Two new papers published today in Health Affairs could help turn opinion against the excise tax, especially from an academic perspective. Using a combination of analysis and interpretation, six researchers reached essentially the same conclusion: The excise tax would be unfair in its impact, and there is no reason to believe it would effectively target unnecessary medical care despite the claims made on its behalf.
The first paper, entitled "Taxing Cadillac Plans May Produce Chevy Results," contained the findings of a study by four well-regarded researchers. They mined data from the 2007 Kaiser Employer Benefits Survey and other sources, drawing the following conclusions:
"Health reform provisions that treat these plans like luxuries may be misguided. Only 3.7 percent of variation in the cost of family coverage can be explained by benefit design (actuarial value)."
- "... (D)ifferences in plan characteristics over and under the standard deduction are not ... dramatic."
- Industry is a highly significant factor.
- "(B)ecause the cost of medical inputs and the health status of employees are beyond the employer's control, inadequacies identified in this paper likely would exist after a limit was established."
Their conclusion? "Our inquiry suggests ... that analysts should not equate high-cost plans with Cadillac plans, but that in fact other factors—industry and cost of medical inputs—are as important in predicting whether a plan is a high-cost plan. Without appropriate adjustments, a simple cap may exacerbate rather than ameliorate current inequities." (emphasis mine)
Health Affairs also published a companion essay by Joseph White and Timothy Jost entitled "Cadillacs or Ambulances?" (White is Professor of Public Policy, Chair of the Department of Political Science, Professor of Epidemiology and Biostatistics, and Director of the Center for Policy Studies at Case Western Reserve University; Jost is a law professor with extensive health credentials.) As I and others have done, White and Jost liken the bill's effect to that of the Alternative Minimum Tax:
"(T)he bill defines a Cadillac price, not a Cadillac plan. Just as the Alternative Minimum Tax started as a tax on the very rich and eventually extended to much of the middle class, the “Cadillac plan” tax will over time cover an increasing number of mid-range sedans as well."
Jost and White conclude: "(B)enefits deemed “excessive” due to their cost for many groups are likely to offer average protection from medical risk," adding:
"How serious could this inequity be? We do not know – but neither do advocates for the excise tax, who, when asked, agree that there are no good data on which plans cost how much and for what reasons."
Their money quote is here:
"As drafted, the “excise” tax is simply a fall-back cost-control method that targets beneficiaries: if health care costs rise too quickly, the federal government will slash health insurance benefits for people in the employer-based system, even if costs are high because of need for care." (emphasis theirs, not mine)
The tide may be turning against the academic community's seeming consensus in support of the excise tax. We are beginning to see some meaningful analysis, rather than merely policy groupthink. That may make all the difference in the weeks to come.