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UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who covered Washington during all or part of ten of America's presidencies and who has edited alternative journals since 1964. The Review, which has been on the web since 1995, is now published from Freeport, Maine. We get over 5 million article visits a year. See prorev.com for full contents of our site

January 12, 2010

THREE LIES BEHIND OBAMA'S PROPOSED TAX ON WORKING CLASS HEALTH PLANS

Bill Salganik, Counterpunch - The theory behind the so-called "Cadillac tax" on high-premium health plans is that [some people] have too much health insurance, which causes them to get more medical care than they need. . .

There are three key ideas put forward in support of the benefits tax-the tax will hit only lavish plans, it will help bring down health costs, and employers will pass the cost savings directly into wages.

All are wrong.

The myth of rich-benefit "Cadillac" plans is the first flaw in the theory. By 2019 the benefits tax would hit one-fifth of households making between $50,000 and $75,000 a year, according to figures from the Congressional Joint Committee on Taxation. The tax would pose a heavy burden on working families.

Studies by the Economic Policy Institute and for the policy journal Health Affairs show that plans with big premiums don't necessarily have big benefits.

Rather, high premiums go with an older workforce, because older people use more medical services. Smaller employers are also more likely to be affected; they pay, on average, 18 percent more than large employers for the same benefits, according to the White House Council of Economic Advisers. And health costs also tend to be higher for women, so work groups that have large female representation-such as teachers, nurses and telephone call center employees-are more likely to be taxed.

An average family policy in Miami costs more than $20,000 a year-meaning the average policy comes close to the "Cadillac" definition in the Senate's legislation-while a policy with the same benefits in Phoenix costs less than $15,000, according to the actuarial consulting company Milliman. The difference has nothing to do with "Cadillac" benefits. It's a function of prices and medical practice styles in the different markets.

Second, supporters say the tax would hold down health costs by pushing employers into less expensive plans. If there were cheaper plans out there that offered equivalent benefits, opponents counter, employers would already be in them. Instead, the only way employers can make plans less expensive is by cutting benefits-and that's what nearly two-thirds of employers plan to do, according to a survey by Mercer, a benefits consultant. And that means higher co-pays and deductibles.

Ah, say supporters of the tax, if consumers face higher out-of-pocket costs, they'll cut out unnecessary care and shop for better prices. Studies show that consumers do use less care when they have to pay more, but they cut back on necessary as well as unnecessary treatments.

That can lead to higher costs down the road. For example, one study tracking higher co-pays for office visits and prescriptions found that workers did cut back-but that savings were offset by higher hospital admissions, especially for older workers and those with chronic health problems.

Third, supporters of the benefits tax also say that people don't have to worry about a tax on benefits. Sure, the employers would trim benefits but wages, they say, would go up as health costs came down.

A report from the Economic Policy Institute tracking health costs and wage growth over the past 20 years concluded that isn't so. While there's some connection between wages and benefit costs, employers are more likely to keep any savings for themselves rather than pass them on to workers, especially in an economy with high unemployment.

Bill Salganik is a member of CWA Local 32035, the Washington-Baltimore Newspaper Guild, and does writing and research for a CWA Web site,.

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