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Taxing Our Patients

As the New York Times reports, there is a jumbo fight brewing among Democrats over just how much they’re going to tax the middle class in the name of health-care reform. Senate Democrats want to tax so-called Cadillac health-care plans to pay for the gargantuan health-care bill, while House Democrats don’t think it’s a good idea to whack middle-class voters, and especially union members. Well, on this one, House Democrats have a point:

In a preliminary estimate, the Congressional Joint Committee on Taxation calculated that absent any such employer efforts, 14 percent of family health policies and 19 percent of individual policies would be hit by the tax in 2013. By 2019, according to the estimate, 37 percent of family policies and 41 percent of individual policies would be affected. Those numbers rise over time in these calculations because although the initial tax threshold would increase with the economy’s overall inflation, premiums would be expected to rise even faster.

The tax really won’t be paid, because employers will start cutting back on health-care benefits, say supporters of the scheme. Turning Cadillac health-care plans into Yugo health-care plans won’t be so easy for unionized employers with collective bargaining obligations. But the idea that the problem will be “solved” by taking away current health-care benefits runs smack into Obama’s promise that we’ll all get to keep the health-care benefits we have. Apparently we won’t.

And let’s suppose all employers cut back so there aren’t so many Cadillac plans out there. Where is the money going to come from to pay for the whole scheme? We were promised, you recall, that this reform was going to save money. Well, not if the tax doesn’t materialize.

You can’t help but marvel at what’s going on here. The Democrats are fighting among themselves on how to tax and slash health-care benefits for their own constituents. Democrats fear doing nothing on health-care reform and that wary voters will punish them for inaction. But once voters catch on to what that action is, they may be very, very upset.



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