What’s more, high-premium employer-based plans raise the cost of health care for everyone by encouraging the overconsumption of expensive services. This means that even Medicare and Medicaid face higher prices.
Quite aside from its benefits for the health-care market, the Cadillac tax would also have the effect of expanding the tax base and making the tax code more efficient. It would raise revenues by about $15 billion a year. Most of that increase would be in the form of greater payroll and income tax revenue, because employers would replace their high-premium plans with higher salaries.
Rather than killing or delaying the Cadillac tax, Democrats should be trying to make it operational. The tax would raise revenue, lower costs, increase the efficiency of the tax code and give the Obamacare individual market its best chance at success. Instead, Democrats have set up that market for more turmoil.
Karl W. Smith is a former assistant professor of economics at the University of North Carolina's school of government and founder of the blog Modeled Behavior.
This column was provided by Bloomberg News.