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Health Policy Experts' Statement about Excise Tax on High-Cost Plans

A group of 101 prominent health economists and policy analysts have sent Congress the following letter about health reform’s excise tax on high-cost health plans. The letter was spearheaded by a bipartisan group of health care experts — Henry Aaron, Joseph Antos, David Cutler, Peter Diamond, Robert Reischauer, Alice Rivlin, and Gail Wilensky.

Click here to view a PDF version of this letter.

October 1, 2015
The Honorable Orrin G. Hatch
Chairman
Committee on Finance
United States Senate
The Honorable Ron Wyden
Ranking Member
Committee on Finance
United States Senate
The Honorable Paul D. Ryan
Chairman
Committee on Ways and Means
U.S. House of Representatives
The Honorable Sander M. Levin
Ranking Member
Committee on Ways and Means
U.S. House of Representatives

Dear Chairman Hatch, Senator Wyden, Chairman Ryan, and Congressman Levin:

For decades economists and health policy experts of all political persuasions have agreed that the unlimited exclusion of employer-financed health insurance from income and payroll taxes is economically inefficient and regressive.  The Affordable Care Act established an excise tax on high-cost health plans (the so-called ‘Cadillac tax’) to address these issues. 

The Cadillac tax will help curtail the growth of private health insurance premiums by encouraging employers to limit the costs of plans to the tax-free amount.  The excise tax will discourage the provision of insurance that covers such a large proportion of health care spending that consumers have little incentive to insist on cost-effective care and providers have little incentive to provide it.  As employers redesign health insurance plans to hold costs within the tax-free amount, cash wages or other fringe benefits will increase.  Furthermore, repealing the Cadillac tax would add directly to the federal budget deficit, an estimated $91 billion over the next decade according to the Joint Committee on Taxation. 

We, the undersigned health economists and policy analysts, hold widely varying views on other provisions of the Affordable Care Act, and we recognize that measures other than the Cadillac tax could have been used to restrict the open-ended health insurance tax break. 

But, we unite in urging Congress to take no action to weaken, delay, or reduce the Cadillac tax until and unless it enacts an alternative tax change that would more effectively curtail cost growth.

Sincerely,

Henry Aaron
Brookings Institution
Jason Abaluck
Yale University
David Albouy
University of Illinois
Joseph Antos
American Enterprise Institute
Alan Auerbach
University of California
Nikhil Agarwal
Massachusetts Institute of Technology
Laurence Baker
Stanford University
Martin Baily
Brookings Institution
Ernst Berndt
Massachusetts Institute of Technology
Linda Blumberg
Urban Institute
Thomas Buchmueller
University of Michigan
M. Kate Bundorf
Stanford University
Leonard Burman
Urban Institute
Gary Burtless
Brookings Institution
Stuart Butler
Brookings Institution
Amitabh Chandra
Harvard University
Michael Chernew
Harvard University
Julie Berry Cullen
University of California
David Cutler
Harvard University
Leemore Dafny
Northwestern University
Patricia Danzon
University of Pennsylvania
Angus Deaton
Princeton University
Brad DeLong
University of California
Peter Diamond
Massachusetts Institute of Technology
Avi Dor
George Washington University
Bryan Dowd
University of Minnesota
Mark Duggan
Stanford University
Susan Dynarski
University of Michigan
David Ellwood
Harvard University
Douglas Elmendorf
Brookings Institution
Ezekiel Emanuel
University of Pennsylvania
Michael Frakes
Northwestern University
Austin Frakt
Boston University
John Friedman
Brown University
Donald Fullerton
University of Illinois
William Gale
Brookings Institution
Martin Gaynor
Carnegie Mellon University
Paul Ginsburg
University of Southern California
Sherry Glied
New York University
Lawrence Goulder
Stanford University
Jonathan Gruber
Massachusetts Institute of Technology
Gautam Gowrisankaran
University of Arizona
Ben Handel
University of California
Ron Haskins
Brookings Institution
Kate Ho
Columbia University
John Holahan
Urban Institute
Jill Horwitz
University of California
Hilary Hoynes
University of California
Robert Huckman
Harvard University
Robert Inman
University of Pennsylvania
Damon Jones
University of Chicago
Lawrence Katz
Harvard University
Melissa Kearney
University of Maryland and Brookings Institution
Jenny Kenney
Urban Institute
Jonathan Kolstad
University of California
Darius Lakdawalla
University of Southern California
Robin Lee
Harvard University
Arik Levinson
Georgetown University
Frank Levy
Massachusetts Institute of Technology (emeritus)
Helen Levy
University of Michigan
Erzo F.P. Luttmer
Dartmouth College
Pinar Karaca Mandic
University of Minnesota
Eric Maskin
Harvard University
Thomas McGuire
Harvard University
Ellen Meara
Dartmouth College
David Meltzer
University of Chicago
Bruce Meyer
University of Chicago
Marilyn Moon
American Institutes for Research
Fiona Scott Morton
Yale University
Adriana Lleras-Muney
University of California
Alicia Munnell
Boston College
Len Nichols
George Mason University
Kavita Patel
Brookings Institution
Mark Pauly
University of Pennsylvania
Harold Pollack
University of Chicago
Daniel Polsky
University of Pennsylvania
James Rebitzer
Boston University
Robert Reischauer
Urban Institute
Alice Mitchell Rivlin
Brookings Institution
Christopher Ruhm
University of Virginia
Andrew Samwick
Dartmouth College
Douglas Shackelford
University of North Carolina
Louise Sheiner
Brookings Institution
Kosali Simon
Indiana University
Kent Smetters
University of Pennsylvania
Neeray Sood
University of Southern California
Mark Stabile
University of Toronto
Amanda Starc
University of Pennsylvania
Eugene Steuerle
Urban Institute
Katherine Swartz
Harvard University
Richard Thaler
University of Chicago
Robert Town
University of Pennsylvania
Paul Van de Water
Center on Budget and Policy Priorities
Tom Vogl
Princeton University
Kevin Volpp
University of Pennsylvania
Gail Wilensky
Project HOPE
Roberton Williams
University of Maryland
David Wise
Harvard University
Justin Wolfers
University of Michigan
Richard Zeckhauser
Harvard University
Stephen Zuckerman
Urban Institute