Two key funding sources for the Affordable Care Act face serious political jeopardy this year, according to a seemingly well-sourced report in The Hill newspaper.
Congress' two top Democrats, House Minority Leader Nancy Pelosi and Senate Minority Leader Harry Reid, who were instrumental in passing the ACA, reportedly are determined to repeal the so-called Cadillac tax on high-value health plans. They join Democratic presidential candidates Hillary Clinton and Bernie Sanders in pressing to kill the tax, which would raise $87 billion for the law's coverage expansion over a decade. It's not clear whether the two Democratic leaders have any replacement funding scheme in mind.
“Point is, they both want to get this done,” a senior Democratic aide told The Hill.
Labor unions hate the tax because it may hit their members when it takes effect in 2018, and Democrats are concerned about winning the support of union members in the 2016 elections. But the Obama administration opposes repealing the Cadillac tax, arguing that it's a key element in controlling healthcare spending, as well as an important ACA funding source.
To get Republicans to bring the Cadillac tax up for a repeal vote, The Hill reported, Pelosi and Reid also might have to agree to repeal the ACA's 2.3% excise tax on medical devices, which is expected to raise about $26 billion for coverage subsidies over 10 years. The two taxes combined account for more than 10% of the revenue supporting the law's coverage expansions.
This raises the question of whether the two Democratic leaders have thought through the longer-term ramifications of repealing those revenue sources on the landmark law they shepherded through. “This is a dangerous slippery slope toward squeezing progressive and adequate funding for health insurance, which will eventually lead to a reduction in benefits,” said Theda Skocpol, a Harvard University professor of government who studies healthcare reform.
Skocpol argues that repealing the taxes without replacement revenue would create powerful political pressure after the 2016 elections to lower the income-eligibility threshold for the Obamacare premium subsidies, which currently are available to Americans with incomes of up to 400% of the federal poverty level.
Scaling back the subsidies seemingly would run counter to poll findings and arguments by many health policy experts that working and middle-class consumers need bigger subsidies, not smaller ones, to make coverage and care affordable.
Another danger for the ACA in wiping out the two taxes is that it surely would give a boost to efforts to repeal other ACA taxes that fund the law's coverage expansion, particularly the health insurance premium tax, which the health plan industry despises.
Still, a White House spokesman told The Hill that “we're open to a conversation” about some type of compromise on the Cadillac-plan tax, which applies a 40% levy to health-plan values exceeding $10,200 for individuals and $27,500 for families.
Skocpol said that up until now, the only thing that has stopped Congress from making changes to the ACA on a bipartisan basis has been Republican demands for full repeal or nothing—and many in the party still call for that. If they insist on adding provisions that go too far in rolling back Obamacare, all deals are off, she said.
But she predicts new Republican House Speaker Paul Ryan will try to move his chamber colleagues toward chipping away at the law rather than taking it out in one blow. “I think Ryan is considerably more savvy about how you unravel something,” Skocpol said.