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Two reports underline the significant problems with the bill passed by Senator Baucus and the Senate Finance Committee yesterday. In short: The bill is not affordable and includes a substantial tax increase on middle class Americans.
A report released by Health Care for America Now highlights the affordability problems in comparison with the late Senator Kennedy’s HELP Committee bill. Broken out by state, the numbers are stark [pdf]:
The U.S. Senate will make a choice this month between two health reform options that affect the affordability of health coverage for America’s families. One bill does not require employers to contribute to the cost of employees’ health insurance but requires a typical family in Nebraska to spend an average of 18.5 percent of family income for health insurance premiums and out-of-pocket costs. Another bill requires shared responsibility from employers and asks a typical middle-income family in Nebraska to contribute $2,419 less each year toward their family’s coverage than the alternative.
Here is the comparison of what a typical middle-class family would pay under either bill:
Where a family making $55,100 per year would pay $5,200 in total costs for health care under Kennedy’s HELP bill, the Finance bill would force them to pay almost twice as much – $9,100, or 16.5% of their income.
Why the difference? First, the Finance bill does not include a public health insurance option, which, if included, would lower premiums. Second, the Finance bill is paid for with a tax increase on the middle class, the so-called “excise tax.” (More on that shortly.) Third, the Finance bill has much less generous subsidies. The result is that middle class families will have to purchase insurance exclusively from private companies, and that insurance will not be affordable.
Needless to say, the American public is against the idea. The Finance bill – like other bills on the table – would require everyone to purchase health insurance. That idea is only supportable if it’s affordable to families and if it gives us a choice. 64% of Americans reject a mandate without a public health insurance option. 60% support the idea if they can choose a public option.
A report released yesterday by Communications Workers of America (CWA) [pdf], compiling data from the Joint Committee on Taxation (JCT) and an analysis by Citizens for Tax Justice (CTJ), further repudiates the notion that the Finance Committee bill would make health insurance affordable for Americans:
The so-called “Cadillac” tax (also known as an excise tax) on health care plans proposed by the Senate Finance Committee would actually slam 40 percent of health care plans and disproportionately hit middle-class workers, older workers, and those in hazardous jobs, a new report released today reveals. Moreover, there would be about a $7,800 average tax increase between 2013 and 2019 to households affected by the tax — and middle income households making $50,000 to $75,000 affected by the tax would see their taxes increase 2% while millionaires affected would see their tax increase just 0.1%, according to the report.
The idea for the “Cadillac” tax or “excise” tax is based on the false notion, common in health policy circles, that if only people in America felt the cost of their health insurance in their wallets, they would use less health care and thus lower costs for everyone. Proposals eliminating or adjusting the tax exemption people get for health care at work (the cost of your health plan through work is not taxed as income, as other benefits often are) aim to correct this “problem” and tax people with “gold-plated” or “Cadillac” health care plans – supposedly richer than the average family – who are spending beyond what’s necessary.
Policy wonks also love this idea because it raises a ton of money, helping pay for health reform. Policy wonks miss what America gets.
The cost of your health care plan is not directly related to your income. Plenty of people who make solidly middle-class wages have “Cadillac” health care plans. Why? Their union may have negotiated a better plan for them, or they may have taken the job specifically for the benefits. Either way, as the CWA report makes clear, a “Cadillac” tax does not just affect the rich. Under the Senate Finance proposal, 40% of health care plans in this country would be eventually taxed.
The charts here are striking. For example, middle-class families making $50,000 per year would face a $1,000+ tax hike by 2019:
All this begs the question: Why tax the very people health care reform is supposed to help to pay for it?
The middle class doesn’t need another tax hike. Health reform should indeed be paid for, but it should be paid for by those in society who can most afford it. And indeed, that idea is popular. Most Americans support paying for health care reform by increasing the surtax [pdf] on those households making more than $350,000 per year.
Let’s review:
- The Senate Finance Committee bill would ask middle class families to pay almost $4,000 more per year for health care costs – a total of 16.5% of their income – than Kennedy’s HELP bill.
- On top of that, the Finance Committee bill would tax middle class families more than $1,000 per year for the health care plan they already have.
Why is the Finance bill so bad? Because it specifically avoids solutions that are popular in America [pdf], 60% to 40%.
Americans oppose having to buy insurance exclusively from private companies, but they support having to buy insurance if and only if there is a public health insurance option available. Not surprisingly, Americans think holding the insurance companies accountable and lowering costs – which the public health insurance option would do – is important.
Americans also oppose being taxed to pay for health care. Instead, they’d rather see the richest in society asked to pay their fair share after the free ride they got under Bush’s tax-cuts-for-the-rich. A bonus: This kind of fair financing would raise more money, allowing for more generous subsidies that would make health care truly affordable to families, as we see in Kennedy’s HELP bill and the House bills.
As the Senate moves on to the next step, they have a choice. Will they move forward with a bill that makes health care affordable, gives us the choice of a public health insurance option, asks employers to pitch in their fair share, and is fairly financed? Or, will they move forward with the Finance bill, which lacks all this and is “a dream come true of the health insurance industry.”
(also posted at the NOW! blog)
I’m proud to work for Health Care for America Now
5 Comments
It’s too bad the idea of raising income taxes in a progressive way is anathema–would seem to make sense not to burden middle class families with costs when income tax rates on wealthy Americans have been sharply cut over the past 30 years.
Really amazing, right? Taxing the rich is so toxic, and yet it’s a basic progressive principle for them to pay their fair share.
yeah, the Republicans have done a great rhetorical job (over the past several decades, really) of making taxes absolutely toxic–and talking about taxing the rich is attacked as socialism or class warfare. I was surprised to look at historic tax tables and see that the highest marginal tax rate was, for many years, much, much higher. At some point, someone needs to make the case that government can’t provide things people want without taxing, and the fairest way to raise revenue is thru progressive taxation.
Thanks.
And no, I don’t have yellow teeth.
As if the Democrats haven’t already pillaged the treasury empty, now they’re siphoning off our income to send to the insurers to appease their Wall Street investors.