Obamacare's Biggest Threat Yet

It's hard to greenlight taxes once they're stopped.

Photographer: Drew Angerer/Bloomberg

After dozens of futile votes to repeal Obamacare, Republicans in Congress may have finally found a winning strategy: Delay or suspend the taxes that pay for the program, and enfold the provisions in a larger spending bill that has to pass.

Even congressional Democrats are on board with the plan -- at least this year. But these taxes are crucial to the success of health-care reform, and Democrats need to ensure the delays and hiatuses remain temporary.

QuickTake Obamacare, Assessed

Each of three taxes targeted in the spending bill is defensible on its merits. The first, the so-called Cadillac tax on high-cost employer-sponsored health plans, does more than just help to pay for Obamacare; it's also meant to help control health-care costs by giving employers an incentive to direct less compensation toward health benefits and more toward wages. The design of the tax could be improved, but the goal of lower costs is beyond dispute. By delaying the tax for two years, the bill sets back that goal.

The other Obamacare taxes frozen by this deal don’t do as much to promote efficiency, but they're important in helping to pay for the law. One of the effects of Obamacare has been to increase the revenue of many health-care providers. So the law taxes some of that new revenue -- including a 2.3 percent tax on sales of medical devices and an annual fee on health insurers. The spending bill lifts the device tax for two years and the insurance tax for one.

If those three taxes are delayed or lifted only for the time agreed to in the omnibus bill, it will cost the federal government an estimated $30 billion in lost revenue over two years. That's a big if. Once Congress suspends a tax, it's very hard to reinstate it. Permanently repealing these three taxes would cost $257 billion by 2025.

One of the chief Republican arguments against Obamacare has been that, contrary to official projections, the law wouldn't pay for itself. After five years, that warning has failed to come true. Now the law's opponents are changing the law to match their predictions.

It's neat trick. But it does nothing to advance the goal of a more inclusive and efficient health-care system. If Republicans really want to be taken seriously on health-care reform -- and they do -- they might want to spend less dreaming up ways to undermine Obamacare and more time proposing ways to improve it. 

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.