The Cadillac tax was included in the ACA to help pay for the law, to attempt to control health care costs, and to address the government revenue lost by the tax exclusion of employer-provided health care plans. But lately, the tax has come under fire both on and off the Hill, and both Hillary Clinton and Bernie Sanders have come out against it. Some employers are already beginning to cut benefits to avoid hitting the tax threshold, and advocates say those cuts are not being made up for in terms of increased taxable wages.
Republicans, meanwhile, have done less singling out of the tax, instead preferring to pledge a full-scale Obamacare repeal: Bush did not mention the tax by name in New Hampshire, saying only that Obamacare needs to be repealed, “especially the new taxes on medical devices, drugs, and insurance, all of which drive up the cost of health care for middle-income Americans.”
Health experts note, however, that some of the GOP replacement plans contain similar measures to the oft-criticized Cadillac tax: “Interestingly, as many Democratic candidates are moving away from the Cadillac plan, Jeb Bush and other Republicans are advocating a cap on the tax subsidy for employer-provided health benefits that would accomplish much the same thing as a tax on high-cost insurance plans,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation.
In each chamber, two bills have been introduced repealing the tax, with cosponsors falling largely along party lines with some bipartisan overlap. Senate Democrats introduced their bill with the caveat that the repeal must be offset.
But therein lies the problem with the Cadillac tax: Repealing it would cost somewhere in the ballpark of $90 billion, which not only makes finding an offset highly improbable, but also highlights the price tag of the employer-insurance-tax exclusion.
Experts have always said it was only a matter of time before Republicans advocating for repeal of the Cadillac tax clashed with conservatives pushing for traditional health policy. Committees have yet to take up any of the bills, but if they do, presidential politics will almost certainly complicate the bills’ path forward.
“Most serious health care proposals put forward by Republicans and conservative policy experts include limits on the exclusion for employer sponsored insurance,” Ed Lorenzen, a senior advisor at the Committee for a Responsible Federal Budget, said in August, when momentum was building for repeal of the tax. He added that this could be a “problem politically, because the rhetoric behind repeal of the Cadillac tax will make it harder to enact any changes in tax treatment of high cost health plans.”
The Rest of Bush’s Repeal and Replace Health Care Agenda
Most of Bush’s other proposals are popular conservative ideas, including providing tax credits for people who don’t receive insurance from their employer, increasing contribution limits for health savings accounts, allowing small businesses to make tax-free contributions to their workers’ plans, and strengthening the safety net. Criticizing Medicaid’s cost and regulations, his plan gives each state a capped allotment of federal funding, holding states accountable for outcomes while allowing them to choose their own approaches.