The GOP’s Cruel, Costly, Corporate Obamacare Replacement
Among the many unintended ironies of the GOP’s insane ‘cure’ in search of a disease: It actually punishes large families.
It took Congressional Republicans nearly seven years to devise a plan to repeal and replace Obamacare (PDF), but summing it up takes just three words: cruel, costly, corporate.
The proposed bill also includes an odious whiff of China’s one-child policy, a shift in costs that will burden investors and taxpayers, and the destruction of any notion that Republicans believe in personal responsibility because the proposed replacement encourages what economists call free riders—people who enjoy a benefit, but avoid paying for it. In this case, it will enable people to not pay for health insurance until they need it, leaving a pool of insured Americans who are poorer and sicker than average.
The bill is cruel because the Republicans propose a mix of shrinking subsidies and modest tax credits that will put health care beyond the reach of millions of people who today are treated by doctors thanks to the Patient Protection and Affordable Care Act, Obamacare’s official name. Under the proposed bill, companies could take unlimited tax deductions for health care spending on their executives and directors while eliminating or reducing coverage for the rank and file. The ACA, on the other hand, requires large companies to insure their workers and taxes so-called Cadillac health care insurance for executives who often have no out-of-pocket costs.
The bill is costly because it will drive federal budget deficits higher while adding costs elsewhere, as Congressional Budget Office reports warned this year and in 2015. If people don’t have insurance there will be more premature deaths, the most serious cost of all. The prospect of over 44,000 more Americans dying each year is great news for the Grim Reaper (PDF).
The bill is corporate because its guiding principle is propping up health insurance companies, an utterly superfluous industry that America should sweep into the dustbin of history.
In economic terms, the bill comes from Happy Go Magic Land, a place where fantasy overrides facts. Consider Section 202, the “provision of financial assistance” for “high-risk individuals who do not have access to health insurance coverage offered through an employer.” That’s an official euphemism for people with pre-existing conditions whom no insurance company wants to cover because big medical bills are virtually certain.
To subsidize these “high risk pools” Congress would let the states divvy up $15 billion in 2018 and in 2019. Then, the federal subsidy would be slashed by a third to $10 billion annually through 2026.
Does any rational person believe health care costs for the already sick will fall by a third in three years? In the real world, the cost will be paid either by higher state taxes or by more suffering in the form of pain, disability, and death.
Let’s call this legislation what it is: the Create More Orphans and Widows Act of 2017.
Designed to Fail?
The replace legislation is so economically illogical, politically unrealistic, and tilted in favor of the rich that it seems designed to fail. Democrats will never vote for this bill. And unless a solid majority of the far-right House Republicans in the Freedom Caucus abandon their opposition to federal subsidies for health care, this bill will not be able to get the 218 House votes needed to become law.
Writing the bill so it will fail to become law makes political sense in 2017 Washington, where the far ends of the spectrum favor ideology over pragmatism, and delusional thinking is spreading from the Oval Office to the Capitol rotunda.
By leaving the Patient Protection and Affordable Care Act in place and not fixing its flaws the Republicans can blame higher health care costs on the former president and Democrats. Think of this as avoidance of political responsibility, a companion concept to the GOP theme of personal responsibility.
From Mandates to Tax Credits
In all fairness, it’s important to point out that having a national health care plan designed to prop up health insurance companies didn’t start with this GOP replace bill. It was part of Obamacare, as well, which embraced what had been a Republican idea. It’s worth remembering its history.
The Affordable Care Act grew out of proposals from the Heritage Foundation and other conservative groups to require everyone to have health insurance. That deals with the free rider problem where people don’t pay for insurance until they need it. A key element is requiring everyone to buy health insurance, just as states already require all motorists to carry car insurance.
The Republicans were for mandates before they came out against mandates—and that shift happened because some Democrats, notably Barack Obama, bought into their idea and used it to frame what Republicans dubbed Obamacare. But let’s not confuse the facts with logic.
Instead of requiring insurance, the Republicans’ replacement offers their universal carrot: more tax breaks. People would get tax credits to help pay for health insurance. The credit would be $2,000 for those under 30 and rise with age until it tops out at $4,000 for those ages 60 and above. That means more out-of-pocket payments for health care, at least for those who could afford care, given that the credits are woefully inadequate.
But in return for giving older Americans higher tax credits, the plan also frees insurance companies to charge older people more for coverage under the replace plan. Under Obamacare, richer people were charged more (because they didn't qualify for subsidies that helped pay insurance premiums), but companies were able to charge their oldest customers no more than triple what they charged the youngest ones. The new plan would allow them to charge five times more, with states given the option to set their own ratios.
If the new plan is enacted as currently described, older Americans not yet covered by Medicare could expect their premiums to rise. According to the AARP and other groups, "people in their 50s and 60s could see premiums rising by $2,000 to $3,000 a year or more: increases of 20 percent to 25 percent or higher," the New York Times reports. For example, a midlevel silver plan for a 60-year-old man could cost $10,500 a year, compared with $3,864 if he were 21, according to HealthCare.gov, the online federal insurance marketplace, the Times says.
The tax credits are refundable, which means if you are so poor you owe no federal income taxes you get a check back from Washington. But that only happens if you can afford health insurance. If you are one of the half of workers (80.5 million of them in 2015) who make less than $30,000, you might not be able to afford any insurance premium and, as a result, your tax credit would be zero.
Ironically, it looks like the Republican health bill actually favors blue states over red ones. The Kaiser Family Foundation, which specializes in health care policy, reports that “generally, people who are older, lower-income, or live in high-premium areas (like Alaska and Arizona) receive larger tax credits under the ACA than they would under the American Health Care Act replacement. Conversely, some people who are younger, higher-income, or live in low-premium areas (like Massachusetts, New Hampshire, and Washington) may receive larger assistance under the replacement plan.”
The Attack on Large Families
And there’s another catch: The stench of China’s one-child policy rises from the bill.
The Republicans would cap tax credits at $14,000 per family. This means for parents in their forties, a married couple with three children would qualify for the maximum amount. This policy is a subtle form of coercing people into not having four or more children. I tend to notice such discriminatory policies because I have eight children, now grown.
Some folks may favor the policy out of concern for the environment and a desire to slow population growth. But the fact that it is in the bill reveals how Congressional Republicans think more like the self-appointed communist rulers in Beijing than the founders of our democratic republic.
How to Slash Health Care Costs for Real
There is a way to slash health care costs. We could have a policy that saves as much money as almost 99.5 percent of Americans pay in federal income tax. Every other country with a modern economy has already shown the way, giving them a competitive advantage in commerce and an edge on moral superiority, too.
America spends about 18 percentage points of its economy on health care, six percentage points—or 50 percent more—than France, Germany, and other countries with universal care, my annual analyses of health care spending data from the CIA and the Organization for Economic Cooperation and Development show.
Portugal provides its people with superb universal health care even though its economy per capita is $28,500, half of the $57,300 in the United States. If the Portuguese can afford universal health care, arguing that America cannot is absurd.
Taxpayers already pick up almost two-thirds of health care costs, according to David U. Himmelstein and Steffie Woolhandler, physicians who study health care costs and accessibility and reported their latest findings a year ago in the American Journal of Public Health.
A smart bill would recognize that health care should be, as Donald Trump once told me, a universal service that, like kindergarten and roads, people can use as needed.
The way to free up six percentage points of our economy so we can invest in the future through education, infrastructure, and scientific research is to junk our sick-care non-system system and retire the health insurers. The way to reduce pain, suffering, and early death is through universal health care. The way to ease the burdens on small business is to remove employer involvement in health care, to make it no more an employer’s concern than the political or religious beliefs of workers.
As for the Republican bill to repeal and replace the Patient Protection and Affordable Care Act, down that path are higher costs, more disability and death among Americans, and more profits for health insurance companies. The bill should make you sick. If it becomes law and you are—or become—poor when you do get sick, it will make you sicker still until you die.