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Paying for Obamacare


An e-mail:

I appreciated your post regarding the SFC health care bill.  Here is my question.  It seems to me that the Dems make two points regarding the proposed tax on high-end insurance packages: on the one hand, they point to substantial revenue resulting from the tax.  On the other hand, they suggest that it will bend the cost curve downward as the taxes discourage employers from choosing such plans (which are thought to drive up overall health costs), or employees from enrolling in them.  I am not an expert, but it seems to me that the one can only be true to the extend that the other isn’t — you might see either the additional revenue or the overall cost savings, but certainly not both.  Am I missing something?

The Dems are assuming that employers will shift their savings into taxable wages as the excise tax discourages them from providing “Cadillac plans” to their employees. But as McArdle points out, what if they don’t? When we’re talking about a heavily unionized industry like autos, we’re talking about an industry that has shifted a lot of its wages (taxable) into health benefits (untaxable) in order to save money without cutting overall compensation. McArdle suggests that, in response to the tax, these industries might just cut benefits without increasing wages. You wanna know why unions oppose the Baucus bill? That’s why.


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