Michael Maiello's picture

    Cadillacs All Around

    In the U.S., most people get their health insurance through their employers because... well, because the government wants it that way. 

    During World War II, American industry needed workers to meet the industrial needs caused by a gigantic war.  That demand for workers resulted in enormous wage inflation and the government decided to stop that by putting compensation caps into place.  Remember that next time somebody tells you that the government can't interfere with the markets by, say, regulating drug prices.  When it came to wages for ordinary people, the government interfered in the markets without much regret.

    Since businesses couldn't incentivize workers by paying what was demanded, the government allowed tax breaks for fringe benefits, including health care.  After World War II, that system endured and it eventually took over.

    Smart unions and executives took advantage of this and negotiated better deals for themselves and their members.  Because the government decided to subsidize employer-based health care but not wages, health plans are an attractive compensation tool.  The very best of these plans, enjoyed now by the few remaining workers with strong unions and people with executive jobs. are called "Cadillac plans."  President Obama's health reforms imposes taxes those plans, claiming that they are excessive and wasteful.  More on that later.

    Over the years, people on the right and left have suggested that the government should end the subsidy, as it distorts both the labor market and the insurance market.  I could be persuaded of that case but only if the government were to take over the health system and provide Cadillac plans to every citizen.

     Absent that, the Cadillac tax should be repealed. Ezekiel J. Emanuel, the influential policy hand behind this tax, argues:

    "By covering more services, offering more choices and lowering the costs people experience, expensive plans encourage people to use more health care services and, when there are options, more expensive services."

    On the bizarre planet where Emanuel lives, people apparently use health care services for fun.  His argument would certainly make sense if the government were giving people tax incentives to buy smart phones. To the extent that people use health care services they generally feel they need it or are instructed by a doctor that they need it.  But, but, but, says Emanuel, some people misuse emergency rooms or decide to visit a specialist when a general practitioner will do!  But the emergency room problem is generally caused by people with little or no insurance, not people with great insurance. As for whether a patient decides to visit their cardiologist or their GP to get their blood pressure medication adjusted (an example Emanuel uses), I'd leave that up to the patient and doctors.  I'm willing to bet, though, that people aren't seeking out a cardiologist for such matters, they are simply seeing the cardiologist anyway and getting that done while they're there.  Would Emanuel prefer they visit two doctors when one would do?

    Really, the only problem I can find with Cadillac plans is that they aren't available to everybody.  But that's really the government's fault as it could have supplied such services from the very start.  Instead, the government created a subsidy and encouraged unions and individuals to negotiate for the best deals.  Why change the rules to penalize the winners now?



    I'm with you on this Michael.  I would add that universal government-provided healthcare (medicare for all) would be the best way to ensure fairness across-the-board.  It would also free American corporations from a weighty anchor which impedes their ability to compete with foreign companies that don't have to pay for employees' healthcare out of operating expenses.

    Cadillac plans for the elite amount to tax free subsidies for massages and spa visits. For what used to be high paying union jobs they were tax free subsidies for things like glasses. There's a limit to what tax subsidies the government can afford to give to rich or well off middle class workers. I support the cadillac tax.

    This may be true but spa visits for hydrotherapy for folks with serious back problems may be medically indicated and ultimately cheaper than medication.  Likewise, massage is considered a legitimate medical procedure.  In the aftermath of a serious bicycle accident and ultimately surgery I received prescriptions from a highly regarded pain doctor (M.D.) for massage treatment and was told that hydrotherapy would be appropriate if my bulging disks were in my lower back. Since they are in my neck, hydrotherapy would have been nearly impossible.  To be honest, I don't think the massage treatments did much good and neither, frankly, did the surgery.

    You're talking about legitimate physical therapy. But many elite cadillac plans subsidize ordinary massages for other wise healthy individuals. I've had massages and I think they are great but I don't think the government can afford to subsidize them.

    PS: I'd love to get a weekly massage. It would be great to have a health care plan that paid for it. We'd all be healthier if everyone got a weekly massage. Back in the 80's when I could afford it it cost me about $50. Let's assume the price hasn't gone up the last 30 years. If everybody got a massage a week it would only cost the government 875 billion dollars a year.

    I don't have a problem with a subsidy for eyecare for middle class workers.  Nor do I have a problem subsidizing plans that allow for longer physical therapy treatments or therapeutic massages or that subsidize gym memberships.  Health is important.  The Cadillac plan tax basically targets the few plans out there that are doing right by the people they cover.

    Cadillac plans aren't just subsidies for eye care. By far the largest cost when buying glasses is the frame. They're subsidies for people making a fashion statement.

    I don't agree that the government should subsidize things like gym memberships. There's a limited amount of government money and much more important ways to spend it. We'll just have to agree to disagree.

    I'm with you on Ezekial Emmanuel. I had a podcast of him a few years ago (he was advising Obama early on). He was pushing vouchers to replace all health insurance, including MEDICARE. He's not dumb, and anyone listening who didn't understand the ramifications of such a disastrous policy might have thought his plan was just what the country needed. He was sure that it was the answer to health care for everyone. I am so glad his dream nightmare didn't come to fruition. 

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