It’s tempting to feel like cracking open a champagne bottle when leaders on Capitol Hill come to a bipartisan consensus on anything in this polarized era, but sometimes, they simply converge on being dead wrong. Such is the case with Congress’ recent repeal of taxes built into the Affordable Care Act, meant to offset the country’s burgeoning health care costs and tame a ballooning national debt.
In a victory for the health care industry lobbyists who leaned heavily on the Massachusetts delegation and others, Congress and President Trump agreed in December to a $1.4 trillion appropriations package that permanently repeals a medical device tax, a so-called “Cadillac” tax on high-end insurance plans, and a tax on health insurers — all of which were baked into President Obama’s 2010 law as a way to offset the costs of providing health care to millions more Americans. (The entire Massachusetts Congressional delegation voted for the spending deal repealing the taxes, with the exception of Senator Elizabeth Warren, who abstained.) The gutting of these measures, according to the nonpartisan Committee for a Responsible Federal Budget, will cost the country more than $500 billion in revenue over the next decade, and more than $2.1 trillion by 2040.
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Massachusetts medical device manufacturers fought fiercely against the device tax, which went into effect in 2013. It applied a 2.3 percent tax to the wholesale price of MRI scanners, pacemakers, X-ray machines, and artificial knee and hip joints, among other products, but excluded common consumer medical devices such as eyeglasses, pregnancy tests, hearing aids, and wheelchairs. For years, industry lobbyists have argued that it would lead to the offshoring of jobs and slashing of research budgets, and therefore deprive patients of new medical inventions. Senator Markey said he supported the tax repeal on similar grounds. But a Congressional Research Service report found in 2015 that such risks had been exaggerated and that the device industry was unlikely to suffer serious setbacks, given the exemption of many consumer devices from the tax. The report projected that output and employment would fall by less than 0.2 percent.
The Cadillac tax, meant to have finally gone into effect in 2022, has been lauded over the past decade by economists on both sides of the political spectrum. It would have levied a 40 percent tax on certain excessively generous employer health care plans to discourage employers from benefiting from the tax exemption on such plans, as well as to increase the share of employee compensation going to wages versus health care premiums. And it would have closed a loophole that has disproportionately skewed health care benefits in the United States toward higher-income households and raised health care costs in the system overall. Most importantly, the revenue raised from the Cadillac tax would have benefited low-income families by providing a revenue source for subsidies of their medical expenses.
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Since 2010, Congress has postponed the full implementation of the three taxes. But that didn’t stop lobbyists from targeting House Democrats in this Congress, including those newly elected, to repeal the taxes once and for all in the waning days of 2019. Labor unions and large employers fought the Cadillac tax, while medical device manufacturers and insurers lined up against the other two sources of Obamacare funding.
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At a time when this editorial board would like to laud bipartisan agreement, we’re forced instead to point to our elected officials’ bipartisan cowardice. Politicians from both parties pay lip service to ensuring access to medical care for more Americans and to fiscal responsibility — reining in the skyrocketing costs of a health care system that is more expensive than other developed nations’ with no better outcomes. The repeal of these taxes is hypocritical on both counts, and an abdication of leadership. Although we can commend congressional leaders for allocating funds for gun violence research, election security, the 2020 Census, and climate research in the same spending deal, the repeal of the taxes showed that there are limits to their defense of the greater good.
Congress will have the chance to partially redeem itself in 2020 if it can pass robust legislation to ban surprise medical billing and curb high prescription drug pricing. But that will require a new resolve to stand up to the health care industry in the new year.