Is it possible that the Cadillac Tax will be a major health spending cost ‘deflator’?
I have been saying since the initial rumblings of Health Care Reform that tax treatment of group medical insurance may be on its way to great change. As soon as it became mandatory to list the full premium of group medical insurance on W-2’s, even though it is noted that there are presently ‘no tax implications’, the writing is on the wall and the Treasury is setting up better ways to track lost tax revenue as a result of this deduction.
The reason for this can be understood when one takes into account the enormous and fast-paced increase in premiums (basically, an increasing amount of money that is not taxable), an increasing number tax deductible expenses, reduced labor force further reducing taxable wages, the Baby Boomer generation hitting the Medicare system, overwhelming cost of healthcare, enormously expensive new treatments and pharmaceuticals extending life expectancy and so on. It is quite a spiral and the conversation of healthcare system change has been on the agenda for longer than most people are aware.
Budget officials in the Bush administration in 2008 stated that the group health tax exclusion “was costing the U.S. Treasury about $168 billion in lost income tax and employer withholding tax revenue.” Allison Percy of the Congressional Budget Office (CBO) has presented on tax effect projections should limits be placed on the deductibility of group medical insurance.
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