The Republicans are looking everywhere for funds to fix healthcare, as well they should.
This problem is not an easy one to solve, however. Under the Affordable Care Act,
employers were faced with the Cadillac tax. As a result, they wasted no time planning to
mitigate the effect. While the Democrats seemed to believe that this was a pot of gold
available to solve some of the cost issues, the reality turned out much differently.
Consultants, like me, have spent the last few years planning for our clients to avoid ever
paying the Cadillac tax. Employers fled to health savings accounts, self-insured plans
and any strategy that would reduce costs below the taxable threshold. Instead of a pot of
gold, there was a leprechaun at the end of the rainbow waiting to laugh at the CBO
scoring, which had predicted billions in revenue.
Now, some prominent Republicans are looking to limit the employee health insurance tax
exclusion or its counterpart, the employer deduction, to fund healthcare for the
uninsured. Hopefully they take the time to look closely at the potential impact of this
decision.
Peeling back the onion, altering the tax-favored status of employer-provided benefits will
have the same effect as the Cadillac tax — employers are going to plan around it. More
than 175 million Americans get healthcare through their employer, and this is not a
progressive benefit. If the employer exclusion is eliminated there would be little incentive
for employers to continue to provide benefits — and if they do, the pressure to reduce
costs, and thus benefits, will be intense. The impact on lower-paid workers would be far
greater than the more highly-compensated group.
FINDING THE POT OF GOLD
Politicians may not be listening, but the effect of this change in tax treatment would be
the opposite of what is desired. We need to go after the cost of healthcare. That’s the pot
of gold.
Here are some suggestions to go after cost:
- Further encourage the shift from pay-for-volume or pay-for-services-rendered to reimbursement of providers based upon value and the outcome of treatment.
- Make drug pricing fairer; eliminate rebates which obscure real prices and regulate obscene pharmaceutical profits for patent-protected drugs.
- Introduce meaningful tort reform.
- Expand Medicaid in every state. This is the platform that should be used for subsidized care.
Each one of these changes is going to require a great deal of effort, but they are better
than an ill-fitting Band-Aid which, is just going to make healthcare even more expensive
for the individual.
