GOP health plan is an act of class warfare by the rich against the poor

Republican health care bill raises premiums for older, poor Americans by more than 750%
The American Health Care Act would make a low-income 64-year-old in the individual market pay more than half his income for health insurance.

http://www.vox.com/policy-and-politics/2017/3/13/14914596/ahca-cbo-premiums-age

The Republican-backed American Health Care Act would be totally devastating to older Americans who rely on the individual market for insurance, according to an analysis by the Congressional Budget Office (CBO).

The bill does bring down overall premiums in the individual market by about 10 percent by 2026 compared with what they would be under current law, the CBO found. But the CBO includes a big caveat: This would greatly differ based on age and income.

The CBO offers an example of a single individual with an annual income of $26,500.

If that person is 21 years old, he’ll largely benefit from the Republican health care bill. Under the Affordable Care Act (also known as Obamacare), he would on average pay $1,700 in premiums for insurance. Under the Republican plan, he would pay $1,450.

But if that person is 64 years old, he would be hurt by the Republican bill. Under Obamacare, he would also pay $1,700 in premiums for insurance. But under the Republican bill, he would pay $14,600 — more than half his annual income. That amounts to more than a 750 percent increase in premiums from Obamacare to the Republican bill.

A 64-year-old who’s making $68,200 a year would fare a bit better. Under Obamacare, he’s expected to pay $15,300 in premiums for insurance — because his income would be too high to receive the law’s tax credits. But under the Republican bill, everyone below $75,000 gets a tax credit based on age (with a phaseout for higher incomes). So he would get a subsidy that would reduce his premium to $14,600 — just barely enough to be lower than it would be under Obamacare.

Older people with an annual income of $75,000 or more would get fewer to no subsidies under the Republican bill. So they would likely face higher premiums than they did under Obamacare, much like the lower-income consumer.

The Republican bill accomplishes all of this in two ways.

First, it abandons Obamacare’s income-based tax credits (which give more money to people with lower incomes) to instead give anyone with an annual salary below $75,000 a tax credit based on age, with older people getting more money and a phaseout for higher incomes.

But it also peels back an Obamacare rule that protects older people from higher premiums. Under Obamacare, insurers are generally only allowed to charge an older person about three times what they would charge a younger person — under the theory that older people are often sicker and therefore need to use more insurance. But under the Republican bill, the limit of three times would go up to five times, effectively letting insurers charge older people 66 percent more than they would under Obamacare.

Republicans argue this is necessary because it would also let insurers charge younger people less, which would encourage younger and generally healthier people to come into the insurance pool — and therefore bring down the overall cost of health care by making it so more younger, healthier people are effectively subsidizing everyone’s care.

The CBO found that’s broadly true. It would bring insurance premiums down in general, and it would cost young people less to get signed up for a health plan. But it would do all of that at a high cost for older Americans.

Correction: This article originally misstated how the individual market tax credit phaseout works under the American Health Care Act.

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The GOP health plan is an act of class warfare by the rich against the poor

http://www.vox.com/2017/3/13/14914062/republican-health-care-plan-cbo-redistribution-poor-medicaid

The Congressional Budget Office’s assessment of Republicans’ plan to replace Obamacare is a description of one of the largest, most significant income redistribution programs the US government has ever considered — from the poor to the wealthy rather than the other way around.

The plan, the CBO concludes, would take more than $1 trillion away from programs targeting poor and middle-class families, to fund an $883 billion tax cut targeted at the wealthy. It is upward income redistribution of a truly massive scale.

“No legislation enacted in recent decades cut low-income programs this much — or even comes close,” Robert Greenstein, the founder and president of the Center on Budget and Policy Priorities and Washington’s leading advocate for poor and low-income Americans, says.

There are massive cuts to Medicaid: The biggest damage to the poor will come from the plan’s cuts to Medicaid, which total $880 billion over 10 years, almost exactly the same amount as the plan cuts in taxes. “By 2026, Medicaid spending would be about 25 percent less than what CBO projects under current law,” the CBO finds. The program would insure 14 million fewer people — the biggest single coverage loss caused by the Republican bill.

Under Obamacare, the Medicaid program was expanded, to cover everyone up to 138 percent of the poverty line (~$36,000 for a family of four), provided that states accepted the expansion. That meant that for the first time ever, all poor Americans in 31 states plus DC had health insurance.

The Republican plan kills this expansion. It denies federal funding for any further enrollment in the Medicaid expansion, and ensures that funding will be cut off for current beneficiaries if they lose eligibility for two or more months. Since the vast majority of Medicaid expansion beneficiaries are only on the program temporarily, or cycle in and out of it, that means the expansion will gradually die as its beneficiaries cycle out and lose eligibility. All the coverage gains from Obamacare are, with time, wiped out.

And then the plan restricts coverage further by slashing Medicaid funding to states, using a tool called a “per capita cap.” Today, the federal government matches whatever states spend on Medicaid using a given formula. Connecticut gets $1 for every $1 it spends; Mississippi, being poorer, gets $3.11 for every $1. The Republican plan would end all that, and instead give states a set amount of money per enrollee, increasing along with a specialized medical inflation rate (CPI-M, which measures how much people spend on out-of-pocket costs).

This would, in effect, cut Medicaid funding more, the CBO concludes: “The limit on federal reimbursement would reduce outlays because (after the changes to the Medicaid expansion population have been accounted for) Medicaid spending would grow on a per-enrollee basis at a faster rate than the CPI-M.” That means states will have less money for Medicaid, and they will likely respond by kicking people off the rolls or giving them worse coverage.

Tax credits are redirected to the rich: Then there are the cuts to the insurance subsidies established under Obamacare, which helped people making up to four times the poverty rate ($98,400 for a family of four) pay their premiums for private individual insurance. The Republican plan would replace the sliding-scale subsidies of Obamacare, which help lower-income people more, with lower, flat credits that vary only by age, and which only begin phasing out for couples making $150,000 or more.

In other words, the Republican credits will be smaller, and they will be more targeted toward the rich. The result is a $312 billion net spending cut, and the $361 billion in tax credit spending that remains would be redirected to richer people.

The biggest tax cuts help the rich: The Republican plan would reduce federal revenues by $883 billion over 10 years. About $210 billion of that comes from eliminating the employer and individual mandates; the former is paid by companies that don’t insure their employees, and the latter is progressive, as it’s levied as a percentage of income.

But the bulk of the tax cuts would come from eliminating specific provisions meant to raise money for the Medicaid expansion and insurance subsidies in Obamacare, rather than to make sure the insurance market functions properly. The biggest of those is the 3.8 percent tax the Affordable Care Act applied to capital gains, dividend, and interest income for families with $250,000 or more in income ($125,000 for singles). The CBO finds that getting rid of this tax costs $157.6 billion over 10 years.

Repealing that tax is a change that, by definition, only helps the rich, or at least the affluent. If you’re part of a married couple and, like the vast majority of Americans, make less than $250,000 a year, or earn more than that but have little investment income, it doesn’t affect you at all. The Tax Policy Center finds that repealing the tax would amount to an average tax cut of $0 for households in the bottom 90 percent — those making $208,500 or below. A handful of people in the 80th to 95th percentiles would see cuts, but the vast majority wouldn’t.

By contrast, members of the top 0.1 percent, who each on average make more than $3.75 million annually, would get an average tax cut of $165,090.

Then there’s the 0.9 percent Medicare surtax, a hike on wage income in excess of $250,000 a year ($200,000 for unmarried people). The Republican bill would repeal this surtax, which the CBO estimates will cost $117.3 billion over 10 years. That would give everyone in the bottom 90 percent an average tax cut of $0, per the Tax Policy Center. The richest of the rich, the top 0.1 percent, would get an average cut of $30,520.

Another way of saying this is that the Affordable Care Act was one of the single largest downward redistributions of income in American history, made more so when considered in the context of the Obama administration’s increases in taxes on the rich and expansions of tax credits for the poor. This was a point that Jason Furman, Obama’s chief economist, made well in a speech last October.

“In concert with the effects of the ACA coverage provisions, changes in tax policy since 2009 will by 2017 boost incomes for families in the bottom quintile by 18 percent, or $2,200 (the equivalent to about a decade of income gains), and in the second quintile by about 6 percent, or $1,500, relative to what they would have been under the continuation of 2008 policies,” Furman noted. “Under President Obama, the Federal investment in inequality has increased by about 0.8 percent of potential GDP, more than any previous president since the Great Society.”

You don’t have to take Furman’s word for it. A simple glance at the funding mechanisms of the ACA — things like the surtaxes on income above $250,000 — and what it spent money on (namely health insurance for the poor) makes it clear that it takes money from the rich and gives it to the poor, in the form of health insurance.

The American Health Care Act, the Republican health care legislation backed by President Trump and Speaker Paul Ryan, undoes basically all of those components. And then it goes a step further, by slashing Medicaid to below its pre–Affordable Care Act levels using a per capita cap.

The AHCA would reverse one of the greatest actions against inequality ever taken by the federal government, and then increase inequality yet further. It is an act of class warfare against low-income Americans, waged for the benefit of the handful of rich taxpayers affected by Obamacare’s surtaxes.