Republicans Health Care Plan Rewards Rich and Healthy, Punishes Poor and Elderly

After years of criticizing the Affordable Care Act and vowing that they could do better, Republicans have finally revealed their own health care plan titled the American Health Care Act. Though Republicans have tried to frame the plan compassionately, as a way to offer Americans more choices at competitive rates, that is, as Joe Biden would say, a bunch of stuff. The plan is primarily a redistribution of wealth, with money flowing from low income or older Americans to higher income Americans and insurance companies. Key provisions of the bill and their likely impact are outlined below.

Tax Credits Increase for High Earners and Decrease for Many Low Income Americans

One of the primary functions of the ACA was to give tax credits to those Americans most in needlow income individuals who might be unlikely to obtain health insurance on their own. The Republican plan would diminish those tax credits for lower income Americans while giving higher income Americans tax credits they do not get under the ACA.

For example, according to the Kaiser Family Foundation a 60 year-old with an income of $20,000 who receives $9,874 in tax credits under the ACA would receive only $4,000 in tax credits under the Republicans new plan. By contrast, a 40 year-old earning $75,000 a year who does not currently get tax credits under the ACA would get $3,000 in credits under the Republicans plan.

Though some lower income Americans would see their tax credits increase under the Republican plannamely people under 40 who earn a middle class incomethe most vulnerable Americans would see the biggest drop in their credits. As a result, there is little reason to doubt that the Republicans plan would lead to a greater number of uninsured.

The Republican Plan Will End Federal Matching Funds for Medicaid

The ACA enhanced federal matching funds for Medicaid and expanded Medicaid to cover adults who earn up to $16,400 a year. Thirty-one states and the District of Columbia took advantage of those matching funds and over 10 million people are now insured as a result. Republicans plan would end matching Medicaid funds in 2020 and place a cap on the amount the federal government sends states per enrollee.

The likely consequence is that fewer Americans would be able to take advantage of the Medicaid expansion and states, many of which cannot afford to take on more financial obligations, would be unlikely to keep up with rising medical costs. Americans who currently benefit from the Medicaid expansion would be harmed by the Republicans plan.

Young Americans Get Cheaper Plans While Older Americans Pay More

The ACA was designed so that younger, healthier Americans would subsidize older Americans who were more likely to rely heavily on their health insurance. That would change dramatically under the Republicans plan.

The ACA had a limit under which insurance companies could charge older Americans at most, three times as much as younger Americans. The Republican plan will change that ratio to five to one, meaning that insurance companies will be able to charge older Americans substantially more for their health care. Studies from the AARP Public Policy Institute and the Millman actuarial firm concluded that people in their 50s would be faced with a 13 percent increase in premiums while those in their 60s would pay 22 percent more for annual premiums.

Taxes on the Wealthiest Americans and Insurance Companies Would Expire

The ACA was paid for in part by taxes on wealthy Americans. The Republican plan would allow those taxes to expire. According to the Tax Policy Center, people earning over $774,000 a year would receive a tax cut of approximately $33,000 under the Republicans plan. Those in the top 0.1% would have $197,000 more to spend on fuel for their jets and yachts.

In addition, the ACA allowed insurance companies to deduct only $500,000 of their executives pay as a business expense. The Republican plan would eliminate that provision as well, meaning that insurance companies would be able to deduct the millions they actually pay in compensation to their executives, resulting in a hefty tax savings for those companies.

Insurance Companies Can Charge You More if Your Coverage Lapses

The Republican plan would allow insurance companies to increase premiums by 30 percent on people who do not maintain continuous coverage. Since low income Americans are much more likely to have a lapse in coverage than high earners, this provision amounts to a penalty on those who may struggle to pay for health insurance and a deterrent which makes it more difficult for people to obtain insurance in the future.

Taken together, the key provisions of the Republican plan take money that currently goes to low income and older Americansthose most in need of assistance with health insuranceand gives it to high income and young Americansthose who are least likely to need assistance or rely heavily on health care. The American Health Care Act is a redistribution of wealth. Unfortunately, the money goes in the wrong direction.