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Obama Economic Advisor Touts 'Cadillac Tax' as No. 1 Cost Saver

October 26, 2009 1:52 PM

DavisABC News' Teddy Davis reports:

President Obama's chief economic forecaster went to bat on Monday for a tax on high-priced insurance plans, the so-called "Cadillac tax," calling it "probably the number one item that health economists across the ideological spectrum believe is likely to stem the explosion of health-care costs."

"The Senate Finance Committee bill includes a tax on high-priced insurance plans, suggested by Senator Kerry. A policy along these lines, designed carefully, will encourage both employers and employees to be more watchful health care consumers," said Christina Romer, the chair of the Council of Economic Advisors, in a noontime speech to the liberal Center for American Progress in Washington, D.C. 

"It will discourage insurance companies from offering high-priced plans that would otherwise eat up larger and larger shares of workers' wages," she continued. "A policy such as this is probably the number one item that health economists across the ideological spectrum believe is likely to stem the explosion of health care costs."

Romer's full-throated endorsement of the "Cadillac tax" keeps the Obama administration at odds on this issue with some of its closest allies.

Organized labor has made killing the "Cadillac tax" a top priority and more than half of House Democrats have signed a letter to Speaker Nancy Pelosi urging her not to include a "Cadillac tax" in health-care legislation.The union-funded Health Care for America Now group recently launched a television ad attacking the "Cadillac tax" as the wrong way to pay for health-care reform.

Opponents of the "Cadillac tax" argue that it would hit the benefit packages of middle-class union members. They also worry that its impact across the country would be uneven, hitting firms with older workers harder than those with younger workers. Another concern is that the "Cadillac tax" contained in the Senate Finance Committee's legislation does not take regional differences in health-care costs into account on a long-term basis. 

During the question-and-answer period which followed her prepared remarks, Romer sidestepped questions from The Washington Post and ABC News about what the cost-control impact would be if Congress were to drop the "Cadillac tax."

On the question of how the "Cadillac tax" should be "designed carefully," Romer told ABC News that a handful of ideas were under consideration by Congress including: (1) making special provisions for high-risk occupations such as firefighters; (2) taking regional differences in health-care costs into account "for a period of time"; and (3) making special provisions for firms with older, more costly workers.

Among the multiple ideas touted as cost savers during her speech, Romer touted the capacity of a public insurance option.

She was less sure, however, about the impact that a public option with a trigger would have, citing a lack of plentiful data on the subject.

On the topic of uncompensated care, Romer seemed to acknowledge during the question-and-answer period that there would be a cost associated with the estimated 12 million illegal immigrants remaining uninsured under health-care reform efforts being pursued by President Obama and Democrats on Capitol Hill.

"The more uninsured care remains, the more state and local governments will be spending on it," said Romer.

The overarching message of Romer's address was that health-care reform is "the most significant act" the United States "could take to tackle the deficit."

Republicans have been using the country's $1.4 trillion deficit in fiscal year 2009 to argue that the U.S. cannot afford the cost of President Obama's effort to overhaul the nation's health-care system. The president told Congress that the final health-care bill must be paid for and keep costs below $900 billion over ten years.

"Done correctly," said Romer, "health care reform can genuinely slow the growth rate of health care costs and thus puts us on a path to greatly reduced budget deficits in the long run."

--Teddy Davis

October 26, 2009 | Permalink | Share | User Comments (67)

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Right and fining people thousands of dollars for not enrolling in DMV style "health care" is not a "tax" either acccording to Pelosi.

This is the second biggest scam the Dems have going now after Cap n Tax & yet the Republicrats hardly utter a whimper about it.

We have no more representation in DC anymore.

There is very little difference between Al Sharpton & Newt Gingrich and that is sad. Both parties are bathed in the blood of taxpayers.

Posted by: A. Lincoln | Oct 27, 2009 7:30:53 PM

You can quit work now and live off public assistance, charity soup kitchens and going to the ER for health care. Why don't you?
Posted by: jhw539 | Oct 26, 2009 4:25:09 PM
I will do that as soon as I get of the internet.Its easier to get on welfare than you think. Plus I won't have to give up anything. So thank you, to all you working stiffs who try to make a living by working hard and living the american dream.

Posted by: Lizzie | Oct 27, 2009 5:05:06 PM

“I was talking to friend from Australia esterday about the Australia, their Healthcare and taxes to support it. If you make over US$50,000 you pay 48% income tax and there is a 15% VAT on items purchased in stores.”

Australian Taxation Office, Tax rates 2009-10

• $1 – $6,000: $0
• $6,001 – $35,000: 15c for each $1 over $6,000
• $35,001 – $80,000: $4,350 plus 30c for each $1 over $35,000
• $80,001 – $180,000: $17,850 plus 38c for each $1 over $80,000
• $180,001 and over: $55,850 plus 45c for each $1 over $180,000

Even with the 1.5% Medicare levy, that’s nowhere near 48%.

And the VAT tax is 10%, not 15%.

Posted by: Jess Sayen | Oct 27, 2009 12:08:10 PM

I sure am glad that Ms. Romer, our Insurance Guru in the West Wing, isn't my insurance agent....."culd be"..."might be"...."not sure"....are answers I don't like. Can we just drop this whole Health Care(?) Reform nonsense, give the whole mess to the CBO (...the only straight answers I have heard from anyone down on the Potomac beaches), have them form a public Commission...and I mean "public"...and under no constraint that "we gotta take a vote"...."we need to keep our 60 votes in line"..adnaseum..let them come up with A ,,JUST ONE,.AGAIN, "a" plan which can be (A) clearly communicated to the American People..(B) vited on both Houses of Congress with NO AMENDMENTS
and signed into law by the President because We, The People say so.....this whole Tower of BABEL would be silly, but it is costing you and me money, and we don't like being held in an ignorant state, do we?

PS...I would give you more of my pearls of wisdom but I have to catch a flight to Europe to get a Swine Flu shot....aren't these people great????

Posted by: justj joey | Oct 27, 2009 10:21:46 AM

Will they heavily tax the very lucrative health plan that Congressmen and Senators get??

Posted by: Health Czar | Oct 27, 2009 9:14:24 AM

To those unfamiliar with the term "Cadillac Plan" - here's an easy definition. If you have a plan typical of the larger unions (UAW, etc.), or a plan typical of these offered by large firms, with little to no co-pays, and a low cap on out of pocket expenses, then you have a Cadillac plan. That's why the unions have been voicing their opposition to this tax, or looking for an exemption for any plans that are the result of collective bargaining.

Now - yesterday on MSNBC, and almost daily on the web, you can find "horror" stories from those whose medical problems ruined them financially. Many of these had insurance, but their insurance did not provide coverage that was extensive enough for their situation. So - what will be the net consequence of forcing an end to "Cadillac" insurance plans? - You will see a LOT MORE people with insurance who are vunerable to being wiped out financially because they were forced into a "lower cost" plan. Lower cost means less coverage - plain and simple. The health insurance industry operates already on one of the lowest profit margins of any business group. The industry wide margin (widely reported on AP in the past couple of days) was 2.2% in 2009, and typical margins are 6% or under. Computer network equipment makers, like Cisco Systems, based near Nancy Pelosi's home in California, have profit margins of around 20%. Yet - who does Pelosi rail against for having "HUGE" profits, who is an "EVIL" company? - Not Cisco, why it's those awful insurance companies who had profits last year of about only 1/10 the size of those in her "home area" industry.

There isn't a government operation in existence that can operate with anything close to the efficiency of a private business. All this talk about a "public option" being more competitive is hogwash - the only advantage these groups will have - and this is what makes them so dangerous - is that they have the dwindling number of American taxpayers to tap into to cover their losses. If the Postal Service was forced to "compete" without taxpayer assistance it would be out of business overnight. Same would be the case for any government run insurance option, but instead of them disappearing, it will be YOUR TAX DOLLARS (assuming you are not a member of the looter class) that will be disappearing down a rat hole.

Posted by: MidwestJim | Oct 27, 2009 9:00:21 AM

Hmmm, Faux Noise bemoans the fact that there is a shortage of H1N1 vaccine and blaming the (keep their grubby hands off my healthcare) government for the shortage. If there was a surplus of vaccine, these same folks would whine and complain about the waste of taxpayer $$$.

Posted by: repubswrong | Oct 27, 2009 7:47:47 AM

It would be nice if there was more clearification on what is ment by a "cadillac" insurance plan. I know executives get a better insurance plan than workers. I am currently assuming that plan would be placed in that definition. The border needs to be better conveyed.

Posted by: Wayne | Oct 27, 2009 7:02:07 AM

Thank God they won't consider taxing John Kerry, and Max Baucus friends the wealthy. That's okay, though because while we the middle class are paying for the health care, (which is why I chose Obama, over McCain) and oil, and food which will be going back up, we will hit the wealthy, as we go right back down the tubes, sending the precious stock market into another tailspin. We will also hit the low income people, by not eating out, or spending as much on retail. The default on loans will head back in the wrong direction. But at least we aren't making the wealthy pay any extra from the profits they make off the sweat of the middle class.

Posted by: Parma Hts Gary | Oct 27, 2009 7:01:44 AM

The problem with the current Health Plans is they can't pay for them without the cut in Medicare, Tax on the Cadillac Plans, and mandatory Health Insurance for all. I was talking to friend from Australia esterday about the Australia, their Healthcare and taxes to support it. If you make over US$50,000 you pay 48% income tax and there is a 15% VAT on items purchased in stores. Guess that free Healthcare stuff depends on how you define it.

Posted by: 56fle | Oct 27, 2009 5:55:44 AM

This is worrisome as we have a pretty good plan. It's not the 40k of Goldman Sachs, but it is decent. My husband is union and when the men were asked to forestall wage increases they opted to increase their benefits package. This is one of the few times I have to side with Rush and say "What is so wrong with making my life a little better? What is wrong with trying to not be a burden on society?" I like my independence. I like being self sufficient. In a country with the likes of Emerson and Thoreau I can't think of anything better.

Posted by: Mary Rowlands | Oct 26, 2009 10:31:56 PM

"the figures should NOT be interpreted as exact predictions, nor relied upon to be exact figures."

Meaning that we should expect the actual figure to be 20-25% higher than the projection? Sure...
___________________________________

No, meaning you should learn how to truthfully present information rather than just type trash for your own political purposes . .. .

Posted by: julieterra | Oct 26, 2009 10:23:33 PM

"the figures should NOT be interpreted as exact predictions, nor relied upon to be exact figures."

Meaning that we should expect the actual figure to be 20-25% higher than the projection? Sure...

Posted by: Fascist Hyena | Oct 26, 2009 9:20:33 PM

"What did Romer predict unemployment would be withou the stimulus? 8%."
___________________________________-

Romer (and the co-author) went to great pains in her report to state clearly that the figures should NOT be interpreted as exact predictions, nor relied upon to be exact figures.

Unfortunate the right wing is unable to read.

Posted by: julieterra | Oct 26, 2009 8:30:37 PM

What did Romer predict unemployment would be withou the stimulus? 8%.

And what did the Feds predict this year's income tax receipts would be? And how did that work out?

The seeds of catastrophe that are carried with these various congressional proposals are so evident, and so certain to grow, that it's hard not to simply laugh.

It really doesn't matter. Even without this cuckoo legislation the nation is headed pell-mell down a slope of unpayable public debt that there's no compelling reason not to hasten the inevitable. Let the serfs and yokels celebrate as they imagine themselves clambering a bit higher up the side they don't know is sinking.

Posted by: Fascist Hyena | Oct 26, 2009 7:58:42 PM

So we are going to reduce the cost of health care by taxing it to make it more expensive? I feel like I'm taking crazy pills.

Posted by: K. | Oct 26, 2009 7:23:07 PM

This seems to confuse health care (medical services and products) costs with health insurance (premiums charged) costs. Reducing health insurance benefits may reduce health insurance costs, but it does not logically lead to reductions in health care costs.

Posted by: ed | Oct 26, 2009 7:07:14 PM

Is Congress going to start paying their taxes for their Cadillac plans? You know, the ultimate healthcare they get for "free"? C/o us measly taxpayers funding it for them?

Posted by: FightTheSmears | Oct 26, 2009 6:22:33 PM

How long will it take for Podesta and Soros to sway Obama to push for legalizing pot?
I could use a pound or two to get me on the same mental path as congress.
Posted by: david | Oct 26, 2009 5:52:14 PM
*********
Thanks for my laugh of the day! Too funny!

Posted by: wheresmymoney | Oct 26, 2009 5:58:19 PM

As I understand it a cadilac plan means those plans that cover dental and eyecare in addition to the medical. So I assume if we have these two options, according to the Government spokesperson, that this is going to raise boatloads of money? In other words those of us who get out teeth cleaned and eye test cost are wealthy s.o.b's and need to pay more taxes for it? Huh?

How long will it take for Podesta and Soros to sway Obama to push for legalizing pot?
I could use a pound or two to get me on the same mental path as congress.

Posted by: david | Oct 26, 2009 5:52:14 PM

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