As Democrats fight over whether to replace our rotting health care system or to instead build on the Affordable Care Act, the slow chipping away at the legacy of Obama’s signature achievement continues: Three of the taxes that were supposed to make the Affordable Care Act work are dead. Or, at least, they will be when Congress passes its year-end spending bill, which, Politico reported this week, will include the repeal of the health insurance tax, the medical device tax, and the Cadillac tax (which, despite its name, is not a tax on Cadillacs).

In the grand scheme of bad decisions currently being made in Washington, the final repeal of these taxes is not earth-shattering. The Cadillac tax, a 40 percent tax on expensive health insurance plans, was never implemented and was never a particularly good thing. The intention was to encourage employers to offer less expensive, lower-quality health plans; this might contain the cost of care by encouraging patients to be judicious about what care they seek. (As we know, an iron law of health policy: People must be discouraged from using too much health care, preferably by making it too expensive to use at all.)



But in 2019, the notion that employers were dumping money into too-generous health care plans seems like a long-distant relic. Ten years ago, the average cost of an employer-provided family plan was around $13,000; it’s now more than $20,000, and use of high deductibles has skyrocketed. It is not just the Cadillac plans, in other words, pushing up the cost of health care—and patients hardly need much more help being discouraged from using care by high costs. Like the individual mandate, the Cadillac tax is something that all the ACA’s defenders agreed in 2009 was necessary and good but now seems ridiculous. When the House voted almost unanimously to repeal the Cadillac tax in July, The New York Times noted the floor debate saw “one Democrat after another denouncing the provision as if Democrats had nothing to do with its creation.”



The other two taxes—the health insurance tax (HIT) and the medical device tax—were opposed for less sound reasons. The medical device tax was a revenue-raising idea, a simple 2.3 percent tax on the sale of medical devices. But the industry has lobbied against the tax for years—and it became a prime target for Republicans, who claimed it would lead to wide-scale job loss, as they sought to undo the law. (The Congressional Research Service estimated it would kill “one one-hundredth to two-tenths of 1 percent of jobs in the industry.) Even Democrats in states where medical device manufacturers dominate—like Senator Elizabeth Warren in Massachusetts—signed on to the industry’s campaign to get this modest tax repealed. Another key piece of context: The medical device industry is the site of some of the biggest profiteering markups in the industry, and the Food and Drug Administration’s streamlined process for allowing the sale of medical devices lets dodgy devices get to market without clinical trials or testing. Meanwhile, the HIT was self-explanatory: a tax on health insurers. It must, therefore, be done away with, as an expensive campaign by health insurers urged.



The dismemberment of the taxes underpinning the ACA supplies a valid criticism of the “pay as you go” policy and the general politics of strict budget hawkery. Congress found a bunch of targeted taxes to “pay for” the ACA, several of which were delayed or temporarily suspended, and now these three will be permanently repealed (in addition to the repeal of the individual mandate in 2017). The ACA remains law; the Republic stands; the ocean has not consumed the Capitol, nor has the ground beneath it split and reclaimed the unholy above. And the Democrats who said this was necessary to pay for the bill are now on board with repealing the taxes. It does make you wonder if we could skip the whole fuss next time.

