Jeb Bush’s Obamacare Replacement Has a “Cadillac Tax” Of Its Own

While everyone else wants to repeal the tax, Bush is proposing a very similar policy.

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Caitlin Owens
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Caitlin Owens
Oct. 13, 2015, 2:53 p.m.

Jeb Bush wants to do away with the Af­ford­able Care Act’s “Ca­dillac tax”, a cost-con­trol meas­ure that slaps a tax on the most ex­pens­ive health be­ne­fits and is a top Obama­care re­peal tar­get for Demo­crats and Re­pub­lic­ans alike. Bush, like the rest of the 2016 GOP pres­id­en­tial field, doesn’t want to stop at the Ca­dillac tax: He wants to strike down the law com­pletely.

But in his re­place­ment health-policy plan, Bush wants to bring back the Ca­dillac tax, or at least something mighty close to it.

Bush spoke about his Af­ford­able Care Act re­place­ment Tues­day morn­ing in a speech at the New Hamp­shire In­sti­tute of Polit­ics, and he re­leased fur­ther de­tails of the plan on his web­site, where he re­ferred to the Ca­dillac tax as “Obama­care’s com­plex and oner­ous ‘40 per­cent tax.’”

Bush’s own plan, however, calls for tax­ing be­ne­fits cost­ing more than $12,000 for in­di­vidu­als or $30,000 for fam­il­ies. The level at which those be­ne­fits are taxed would vary with in­come.

That’s not too far from the Ca­dillac tax, which would in­voke a 40 per­cent tax on be­ne­fits cost­ing more than $10,200 for in­di­vidu­als and $27,500 for fam­il­ies.

Bush’s stated aver­sion to Obama­care’s “oner­ous” taxes, coupled with his in­clu­sion of a high-end be­ne­fits tax in his own plan, high­lights a hard truth of health policy: In or­der to suc­cess­fully and sim­ul­tan­eously ex­pand cov­er­age, con­trol costs, and avoid adding to the de­fi­cit, all health-re­form plans need sticks to go with the car­rots.

The Ca­dillac tax was in­cluded in the ACA to help pay for the law, to at­tempt to con­trol health care costs, and to ad­dress the gov­ern­ment rev­en­ue lost by the tax ex­clu­sion of em­ploy­er-provided health care plans. But lately, the tax has come un­der fire both on and off the Hill, and both Hil­lary Clin­ton and Bernie Sanders have come out against it. Some em­ploy­ers are already be­gin­ning to cut be­ne­fits to avoid hit­ting the tax threshold, and ad­voc­ates say those cuts are not be­ing made up for in terms of in­creased tax­able wages.

Re­pub­lic­ans, mean­while, have done less singling out of the tax, in­stead pre­fer­ring to pledge a full-scale Obama­care re­peal: Bush did not men­tion the tax by name in New Hamp­shire, say­ing only that Obama­care needs to be re­pealed, “es­pe­cially the new taxes on med­ic­al devices, drugs, and in­sur­ance, all of which drive up the cost of health care for middle-in­come Amer­ic­ans.”

Health ex­perts note, however, that some of the GOP re­place­ment plans con­tain sim­il­ar meas­ures to the oft-cri­ti­cized Ca­dillac tax: “In­ter­est­ingly, as many Demo­crat­ic can­did­ates are mov­ing away from the Ca­dillac plan, Jeb Bush and oth­er Re­pub­lic­ans are ad­voc­at­ing a cap on the tax sub­sidy for em­ploy­er-provided health be­ne­fits that would ac­com­plish much the same thing as a tax on high-cost in­sur­ance plans,” said Larry Levitt, a seni­or vice pres­id­ent at the Kais­er Fam­ily Found­a­tion.

In each cham­ber, two bills have been in­tro­duced re­peal­ing the tax, with co­spon­sors fall­ing largely along party lines with some bi­par­tis­an over­lap. Sen­ate Demo­crats in­tro­duced their bill with the caveat that the re­peal must be off­set.

But therein lies the prob­lem with the Ca­dillac tax: Re­peal­ing it would cost some­where in the ball­park of $90 bil­lion, which not only makes find­ing an off­set highly im­prob­able, but also high­lights the price tag of the em­ploy­er-in­sur­ance-tax ex­clu­sion.

Ex­perts have al­ways said it was only a mat­ter of time be­fore Re­pub­lic­ans ad­voc­at­ing for re­peal of the Ca­dillac tax clashed with con­ser­vat­ives push­ing for tra­di­tion­al health policy. Com­mit­tees have yet to take up any of the bills, but if they do, pres­id­en­tial polit­ics will al­most cer­tainly com­plic­ate the bills’ path for­ward.

“Most ser­i­ous health care pro­pos­als put for­ward by Re­pub­lic­ans and con­ser­vat­ive policy ex­perts in­clude lim­its on the ex­clu­sion for em­ploy­er sponsored in­sur­ance,” Ed Loren­zen, a seni­or ad­visor at the Com­mit­tee for a Re­spons­ible Fed­er­al Budget, said in Au­gust, when mo­mentum was build­ing for re­peal of the tax. He ad­ded that this could be a “prob­lem polit­ic­ally, be­cause the rhet­or­ic be­hind re­peal of the Ca­dillac tax will make it harder to en­act any changes in tax treat­ment of high cost health plans.”

The Rest of Bush’s Re­peal and Re­place Health Care Agenda

Most of Bush’s oth­er pro­pos­als are pop­u­lar con­ser­vat­ive ideas, in­clud­ing provid­ing tax cred­its for people who don’t re­ceive in­sur­ance from their em­ploy­er, in­creas­ing con­tri­bu­tion lim­its for health sav­ings ac­counts, al­low­ing small busi­nesses to make tax-free con­tri­bu­tions to their work­ers’ plans, and strength­en­ing the safety net. Cri­ti­ciz­ing Medi­caid’s cost and reg­u­la­tions, his plan gives each state a capped al­lot­ment of fed­er­al fund­ing, hold­ing states ac­count­able for out­comes while al­low­ing them to choose their own ap­proaches.

Bush would ad­di­tion­ally al­low states to reg­u­late their in­sur­ance mar­kets and in­surers to of­fer a cata­stroph­ic cov­er­age plan. In­surers could then of­fer plans equi­val­ent to the pro­posed tax cred­it, elim­in­at­ing up­front out-of-pock­et costs, while also giv­ing people the op­tion to choose plans with more be­ne­fits. The pro­pos­al keeps the ACA’s man­dated ac­cess to cov­er­age for those with pre-ex­ist­ing con­di­tions.

The pro­pos­al also vaguely prom­ised a “trans­ition plan for the 17 mil­lion in­di­vidu­als en­tangled in Obama­care,” which is per­haps one of the weight­i­est policy pro­pos­als for Re­pub­lic­ans call­ing for the re­peal of the already-en­trenched health care law. Spe­cif­ics on how to do so, however, have yet to be out­lined by any re­peal ad­voc­ates.

Bush’s pro­pos­als also fo­cus on med­ic­al in­nov­a­tion, in­clud­ing sev­er­al ideas sim­il­ar to those in a House bill that passed in Ju­ly called 21st Cen­tury Cures. Among oth­er things, he would mod­ern­ize the Food and Drug Ad­min­is­tra­tion’s reg­u­lat­ory pro­cess and in­crease fund­ing for the Na­tion­al In­sti­tutes of Health.

While Bush’s re­peal-and-re­place pro­pos­als do little to set him apart from a crowded Re­pub­lic­an field, his ideas about in­nov­a­tion have a bet­ter chance of do­ing the trick. They also bode well for him should he re­ceive the party nom­in­a­tion: Med­ic­al in­nov­a­tion has bi­par­tis­an sup­port and few, if any, op­pon­ents, mak­ing it a safe top­ic for the GOP to tackle in both primary and gen­er­al elec­tions.

On the oth­er hand, his plan also would ap­ply the Hyde Amend­ment to all fund­ing and tax cred­its offered un­der his pro­pos­al, mean­ing ef­fected cov­er­age could not in­clude most abor­tions. It would also pre­vent Title X fund­ing from go­ing to or­gan­iz­a­tions that provide or refer for abor­tions, which would re­move Planned Par­ent­hood’s ap­pro­pri­ated fund­ing, and al­low states to end Medi­caid fund­ing for those same or­gan­iz­a­tions, which they are cur­rently pro­hib­ited from do­ing.

“Bush’s ideas for re­pla­cing the ACA re­flect an emer­ging Re­pub­lic­an con­sensus,” Levitt said. “His oth­er pro­pos­als in health care seem to be an at­tempt to dif­fer­en­ti­ate him­self.”

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