Baucus Changing Tax on “Cadillac” Plans

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One provision in Chairman Max Baucus’s original Chairman’s Mark is a new tax on so-called “Cadillac” health insurance plans. The original Baucus mark calls for insurers to pay a 35% tax on plans that cost more than $8,000 for individuals and $21,000 for families. The logic here is that very expensive plans that require little or no out of pocket spending encourage overuse of health care services. The excise tax would also, of course, raise billions to help pay for the spending in the Baucus bill. The new tax would kick in in 2013 and the thresholds for plan costs would be pegged to the consumer price index, which grows significantly slower than medical spending inflation. Several senators on the committee, including Republican Olympia Snowe, have expressed concern that this excise tax would eventually encompass too many health insurance plans, affecting much of the middle class. So Baucus made a point of saying he realizes this needs to change:

In between opening statements, Baucus indicated he is open to adjusting the excise tax so it is instead pegged to the consumer price index “plus one.” This change is significant because it would mean fewer insurance plans would be taxed in the future.

A few other highlights so far:

  • Democratic Senators Ron Wyden and Max Baucus were complimenting each other on their work and Wyden warned against getting into a “bouquet tossing contest.” But on a serious note, every senator to speak so far has begun by complimenting Baucus on the monumental effort he has put forth so far.
  • Although more members are present now, at various points, as many as 10 chairs have been empty.
  • Nancy Ann DeParle, President Obama’s lead health reform adviser, arrived shortly after the markup began. She sat in the front row.
  • Democratic Senator John Kerry said he’s opposed to straight fees that would be paid by medical device makers under Baucus’s bill. Kerry said these fees would stifle innovation.
  • Democratic Senator Kent Conrad advised his “progressive friends” to read T.R. Reid’s new book, “The Healing of America,” which outlines how effective health care works in other countries without a government-run system.
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