By Stephen Moock
Staff Writer
It has been almost six months since President Obama’s original August 2009 deadline for finalizing a health care bill. It quickly became evident to Congress that if health care is going to be successfully reformed, it would take time and careful deliberation on many aspects of the bill.
The source of funding for the bill will be the most difficult piece to take on. Congress has included in the bill a tax on what are sometimes called “Cadillac” health care plans. Originally, the tax would be placed on premiere plans costing more than $23,000 for families and $8,400 for individuals, generating $150 billion over the next ten years. However, new legislation would raise the price limit to plans costing $24,000 and $8,900 for families and individuals, respectively. The small change in the price limit of subject high-cost plans would drop the projected tax revenue to $60 billion over ten years. This move can be argued as inefficient because the seemingly small change in the price limit of taxable plans translates to a large decrease in projected revenue from the tax.
Providers of high-cost insurance plans will have to pay a steep 40 percent tax. This proposal is angering many labor unions because union members have typically sacrificed higher salaries for superior health benefits, which come with a steep price tag. Consequently, union members are at a disadvantage compared to non-union members who will not be subject to the tax. Workers, as well as government employees, currently in collective bargaining agreements will not be affected by the tax until 2018, while the tax will take effect for everyone else in 2013. The 40-percent tax on insurers will decrease their willingness to offer such high-cost plans, as well as compromise the quality of benefits offered with these plans. It is also likely that insurance companies will increase the prices on their lower-cost plans to offset the proposed tax on the more expensive plans.
While the Senate strongly favors taxing health care providers, the House of Representatives favors an alternative method that taxes high-income individuals. In the House, individuals and couples with incomes higher than $500,000 and $1 million, respectively, would be forced to pay an additional 5.4 percent income tax. According to a CNN / Opinion Research Corporation poll, 61 percent of people polled favored the House proposal, compared to 29 percent who supported the Senate‘s plan.
In addition, also in question is the amount of financial responsibility for the bill pharmaceutical companies would bear. The original contract between Congress and drug companies would generate $80 billion in tax dollars over ten years. Drug companies would also be required to discount medications by 50 percent for Medicare beneficiaries. Now, Congress is asking for an extra $10 billion from the pharmaceutical industry, a bold move that makes Congress look like a financial scavenger, looking for money from wherever possible.
Senators are saying that because an additional 30 million Americans would be receiving health care insurance, the extra $10 billion expense incurred by pharmaceutical companies would be offset by the massive increase in market size. However, companies are still hesitant because restrictions on insurers would make for unpredictable future drug sales.
Another measure under consideration is whether to allow generic drugs to be sold alongside brand name drugs. As the bill stands, brand name pharmaceutical companies would have twelve years of closed sales before generic companies would be allowed to compete. This would allow the big-name drug companies to see maximum profit on their sales without having to worry about being undersold by manufacturers of generic varieties. Subsequently, the profits of brand name drug companies would largely be used to promote research and development of new drugs.
