Congress is poised to take the first major bites out of Obamacare’s finances this week when it postpones a series of taxes intended to pay for the hefty overhaul — defying President Obama’s pleas to leave his signature domestic achievement alone.
The Affordable Care Act’s excise tax on medical devices would be canceled for the next two years, and another tax on high-cost “Cadillac” health plans, slated to take effect in 2018, will be postponed for two years under the terms of a deal agreed to by top Democrats and Republicans on Capitol Hill. Negotiations also rolled back a tax on health insurers for one year.
Added up, the delays will save taxpayers an estimated $36 billion. But their real significance is symbolic: They mark the biggest changes yet to the economics of Mr. Obama’s health law, which had counted on those taxes to pay for all of the new benefits.
Still, the White House considered itself lucky, saying that given Republicans’ efforts to nix the law entirely, postponing a few tax hikes was a victory for Mr. Obama.
“When you consider their ambitions, the steps that are included in this proposal are quite, quite meager,” White House press secretary Josh Earnest said.
The taxes were part of the 2010 law, and were designed to bring in money to help cover the costs of generous new benefits such as expanding Medicaid and offering taxpayer-funded subsidies to help many Americans buy insurance and meet the law’s individual mandate.
Postponing the taxes upsets the math and threatens Mr. Obama’s vow that his law would be fully paid for and wouldn’t add to the deficit.
“It’s bad enough that this budget-busting tax deal would add to the debt, but lawmakers have decided to make things worse by undermining the cost-control measures in the Affordable Care Act,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
Republicans on Capitol Hill, however, said they saw a chance to dent Obamacare — and took it.
Sen. Orrin G. Hatch, a Utah Republican who, as chairman of the Senate Committee on Finance, helped strike the deal to postpone the medical device tax, said they’ll be back to finish it off.
“It’s only for two years, but we’re going to ultimately get rid of it completely,” he said.
The 2.3 percent medical device excise applies to gross sales of pacemakers, artificial joints and other products. It’s been unpopular with Democrats and Republicans whose districts and states are home to manufacturers who are now paying the tax, and who say it’s sapping their ability to expand.
Meanwhile, the Cadillac tax proved unpopular with labor unions, many of whom negotiated gold-plated insurance in lieu of pay raises in their contracts, and who felt betrayed by the tax.
Until now, their efforts ran into a wall of opposition from Mr. Obama. He defended the device tax as acceptable because he said his health law was boosting demand for devices, so companies would come out ahead anyway.
The White House and its economists were even more devoted to the Cadillac tax — a 40 percent excise on the cost of health coverage above $10,200 for an individual and $27,500 for family coverage — saying the high-value plans end up creating an incentive to overtreat patients, driving up health costs for everyone.
Larry Levitt, senior vice president at the Kaiser Family Foundation, a nonpartisan health policy organization, said a two-year postponement won’t change the fundamental economics — but he said it’s a precedent.
“The big effects of the Cadillac tax come over the long-term because the thresholds under the tax grow with inflation, while health insurance premiums have historically grown much faster than that,” he said. “At the same time, once Congress starts delaying a tax like this, it increases the chances that they’ll keep delaying it rather than let it go into effect.”
Rachel Cohen, a spokeswoman for Sen. Mark R. Warner, Virginia Democrat, warned that if Congress approves a delay now, “there will be more pressure two years from now to further postpone or repeal the Cadillac tax, which is essential to funding the health care law and keeping health care costs contained over the long term.”
Before this latest deal, Congress had made only minor tweaks to the 2010 law, including clawing back more money when the government overpaid subsidies and repealing a tax-expensing provision that was designed to raise revenue by forcing small businesses to keep better track of their expenses. That was among the first things to go when the GOP took control of the House in 2011.
Congressional Republicans have held repeated votes to repeal bigger parts of the health law, but each of those has come up short as Democrats filibustered in the Senate.
The latest effort, using a fast-track budget procedure to avoid the filibuster, cleared the Senate earlier this month, and only awaits final House action. But Mr. Obama has vowed to veto that, and there aren’t the votes to overcome his rejection.
That leaves the GOP eyeing 2017, when they hope a Republican president can join with majorities in the House and Senate to undo more of the law.
“I expect that Congress will continue to try to cut taxes for powerful constituencies, including taxes imposed by the [Affordable Care Act],” said Timothy Jost, a law professor at Washington and Lee University who closely tracks the law. “Fortunately, ACA spending has so far come in well below predictions. But, depending on who is elected president and who controls Congress as of 2017, there may be efforts to cut spending under the ACA as well.”
• Tom Howell Jr. can be reached at thowell@washingtontimes.com.
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