Health Care Victory—or Pretzel?

Warning: what follows gets wonky:

Yesterday Rich Trumka announced a deal with the White House: high-cost union health care plans won’t be subject to an excise tax till 2018—five years later than almost everyone else. The rationale: five years will give union and company bargainers the time they need to negotiate lower costs.

What—they never heard of a reopener?

This part of the deal (see more details below) will be universally seen as a giveaway to a special interest, just like Senator Ben Nelson’s exclusive deal for Nebraska.

Let’s step back and look at one of the justifications for the Senate’s original excise tax on high-cost health care plans —before it got tinkered with this week by union leaders and the White House negotiating “past midnight.” The goal was to raise $149 billion to pay for other aspects of the omnibus health care reform plan.

That was always a crock, and internally inconsistent. The $149 billion was to come from two places: (1) $30 billion would be gained because plans costing more than $23,000 for a family or $8,500 for an individual would cost insurers a 40 percent tax, which they would then pass on to employers. Employers naturally wouldn’t want to pay that tax, so they would force employees into cheaper health plans—dang, there goes that source of revenue!

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But (2), generous souls that they are, employers would give workers higher wages to make up for their new crappier, high-deductible, high-co-pay plans. And normal income taxes on those higher wages would add up to $119 billion!

But since neither of those things were going to happen, the $149 billion was never going to happen, either.

Victory!

Yesterday Rich Trumka and other union leaders announced what they called a big victory—carve-outs from the excise tax. Plans that cover lots of women, older people, retirees over 55, plans in high-cost states—all would get a higher threshold, so the tax wouldn't kick in. Dental and vision coverage wouldn’t be included in what’s considered the cost of the plan. And union-negotiated plans and those for state and local public employees got an even better deal, a five-year postponement on any tax till 2018. With 2018 so far away, who knows what could happen before then? Hey, maybe unions could even elect a Democratic Congress and a new Democratic president who promised us audacious hope and change and real health care reform and … oh, right. We did that already.

I don’t know if the 60 Democratic senators who voted for the original excise tax—and refused to consider the House’s tax on millionaires—will notice that their funding mechanism, which was never going to work, is now officially not going to work. Will they balk at the carve-outs achieved by Big Labor? Do they like the idea of taxing workers’ health plans so much that they’ll settle for this weakened version?

Trumka made clear that the intent of the changes the unions brokered—and nobody can predict what will happen in real life—is to make so many groups exempt from the tax that in practice it will almost never be applied. That’s worthy. But as I listened to Trumka’s explanations of higher-threshold-this and 2018-that yesterday, I remembered the words of an AFL-CIO convention delegate who wanted Medicare for all: “We’re building a pretzel around the right thing.”

John Conyers’ HR 676, the long-suffering Medicare for All bill, is only 30 pages long.