Do Cadillac health plans drive up costs?

Nancy Marshall-Genzer Jan 11, 2010

Do Cadillac health plans drive up costs?

Nancy Marshall-Genzer Jan 11, 2010


Kai Ryssdal: Labor leaders went to the White House today to talk health care with President Obama. And they are not a happy bunch, those labor leaders. Unions are upset with the president for supporting a tax on what are called Cadillac health plans. Plans that a lot of union members happen to enjoy.

We asked Marketplace’s Nancy Marshall Genzer for a primer on how they work. And how they affect health care costs for everyone.

Nancy Marshall Genzer: The so-called Cadillac plans are luxurious. It’s an all-you-can-eat approach to health care.

Jerry Katz is a health care analyst at Kurt Solomon Associates.

JERRY KATZ: All you can eat. It’s a big buffet at a five-star restaurant.

And someone else is picking up the tab. Employers pay the sky-high premiums. Workers have almost no out-of-pocket expenses. Katz says they tend to go to the doctor a lot. And what their plans pay has a big impact on the rest of us.

KATZ: So it kind of sets the bar very high. Physicians and hospitals tend to set the prices around the high end of these Cadillac plans.

The Senate health care bill would tax Cadillac plans. The idea is employers would be less likely to offer them. Workers would pay more, and use less care.

But Georgetown health policy professor Karen Pollitz says that could backfire.

KAREN POLLITZ: When you ask patients to pay more at the pump, they will use less care but patients will decline care that they need.

Pollitz says that lands them in the emergency room, which costs more in the long run.

Vivian Ho disagrees. She’s a health care economist at Rice University.

VIVIAN HO: You’ll still get the care, you’ll be more price conscious about it, but I don’t think it’s going to affect the quality of your care to the extent that you would end up postponing necessary care that could lead you to get sicker later on.

This debate will continue on Capitol Hill. House and Senate negotiators are hoping to get a final health care overhaul bill on the president’s desk by late this month or early next.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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