Sebelius Plays Two Political Tricks

Last Friday in "A Health-Coverage Tax and Its Burden" I demonstrated that the burden of a tax placed on restaurant owners would be shared between patrons and the owners in the short-run, and exclusively by the patrons in the long-run.  I also claimed that politicians frequently claim that taxes placed on business will not affect employees or consumers.  Two days later Kathleen Sebelius, the Secretary of Health and Human Services, added evidence to my claim in an interview with David Gregory on Meet the Press in which she stated that it is insurance companies will pay the tax on "gold-plated or Cadillac plans."  To give context to her statement I have included the question by Gregory and her response with the pertinent statement highlighted.   

GREGORY: I want to go to just a couple of issues. One has to do with how this gets paid for. That is a tax, an excise tax on so called gold-plated or Cadillac plans. But in the Senate bill that's been put off until 2018.

And the reasonable question comes up which is, do you really think a future Congress which will be under a lot of pressure not to raise $1 trillion worth of taxes, is going to withstand that pressure, or are you going to be left where -- because this Congress won't raise the tax now, they're going to put it off to 2018 so you're going to have all of the spending and not get any of the savings until 2018. Isn't that unrealistic?

SEBELIUS: I think two things happen right away with the way this is designed. First of all, it puts insurance companies who pay the tax ultimately on notice that this is coming. And they can begin to change the kind of policies that are in the market.

But what we want to do is change insurance company behavior which hasn't been very strategic in terms of cutting costs. And in fact, as the Goldman analyst said they are driving up cost, they have a market strategy that they are willing to dump customers and continue to raise costs; so changing their behavior, putting them on notice that this is coming.

Besides claiming consumers and taxpayers will not share the burden of taxes on business, politicians also like to find enemies to justify actions.  Voters should not allow politicians to scapegoat insurance companies; they are no more or less moral than other businesses which also seek profits or consumers who attempt to get the most out of every dollar spent.  Creating enemies out of whole cloth increases tension between consumers and business and undermines business confidence.   

Three questions come to mind.  First, why do we need a complete overhaul of health care if a simple change in tax structure will alter incentives of insurance companies and consumer incentives as well?  While I don't support an overhaul of the health care system, I do support equal tax treatment of income used to purchase health care through employee provided plans and privately purchased plans as I wrote in the above linked post and here, but why limit taxes to these plans?  Wouldn't a broader based tax further alter insurance company and consumer behavior?