Health Economists’ Keep-the-Cadillac-Tax Letter
Health Economists’ Keep-the-Cadillac-Tax Letter:
October 1, 2015
The Honorable Orrin G. Hatch Chairman
Committee on Finance
United States Senate
The Honorable Paul D. Ryan Chairman
Committee on Ways and Means
U.S. House of Representatives
The Honorable Ron Wyden Ranking Member
Committee on Finance
United States Senate
The Honorable Sander M. Levin Ranking Member
Committee on Ways and Means
U.S. House of Representatives
Dear Chairman Hatch, Senator Wyden, Chairman Ryan, and Congressman Levin:
For decades economists and health policy experts of all political persuasions have agreed that the unlimited exclusion of employer-financed health insurance from income and payroll taxes is economically inefficient and regressive. The Affordable Care Act established an excise tax on high- cost health plans (the so-called ‘Cadillac tax’) to address these issues.
The Cadillac tax will help curtail the growth of private health insurance premiums by encouraging employers to limit the costs of plans to the tax-free amount. The excise tax will discourage the provision of insurance that covers such a large proportion of health care spending that consumers have little incentive to insist on cost-effective care and providers have little incentive to provide
it. As employers redesign health insurance plans to hold costs within the tax-free amount, cash wages or other fringe benefits will increase. Furthermore, repealing the Cadillac tax would add directly to the federal budget deficit, an estimated $91 billion over the next decade according to the Joint Committee on Taxation.
We, the undersigned health economists and policy analysts, hold widely varying views on other provisions of the Affordable Care Act, and we recognize that measures other than the Cadillac tax could have been used to restrict the open-ended health insurance tax break.
But, we unite in urging Congress to take no action to weaken, delay, or reduce the Cadillac tax until and unless it enacts an alternative tax change that would more effectively curtail cost growth.
Sincerely,
Henry Aaron Jason Abaluck David Albouy Joseph Antos Alan Auerbach Nikhil Agarwal Laurence Baker Martin Baily Ernst Berndt Linda Blumberg Thomas Buchmueller M. Kate Bundorf Leonard Burman Gary Burtless Stuart Butler Amitabh Chandra Michael Chernew Julie Berry Cullen David Cutler Leemore Dafny Patricia Danzon Angus Deaton Brad DeLong Peter Diamond Avi Dor Bryan Dowd Mark Duggan Susan Dynarski David Ellwood Douglas Elmendorf Ezekiel Emanuel Michael Frakes Austin Frakt John Friedman Donald Fullerton William Gale Martin Gaynor Paul Ginsburg Sherry Glied Lawrence Goulder Jonathan Gruber Gautam Gowrisankaran Ben Handel Ron Haskins Kate Ho John Holahan Jill Horwitz Hilary Hoynes
Robert Huckman Robert Inman Damon Jones Lawrence Katz Melissa Kearney Jenny Kenney Jonathan Kolstad Darius Lakdawalla Robin Lee Arik Levinson Frank Levy Helen Levy Erzo F.P. Luttmer Pinar Karaca Mandic Eric Maskin Thomas McGuire Ellen Meara David Meltzer Bruce Meyer Marilyn Moon Fiona Scott Morton Adriana Lleras-Muney Alicia Munnell Len Nichols Kavita Patel Mark Pauly Harold Pollack Daniel Polsky James Rebitzer Robert Reischauer Alice Mitchell Rivlin Christopher Ruhm Andrew Samwick Douglas Shackelford Louise Sheiner Kosali Simon Kent Smetters Neeray Sood Mark Stabile Amanda Starc Eugene Steuerle Katherine Swartz Richard Thaler Robert Town Paul Van de Water Tom Vogl Kevin Volpp Gail Wilensky Roberton Williams David Wise Justin Wolfers Richard Zeckhauser Stephen Zuckerman + MANY MOAR…