Ten months of effort was blown away yesterday by an unprecedented electoral upset, a most unlikely end to health reform.
Yes, I did mean to write ‘end to health reform’. This afternoon the Senate Democratic caucus is meeting to figure out what to do next, but the outcome was pre-ordained when Senate Majority Leader Harry Reid announced earlier today that nothing would be done on health reform until Senator-Elect Brown (R MA) is seated.
Which means nothing will be done this year.
That doesn’t mean health reform won’t happen at all, but the ‘health reform hangover’ makes it very unlikely anyone will eagerly jump into reform anytime soon.
I’ll admit to being conflicted over the demise of reform. Covering another 30 million Americans would have been good progress towards addressing one of our country’s greatest shortcomings. But the cost of that expansion, the lack of any meaningful cost controls or an enforceable mandate, and the political thievery committed by key swing Senators selling their votes (I mean you, Nelson of NE, Lieberman of CT, and Landrieu of LA) made for a Senate bill just a whit better than no bill at all.
The House bill was better, except for the unfounded belief in the public option; at least it had a better mandate provision.
But the cost reported for both was too low by a quarter trillion, as neither included the cost of reforming Medicare physician reimbursement.
What happened?

The Dems could have had a bill last July, but liberal Senators refused to compromise, convincing Reid they could win without any GOP votes. This forced the more intelligent and intelligible Republican Senators to jump on the death panel/rationing bandwagon. Sure, the compromise necessary to get a bill with at least a few Republicans on board would have been a higher Cadillac tax, lower cuts to Medicare Advantage, and no public option, but a bipartisan bill would have been a huge win for both the Dems and the President.
Instead, we’re left with a wasted year.
What does this mean for you?
Without health reform, we’re looking at family premiums over $30,000 by the end of the teens. Good luck with that.
That’s not to say the House or Senate bill would have made much difference.

The growing furor over the tax on high-cost healthplans is welcome indeed, as it is exposing the tax for what it is – an unfair burden on some based on a superficial understanding of cost drivers.
First, lets clear up a common misconception about the tax. It only affects the value of your health plan above a specific level – the benefit value below that level is not taxable income. Here’s how it works in dollars.
The tax, which is in the Senate bill but not the one passed by the House, taxes the value of health benefits above $8500 for individuals and $23,000 for families. If you have an individual policy valued at $10,100, the amount subject to tax is the difference between $8500 and $10,100 – $1600. The Senate plan taxes that $1600 at 40%, so you would have to pay $640 in taxes.
I have no problem with instituting a tax on health benefits, but it should either be on all plans, or on those plans that fail to keep costs under control.
The Cadillac tax does neither, instead taxing benefits on two groups:
– bargaining units that have substituted benefits for wages in negotiated agreements with management; and/or
– individuals and families that live in high cost areas.
The ‘benefits’ themselves have little to do with whether or not you’ll hit the tax threshold; much more important is where you live.
For example – the interstate variation in health care costs – not insurance premiums, but per-capita costs – ranged from $3972 in Utah to $8295 in Washington, D.C. in 2004.
So a company in Utah could cover cosmetic surgery, private hospital rooms, laser eye surgery, $10 copays for office visits and $5 copays for all drugs, all without coming anywhere close to the ‘Cadillac tax threshold’. But an employer in the District with a high-deductible plan, $50/$100 drug copays, limits on PT and outpatient therapy, and high copays for out of network services would already be over the threshold.
The idea behind the Cadillac tax is a good one – make consumers more cost conscious of the value of their benefits, and hopefully more careful consumers. And there’s no question the additional tax revenue will help offset the costs of the reform bill. (I’ll not comment on whether that’s good or bad).
Instead of this blunt instrument, that forces people in DC to help fund health reform for no other reason than they live in the District, while doing nothing to encourage Utahans to control costs, Congress should institute a tax on health plans that fail to keep costs under a threshold – thereby motivating all health plans, employers, and individuals to work to keep costs down.
Such an idea was proposed last summer but didn’t make it into the Senate bill. It makes much more sense than the current proposal, would give President Obama and Democratic legislators political cover, and would not give the opposition any ammunition.
What does this mean for you?
Watch what happens in the reconciliation process; it looks like the C-tax is on shaky ground, and the Dems will have to find an alternative funding source.