The GOP plan being considered in the House of Representatives to replace or revise Obamacare would save the federal government billions of dollars. But at a cost. Tens of millions Americans who have health insurance today are expected to drop coverage or lose it if the bill is approved as written. (Read: “GOP Health Care Plan Would Save Billions, Hurt Millions.”)
How would the Republican health care plan affect you? It’s too early to know. It’s still just a proposal — subject to horse-trading, amendments and compromises as it moves through Congress. It may or may not become law. And yet, as these six controversial issues reveal, there will be winners, losers and trade-offs:
1. Cutting taxes will shrink services
Signed by President Barack Obama in 2010, the Patient Protection and Affordable Care Act (or, ACA) primarily helps people who don’t have workplace health plans buy private insurance through state and federal online marketplaces. Obamacare, as it came to be known, provides tax credits to help lower-income people buy coverage. The ACA is funded by a combination of spending cuts, taxes and tax penalties.
The GOP plan, called the American Health Care Act, would abolish those taxes, leaving less money to help people pay for their insurance. It would — to offer one example — kill a tax on drug and medical device makers and health care insurers that would eliminate $190 billion in revenue for health insurance over 10 years, according to the nonpartisan Tax Policy Center.
Because of decreases in subsidies, increases in insurers’ premium costs and the elimination of a mandate that everyone must buy insurance, about 21 million people will drop or lose their health care coverage by 2021 — a number that will grow to 24 million by 2026, for a total of 52 million uninsured Americans, the Congressional Budget Office (CBO) predicts. Other consumers may opt for cheaper plans that buy fewer services or require bigger out-of-pocket payments. Some people will lose coverage under a scaled-back version of the Medicaid program, which Obamacare had expanded to bring care to more needy adults.
The New York Times says the changes will have an impact for older Medicaid patients:
Hospitals that serve the rural regions in what could be called Trump country would be particularly vulnerable. Their patients tend to be older, poorer and sicker, and their profit margins much narrower, if they make any profit at all.
Randy Oostra, president and CEO of a small hospital in Toledo, Ohio, told The Times:
“It will drive down reimbursement over time, and we’re going to start stripping care away,” Mr. Oostra said. “They may have Medicaid, but it’ll be so stripped down that they basically won’t have coverage.”
2. This plan is kind of like Obamacare
The Republican plan changes much more than it leaves the same. Some examples:
- Companies with 50 or more full-time workers would no longer have to offer their employees a health insurance benefit, as currently mandated under Obamacare.
- Consumers would no longer pay a fine for going without health insurance. (Under Obamacare, anyone failing to get health insurance in 2016 was subject to a penalty of $695 or 2.5 percent of your income, whichever was higher.)
- If you did get insurance after being uninsured more than 63 days in one year, however, your premiums would cost 30 percent extra.
- Insurers would no longer have to pay for at least 60 percent of the cost of your covered benefits — a huge savings for insurers that opens the door to plans with lower premiums but with less coverage and higher out-of-pocket costs.
But the GOP plan — thus far — does leave several Obamacare provisions in place, to the consternation of many conservative critics. Examples:
- It uses refundable tax credits (more on this below) to subsidize some of consumers’ insurance premiums. Credits range from $2,000 for younger consumers to $4,000 for older ones, says the Washington Post.
- It requires insurers to allow young people to stay on their parents’ plans until they reach age 26.
- It forbids insurers from denying coverage or charging higher prices because of pre-existing health conditions.
- It keeps until 2020 current Medicaid subsidies allowing tens of millions of poorer Americans to buy health insurance.
- It requires insurers of individual plans — but not state Medicaid plans after 2019 — to cover 10 essential health care services, including hospital stays; ER and ambulatory care; prenatal, maternity and newborn care; pediatric care; rehab services; prescription drugs; mental health and substance abuse treatment; laboratory services; and wellness and prevention.
These and other similarities to Obamacare attest “to how entrenched the health care law has become since its enactment seven years ago, and how difficult it will be for the GOP to repeal it entirely,” according to Vox.
2. The wealthy come out on top
The GOP plan eliminates most of the taxes that fund Obamacare. Among them, a 3.8 percent tax on investment income and a 0.9 percent tax on wages. Since only high-earning households (singles making $200,000 and up, married couples making $250,000 and up) pay those taxes, only they would benefit from the tax cuts.
According to the nonpartisan Tax Policy Center’s analysis of the plan:
Nearly all families affected by the additional payroll and investment taxes are in the top 5 percent of income, with most of the burden borne by families in the top 1 percent of income. JCT (the congressional Joint Tax Committee) estimates repealing these two taxes would cost $275 billion over ten years.
Obamacare gives bigger subsidies to lower-income people to help them buy coverage in the insurance marketplace. The GOP plan, instead, makes insurance cheaper for younger, healthier and more affluent people, as The Arizona Republic explains. The hope is to attract younger, healthier people to join the insurance pool.
In addition to tax breaks for the wealthy, the GOP plan subsidizes people on the upper end of the middle-income spectrum, giving tax credits to individuals earning up to $75,000 a year and married couples earning up to $150,000. In contrast, Obamacare limits subsidies to those earning under $48,240.
“Those with low incomes could do worse under the GOP plan, while those who earned too much to qualify for tax credits under the ACA (an individual making over $48,240) would get tax credits,” according to USA Today.
For example, as the Kaiser Family Foundation shows (see Table 2 at the link), the average tax credit today for someone aged 60 earning $20,000 a year is $9,874 (credits vary by city and region). The GOP proposal allows a flat $3,000 at that age and income, regardless of location. The credit rises to a maximum of $4,000 for seniors earning $75,000 a year in all locations.
And, although older people will pay higher premiums, their tax credits would cover less of their premium costs. “Health-care experts said the GOP tax credits don’t increase enough for older people and cover less of their health-care costs than do the ACA’s subsidies,” writes Fox Business News.
3. Premiums will rise for individual plans
Those who hate Obamacare because of the high cost of plans available in the individual (non-group) marketplace probably won’t like the GOP plan either — at least at first. The GOP proposal would drive up premiums in the individual insurance marketplace by 15 to 20 percent in the first couple of years, the CBO says. Since there would be no requirement for everyone to buy insurance, younger healthier people would drop coverage, raising costs for those who buy individual plans.
“As I read the table (for non-group plans), a 64-year-old with a yearly income of $26,500 would see his annual net premium increase from $1,700 to a whopping $14,600 — and this for a markedly less generous plan,” writes public policy analyst Harold Pollack, at HealthInsurance.org.
Also, the GOP plan lets premiums rise higher on the most-expensive plans, which are used mostly by older or sicker people. Insurers could charge up to five times more for higher-priced plans unless a state prohibits it. Currently, Obamacare sets a limit for higher-priced premiums to three times the cost of lower-cost plans.
4. And then, premiums should drop
The average premium for an individual plan should settle down by 2026, the CBO says, costing about 10 percent less compared with today’s ACA prices. Reasons include federal grants to states, growing numbers of younger consumers in the mix and insurance plans featuring cheaper premiums and less coverage.
That won’t help older consumers, though. Although prices will fall for younger consumers, premiums would increase considerably for seniors.
5. Medicaid is in jeopardy
What does Medicaid — a federal-state health insurance program for the lowest-income and needy Americans — have to do with the GOP plan? Plenty. The ACA expanded Medicaid to enroll millions more Americans in that health care program. According to The New York Times:
Medicaid provides health insurance to 74 million people, or one in five Americans. Of the 20 million who gained insurance under Obamacare, at least half were through Medicaid expansion.
Many picture Medicaid recipients primarily as very poor and disabled people. But young families and older people who are too young to qualify for Medicare are among the many Medicaid recipients. Great numbers of middle-class elders depend on Medicaid for nursing home care and in-home help. In fact, Medicaid covers the bills for more than 60 percent of long-stay nursing home residents, according to AARP. Medicaid, through certain state programs, also pays family members to care for about one million older seniors at home.
The GOP health care bill keeps Medicaid funding untouched through 2019. Then, it freezes spending for the program. “People would fall off the rolls as they lose eligibility because of higher income or other life changes,” The Arizona Republic says.
The effect would be profound. The freeze would strangle Medicaid slowly with funding linked to increases to the growth in medical costs. “That change would allow funding to grow if more people sign up for Medicaid, but not if the cost of care for Medicaid patients spikes, or states want to offer new benefits or increase payments to doctors,” The New York Times says.
Critics say the funding limits would cripple states’ abilities to respond to health crises, epidemics or rising poverty.
“The potential effects are enormous,” Sara Rosenbaum, a professor of health law and policy at George Washington University, tells The New York Times.
Conservative critics, a powerful bloc in the House of Representatives, want to cut Medicaid even more, and sooner. One influential critic, Rep. Mark Walker (R-N.C.), tells Time Magazine that he wants to require Medicaid recipients to work if possible, an idea President Donald Trump supports, according to The New York Times. “We would have to have some work requirements on the 9 [million] to 10 million on Medicaid that are able-bodies,” Walker said.
Trump reportedly has told House conservatives that he supports some of their demands to cut Medicaid benefits even further in the GOP plan. Among them, paying states lump sums for Medicaid instead of tying the funds to the number of each state’s Medicaid beneficiaries. Trump reportedly also wants to prohibit funds to allow any additional states to expand Medicaid coverage to residents. Currently, 31 states offer coverage through Medicaid.
“The (ACA) program currently costs the federal government around $370 billion annually and covers costs no matter the amounts,” according to ABC News.
6. Tax credits vs. tax deductions
Like Obamacare, the American Health Care Act subsidizes individuals’ insurance premium costs through refundable tax credits. Under the GOP plan, older people (who typically use more health care) would get more financial support than younger ones. Obamacare’s credits are on a sliding scale, based on income.
Conservative critics dislike tax credits because they require federal spending. Deductions cost the government less since they’re only used by taxpayers — usually wealthier ones — who itemize deductions.
Tax credits are more valuable to lower-income and middle-class taxpayers than a deduction.
Here’s the difference:
- A credit reduces your total tax bill. A $500 tax credit, for example, subtracts $500 from your tax bill. A refundable tax credit means that, if the credit is larger than what you owe in taxes, you’d get a check for the difference from the government.
- A deduction, on the other hand, reduces how much of your income is subject to taxes. The post “Pop Quiz: Is It Better to Have a Tax Credit or a Tax Deduction?” explains: “A tax deduction lowers your taxable income, while a tax credit lowers your tax bill dollar for dollar.” The IRS has the details here.)
What’s your biggest concern about health care reform efforts going forward? Share with us in comments below or on our Facebook page.