Wondering about the Senate's funding for health care? Read the Medicare actuary's report:

Over at Balloon Juice, John Cole is lashing out at those who are complaining about the Senate's funding mechanism for health care. (Senate: tax a portion of employees' health insurance over a certain amount; House: tax millionaires.)

The post elicited over 300 responses. One of the more interesting was this: (emp in original comment)

The Raven

This is based on the Medicare actuary’s report on the plan. The takeaway here is in this paragraph at the bottom of page 11:

Another provision that would tend to moderate health care cost growth rates is the excise tax on high-cost employer-sponsored health insurance coverage in section 9001 of the bill. In reaction to the tax, many employers would reduce the scope of their health benefits. The resulting reductions in covered services and/or increases in employee cost-sharing requirements would induce workers to use fewer services. Because plan benefit values would generally increase faster than the threshold amounts for defining high-cost plans (which are indexed by the CPI plus 1 percent), over time additional plans would become subject to the excise tax, prompting those employers to scale back coverage. [or prompting Congressional patches, which would themselves become political footballs] This continuing cycle would have a moderate impact on the overall growth of expenditures for employer-sponsored plans. [Italics mine.]

Jon Walker covered this at FDL; he’s a lot more readable than the medicare actuary.

The Senate bill appears to take the view that if you reduce spending on healthcare (partly by putting the onus on the individual), that costs will drop. Without going into a ton of economic theory - with demand curves and all - that presumption is hard to accept. And even if costs did go down, would it be proportional to the reduction in spending? That's not clear either.

But beyond that, the Senate's funding mechanism is terrible politics. It taxes the mid-to-upper middle class (but not the rich) to help those worse off. That has been shown, repeatedly, to generate resentment.

SPEAKING OF THE POLITICS: Another commenter wrote this: (edited/re-formatted)

... my take is more on the ... optics of the thing ...

Obviously cost control is needed, as well as funding for the new subsidies, and there are several measures for it in the Senate bill, but which one is the most visible? The so-called “Cadillac tax”.

Now, sell a bill with tepid cost control measures to the voting middle class. Tell them that some subset of them have to be moved to slightly poorer health plans. Fine, a small sacrifice for the good of the country.

Now tell them about the other high-profile cost control measures in the Senate bill.

• Single payer, public option, or national exchange that will entail a sacrifice from the insurance industry? BZZZZZZZZZZT.
• Medicare expansion/buy-in that will entail a sacrifice from providers? BZZZZZZZZZZT.
• Drug re-importation that will entail a sacrifice from drug companies? BZZZZZZZZZZT.
• Surtax on million dollar incomes that will entail a sacrifice from the rich? BZZZZZZZZZZT.

This will be demagogued as a welfare plan for the poor paid for by a tax on the middle class, with the “fat cats” giving up little.

No matter what John Cole, his readers, you or I think about this, there will be a big problem getting the Senate's excise tax accepted by the House. Recent reports indicate over 100 House members are opposed to the Senate approach. Pelosi cannot sway that many legislators. This will be a huge problem in the coming weeks. It will also be a chance to watch how effective the White House is in these circumstances.


posted by Quiddity at 1/08/2010 07:59:00 AM