Of Cadillacs and Cadillac Plans
A smart e-mail on the Democrats’ proposal to tax “Cadillac” insurance plans to pay for Obamacare (note: some Obamacare supporters claim the tax will actually drive health-care costs down as businesses drop expensive plans in response to the tax):
Taxing “Cadillac” insurance plans in order to lower health care costs is like taxing actual Cadillacs to reduce automobile costs; it makes no sense at all. High end health insurance plans are like luxury cars; they are the most profitable ones to sell. The costs of any extra services a consumer might use are smaller than the increased charges for the plan just like the price of a Cadillac is much more than the extra cost of the leather seats and V8 engine. Luxury plans actually subsidize the lower cost, lower profit, stripped down insurance plans the same way that Cadillac sales subsidize economy Chevies. By discouraging companies from offering top tier health insurance to their employees, this plan will actually raise the price of insurance for everyone else. Health insurance prices don’t rise because some people choose to spend a lot on it any more than car prices rise because some people choose to spend a lot on them. These people are economic illiterates!
Aside from the obvious motive to raise taxes, I believe that discouraging people from getting greater health coverage (with their own money!) is intended to reduce pressure on the government to provide better benefits to those who are insured by the government. All those Boomers who are on private plans now are going to expect Medicare to give them comparable benefits. They and all those that will get the new “public option” aren’t going to tolerate the cut rate, rationed service that Obama wants them to accept to keep the budget from exploding. If the Dems can pressure everyone to accept less through by punishing those who choose to buy more with taxes, then Obamacare won’t compare so badly.