Don't let it get away!
Keep track of the stocks that matter to you.
Help yourself with the Fool's FREE and easy new watchlist service today.
Health-care reform isn't going to be cheap. Ensuring coverage of 94% of eligible Americans will cost a trillion dollars over the next decade, give or take a few billion depending on which chamber the bill is coming out of.
The short answer to who is going to pay for the added coverage is that we all are. Taxpayers, investors, and consumers -- you're probably all three -- are going to foot the bill one way or another.
More specifically, the nonpartisan Joint Committee on Taxation came out with an analysis of the Senate's version of the health-care reform bill this week. It has some interesting breakdowns of where the money to pay for the added costs will come from.
Cadillac coverage gets more expensive
By far, the largest class of taxes -- $149 billion over 10 years -- comes from so-called "Cadillac insurance plans" that cover everything under the sun. Plans that cost more than $8,500 for individuals and $23,000 for families annually will experience a 40% excise tax on top of that. Yikes!
I have a hard time seeing health insurance companies like UnitedHealth Group (NYSE: UNH ) , Humana (NYSE: HUM ) , Aetna (NYSE: AET ) , and CIGNA (NYSE: CI ) just eating that whopping added tax. Instead they're likely to increase the cost of the plans to cover most or all of the added tax.
Ironically, the real beneficiaries of the tax could be companies like Ford (NYSE: F ) or Goodyear Tire & Rubber (NYSE: GT ) with workforces that are dominated by unions. Those workers are typically the ones with the Cadillac plans, and the increased cost might push companies to finally end the madness and scale back insurance coverage. Depending on their contracts with the unions, the decreased costs might not come right away, but it seems likely that the unions will have to give up some of their sweet insurance package the next time negotiations role around.
The rest of us aren't off the hook either
If your insurance cost is currently under the cap, don't think you're off the hook. There's another $60 billion in taxes being imposed on the health insurance industry. While the insurance companies may be willing to absorb some of the added cost, their net margins aren't particularly high, and I suspect that a lot of that added tax will be passed along in the form of higher premiums.
Beauty Queens and CEOs
A new tax on cosmetic procedure like face lifts, implants, anti-wrinkle therapies from Allergan and Medicis Pharmaceutical and even teeth-whitening could have patients wanting cosmetic enhancements digging a little deeper into their pockets. The 5% tax will likely be passed along to the end consumer, which might hurt sales of the more expensive procedures like breast implants sold by Johnson & Johnson (NYSE: JNJ ) and Allergan.
CEOs and other high wage earners will be paying more than their fair share of the health-care burden. A new payroll tax on wages in excess of $200,000 has a catchy name: "hospital insurance tax." Depending on whether you're a supporter of trickle-down economics or progressive tax, you'll either love or hate the new payroll tax. It's a bigger debate than is possible here, but in any case, the tax is in the bill -- for now.
Far from done
With the Congressional Budget Office's and JCT's reports this week, we're one step closer to the Senate opening floor debate on its health-care reform bill. But negotiations will likely need to be made in order to get the bill passed, so all of the taxes are subject to change.
Even then, the House and Senate bills differ substantially in some areas and we'll need to see even more compromise to work out a final bill.
Is the increased coverage worth the added costs?