Healthcare Reform: Middle Class Tax Hit Coming, NYT Columnist Says

The New York Times ran a column December 28 that argued millions of middle-class taxpayers would be hit by a 40 percent excise tax if the Senate version of healthcare reform legislation becomes law.

Author Bob Herbert writes, "There is a middle-class tax time bomb ticking in the Senate's version of President Obama's effort to reform health care. The bill that passed the Senate with such fanfare on Christmas Eve would impose a confiscatory 40 percent excise tax on so-called Cadillac health plans, which are popularly viewed as over-the-top plans held only by the very wealthy. In fact, it's a tax that in a few years will hammer millions of middle-class policyholders, forcing them to scale back their access to medical care."

That can't be, though, can it? Candidate Obama campaigned on a pledge to not raise ANY type of taxes on middle class wage earners--not income taxes, not capital gains taxes, not ANY taxes.

Herbert continues, "The tax would kick in on plans exceeding $23,000 annually for family coverage and $8,500 for individuals, starting in 2013. In the first year it would affect relatively few people in the middle class. But because of the steadily rising costs of health care in the U.S., more and more plans would reach the taxation threshold each year. Within three years of its implementation, according to the Congressional Budget Office, the tax would apply to nearly 20 percent of all workers with employer-provided health coverage in the country, affecting some 31 million people. Within six years, according to Congress's Joint Committee on Taxation, the tax would reach a fifth of all households earning between $50,000 and $75,000 annually. Those families can hardly be considered very wealthy."

So how will wage earners and employees respond? Herbert says that instead of paying a 40 percent tax on healthcare policies, employers and individuals who buy their own health insurance will choose to reduce the quality of the plans they currently have.

Herbert writes, "These lower-value plans would have higher out-of-pocket costs, thus increasing the very things that are so maddening to so many policyholders right now: higher and higher co-payments, soaring deductibles and so forth. Some of the benefits of higher-end policies can be expected in many cases to go by the boards: dental and vision care, for example, and expensive mental health coverage."

He continues, "Proponents say this is a terrific way to hold down health care costs. If policyholders have to pay more out of their own pockets, they will be more careful - that is to say, more reluctant - to access health services. On the other hand, people with very serious illnesses will be saddled with much higher out-of-pocket costs. And a reluctance to seek treatment for something that might seem relatively minor at first could well have terrible (and terribly expensive) consequences in the long run."

Herbert concludes, "The tax on health benefits is being sold to the public dishonestly as something that will affect only the rich, and it makes a mockery of President Obama's repeated pledge that if you like the health coverage you have now, you can keep it."

Of course, some of us have argued all along that individuals would not be able to keep their current plans, and that there was no way to increase coverage and lower costs without raising taxes on the middle class.

http://www.nytimes.com/2009/12/29/opinion/29herbert.html?_r=3