Bush’s Obamacare Replacement Has a “Cadillac Tax”
While everyone else wants to repeal the tax, Bush is proposing a very similar policy.
Jeb Bush wants to do away with the Affordable Care Act’s “Cadillac tax”, a cost-control measure that slaps a tax on the most expensive health benefits and is a top Obamacare repeal target for Democrats and Republicans alike. Bush, like the rest of the 2016 GOP presidential field, doesn’t want to stop at the Cadillac tax: He wants to strike down the law completely.
But in his replacement health-policy plan, Bush wants to bring back the Cadillac tax, or at least something mighty close to it.
Bush spoke about his Affordable Care Act replacement Tuesday morning in a speech at the New Hampshire Institute of Politics, and he released further details of the plan on hiswebsite, where he referred to the Cadillac tax as “Obamacare’s complex and onerous ‘40 percent tax.’”
Bush’s own plan, however, calls for taxing benefits costing more than $12,000 for individuals or $30,000 for families. The level at which those benefits are taxed would vary with income.
That’s not too far from the Cadillac tax, which would invoke a 40 percent tax on benefits costing more than $10,200 for individuals and $27,500 for families.
Bush’s stated aversion to Obamacare’s “onerous” taxes, coupled with his inclusion of a high-end benefits tax in his own plan, highlights a hard truth of health policy: In order to successfully and simultaneously expand coverage, control costs, and avoid adding to the deficit, all health-reform plans need sticks to go with the carrots.
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Obamacare repeal: Bush did not mention the tax by name in New Hampshire, saying only that Obamacare needs to be repealed, “especially the new taxes on medical devices, drugs, and insurance, all of which drive up the cost of health care for middle-income Americans.”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.
Bush would additionally allow states to regulate their insurance markets and insurers to offer a catastrophic coverage plan. Insurers could then offer plans equivalent to the proposed tax credit, eliminating upfront out-of-pocket costs, while also giving people the option to choose plans with more benefits. The proposal keeps the ACA’s mandated access to coverage for those with pre-existing conditions.
The proposal also vaguely promised a “transition plan for the 17 million individuals entangled in Obamacare,” which is perhaps one of the weightiest policy proposals for Republicans calling for the repeal of the already-entrenched health care law. Specifics on how to do so, however, have yet to be outlined by any repeal advocates.
Bush’s proposals also focus on medical innovation, including several ideas similar to those in a House bill that passed in July called 21st Century Cures. Among other things, he would modernize the Food and Drug Administration’s regulatory process and increase funding for the National Institutes of Health.
While Bush’s repeal-and-replace proposals do little to set him apart from a crowded Republican field, his ideas about innovation have a better chance of doing the trick. They also bode well for him should he receive the party nomination: Medical innovation has bipartisan support and few, if any, opponents, making it a safe topic for the GOP to tackle in both primary and general elections.
On the other hand, his plan also would apply the Hyde Amendment to all funding and tax credits offered under his proposal, meaning effected coverage could not include most abortions. It would also prevent Title X funding from going to organizations that provide or refer for abortions, which would remove Planned Parenthood’s appropriated funding, and allow states to end Medicaid funding for those same organizations, which they are currently prohibited from doing.
“Bush’s ideas for replacing the ACA reflect an emerging Republican consensus,” Levitt said. “His other proposals in health care seem to be an attempt to differentiate himself.”