Zdechlik reports on the controversial tax.

MARK ZDECHLIK, BYLINE: About half of Americans get their health insurance through their employer. The thinking was that slamming a hefty 40 percent tax on expensive health plans would make employers much more demanding shoppers. Former Senator Jeff Bingaman, a Democrat from New Mexico, helped come up with the idea.

JEFF BINGAMAN: It served a couple of purposes. I think we saw it as a way to keep the cost of health care from continuing to grow at the rate that it had been growing.

ZDECHLIK: And then there's the money part. The Congressional Budget Office estimates the tax will generate $87 billion by 2025. Estimates vary widely with some consultants insisting as many as half of all employer health plans are on track to trigger the Cadillac tax. Still, being on track to get hit and actually paying the tax are two different things, says Elise Gould of the Economic Policy Institute.

ELISE GOULD: Health insurance providers are going to provide plans that are cheaper. And all else equal, cheaper plans are thinner plans, which means that consumers are going to have to pay more out of pocket.

ZDECHLIK: Opponents of the tax fear more out-of-pocket costs for consumers will add to the difficulty many Americans already have paying medical bills now that high-deductible health plans are commonplace. Bipartisan bills to repeal the tax are moving in the House and Senate. Democratic Congressman Joe Courtney of Connecticut is leading the House effort to scrap the tax, even though doing so would add to the budget deficit.

JOE COURTNEY: Trying to control health care costs by sharply increasing people's out-of-pocket cost is not good health policy because it discourages people from getting care that they need.

ZDECHLIK: Business groups, including many health care companies and the U.S. Chamber of Commerce, support repealing the tax, as do many unions. It's even becoming an issue in the presidential race. Several candidates on both sides want it repealed. But proponents of the tax say making workers pay more for health care will reduce wasteful spending. Henry Aaron of the Brookings Institution is among a large group of economists who are urging lawmakers not to repeal the tax.

HENRY AARON: I can tell you stories about my own experience where doctors interacting with me were quite explicit in saying, well, are you covered for insurance on this? If so, let's do it. I'm not sure it's going to make any difference in your treatment, but you'll feel better.

ZDECHLIK: The Cadillac tax could cut annual U.S. health spending by 3 to 4 percent. That's as much as $60 billion by 2024. Still, economist Jared Bernstein thinks the threat of the Cadillac tax is exaggerated.

JARED BERNSTEIN: I don't think that it's going to be nearly as biting as lots of people claim.

ZDECHLIK: That's because plans deemed excessive would be taxed only on the amount that surpasses the annual limit.

BERNSTEIN: The issue isn't how many plans are over the threshold, it's how much of the plan's costs are over the threshold. And if you look at that, you get a much smaller number.

ZDECHLIK: The Cadillac tax is the latest in a string of attempts to bring down the cost of health care by shifting more of the bill to consumers and encouraging them to be savvier shoppers. But some critics of that approach say it dodges the real problem, how much hospitals, doctors and other health care industry players charge. For NPR News, I'm Mark Zdechlik in St. Paul.

MONTAGNE: That story is a part of a reporting partnership with NPR, Minnesota Public Radio and Kaiser Health News.

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