This time, (d) is correct. For reasons that we explain at much greater length in a forthcoming review of the excise tax and the literature on cost-sharing for the Institute for America's Future, insurers and employers are most likely to respond to the cap by reducing benefits; that will mostly take the form of greater cost-sharing, and this will be particularly harmful to people with more health care needs who happen to work with other people with greater needs. But any measure that limits the ability to pay for health care with pre-tax dollars will help the federal budget, regardless of whether it is fair to beneficiaries. The conferees' problem, then, will be that the excise tax would help finance the rest of the health care reform, but do so in a particularly unfair way. It is also self-contradictory (since the idea of health care reform should be to help sick people get care) and likely unpopular (since it threatens, over time, to cut benefits for most Americans). But the problem is complicated by the fact that, nevertheless, setting some limit on what the federal government will subsidize through the tax code is reasonable in principle. The "gold-plated" plans, like for Goldman Sachs executives, are distinct exceptions, but that does not mean they deserve a subsidy.The right compromise in principle would be to define "excessive" insurance in terms of the benefit package, not the cost. Then any tax would apply to luxury vehicles (Cadillacs) instead of vehicles carrying particularly sick people (ambulances). For example, the standard could be the actuarial value of the House "premium" plan, with the health savings account limit on out-of-pocket costs for all forms of care. But this is a political question, something like the following:3. The House and Senate should
(a) Accept the Senate excise tax in spite of its many flaws.
(b) Dump the excise tax and find other financing for reform (which may be more popular with the public, but not in the Senate).
(c) Set a benefits standard, take whatever savings that gives and then make up the difference with other measures.
As a matter of policy, we think (c) is clearly the right answer. We think it's better politics, too. But we're not taking the test - or grading it.Timothy S. Jost holds the Robert L. Willett Family Professorship of Law at the Washington and Lee University School of Law. He is an expert on health care law and is co-author of a casebook, "Health Law." Joseph White is chairman and Luxenberg Family Professor of Public Policy and a professor of epidemiology and biostatistics, and the director of the Center for Policy Studies at Case Western University.