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Five Key Things to Know about the Republican Health Care Plan

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Publication Date: 
March 7, 2017
Author: 
Ben Palmquist

Updated March 16, 2017, to reflect new numbers from the Congressional Budget Office's analysis. Be sure to check out our summary of the CBO report too.

 

Paul Ryan and the House Republicans finally put out their health care plan, the American Health Care Act (AHCA), though the plan is in fact less about health care than it is about redistributing wealth. The plan would deliver half a trillion dollars in tax cuts to corporations and the wealthy by taking health care access away from poor, working class, and middle class people. It would do nothing to address the crisis of unaffordable health care that imposes impossible costs and denies millions of people access to care.

Though the plan is not final (there is discord among Republicans in Congress) and a full analysis of the budget cuts and how many people they will affect are not yet available, much is already clear. There are five key takeaways.

1) The AHCA takes away people’s access to health care in order to give at least $464 billion in tax cuts to the wealthy and to corporations.

Tax cuts for the wealthy

The House health care plan would give at least $275 billion in tax cuts over the next ten years to people whose annual income is over $200,000 (not counting an additional $24 billion in subsidies for health savings accounts). How much is $275 billion? It represents nearly $1,000 for every single person in the country, and every cent of this wealth will be transferred to people making more than $200,000 per year. As much as ninety percent of the money will go to the top 1%. The top 0.1% of tax filers (whose income averages $7.5 million a year) would get an average of $195,000 each. And the top 400 highest-income taxpayers (whose annual income averages $300 million) would each get a tax cut of about $7 million. Anyone earning less than $200,000 (or less than $250,000 per family) would get absolutely nothing.

To put this in perspective, the tax cuts for the top 400 households alone are worth more than the Affordable Care Act subsidies for 800,000 people in 20 states. This is an enormous transfer of wealth and well-being from poor, working class and middle class people to the super wealthy.

Tax cuts for corporations

In addition to cutting taxes for the wealthy, the House plan will cut $190 billion in taxes for insurance companies, drug companies, and medical device companies over the next ten years. Each of these industries charge extortionate rates for deductibles, medicines, and treatments that bar people from care and push whole families into medical debt. The plan would also increase the tax decuction medical corporations can claim for executive pay, actually encouraging companies to pay their CEOs more. This is inexcusable corporate welfare. Health care and pharmaceutical CEOs are paid more than executives in any other industry (an average of $37 million a year), and their wealthy shareholders are reaping record profits.

2) The AHCA slashes Medicaid by $880 billion over the next decade.

The enormous $880 billion in cuts would push people off of Medicaid, dramatically reducing health care access for poor and working class people. These cuts would be made in two ways: capping and cutting federal Medicaid payments and reversing the Medicaid expansion.

Capping and cutting Medicaid payments to states

The House plan would fundamentally alter the way that Medicaid is paid for by putting a ceiling on federal Medicaid payments to states. How would this cut work? Every state’s Medicaid spending fluctuates over time. When more people are pushed into poverty by a recession or layoffs, or when a bad flu season or natural disaster means more people need medical care, states’ Medicaid costs go up. Right now when a state’s costs go up, the federal government gives the state more money. But the House health care plan will put a cap on what the federal government pays each state. This means that  when costs go up, the state will not receive a penny more. (Policy wonks call this a per-capita block grant payment model.)

Reversing the Medicaid expansion

The House plan would allow additional states to expand Medicaid through 2019, but beginning on January 1, 2020, states will not get any added funding to enroll more people who were made newly eligible for Medicaid by the ACA. This tightening of eligibility will once again exclude childless adults and parents with incomes just above the poverty line from Medicaid. While no one who is already enrolled in Medicaid on January 1, 2020, would automatically be kicked off, many people move in and out of Medicaid eligibility over time as their income fluctuates. If someone becomes ineligible at any point, they will not be allowed to return.

Forcing states to make drastic cuts

The $880 billion cut in federal funding will force states to make their own drastic cuts. States would have the option of raising taxes to cover the lost funding, but it is very likely that they would respond by further restricting Medicaid eligibility, reducing Medicaid benefits, reducing provider payments, or shift money away from other critical public programs. Any of these outcomes would have a devastating effect on the health and wellbeing of poor and working class people.

3) The AHCA cuts ACA subsidies, hurting people who are poorer, sicker, and older.

The House bill will replace the ACA’s insurance subsidies, which are based on people’s incomes, with tax credits that are instead based on people’s age. The annual tax credit will range from $2,000 for an individual under 30 to $4,000 for those age 60 and over. Families will be capped at a $14,000 credit, and all credits will phase out for higher-income people beginning at $75,000 annual income.

Compared to the existing subsidies, these tax credits are highly regressive. They will raise health care costs for people with lower incomes, people with more medical needs, older people, and people who live in places where health care is more expensive. They will effectively redistribute money to wealthier people, healthier people, younger people, and people who live in more affordable places.

In addition, the bill will immediately end the individual mandate that the ACA created to encourage younger and healthier people to get health insurance. This risks destabilizing the insurance markets, which could, in turn, put the healthcare coverage for millions of people at risk. Although commodifying health care through for-profit markets is antithetical to the human right to health care, 20 million people currently rely on the ACA marketplaces for health insurance.

4) The AHCA cuts reproductive health care and public health funding.

The House bill would make two major cuts that would deny access to comprehensive reproductive health care. The bill would eliminate federal funding for Planned Parenthood for a full year, cutting off care for as many as 2.5 million women and transgender people. It would also prohibit any insurance plan that receives tax credits from covering elective abortions.

The House plan will also cut $5 billion in funding for critical public health programs, including the federal vaccine program and programs to prevent heart disease, hospital-acquired infections, and fully 10% of the budget of the Centers for Disease Control and Prevention (CDC).

5) The AHCA leaves the basic structure of the healthcare system in place, but deepens existing inequities and privatization.

Overall, the plan leaves the basic structures of the ACA in place: it maintains a private market-based insurance system that is publicly subsidized and regulated. Yet it would not only redistribute health and wealth from everyday people to the super rich, but also deepen already existing inequities and put further control of the health care system in the hands of private insurance and drug corporations.

  • Spending $100 billion in public money to make up for the failures of private insurance: The House plan would make $100 billion available to states over ten years for so-called “innovations.” These state programs could potentially expand insurance coverage for some people, but will essentially be designed to protect insurance industry profits and help people cope with gaps in coverage that would not exist if the United States had a universal, publicly funded insurance system. One of Republican’s favorite “innovations” are “high risk pools,” which essentially protect insurance companies’ profit margins by segregating people who have the highest health care costs (and are thus unprofitable to insurance companies) in an inadequately funded public insurance program.

  • Charging more for pre-existing conditions for people unable to maintain continuous coverage: Insurance companies would be allowed to charge 30% more to anyone who has a lapse in coverage. This would hurt people who face hiring discrimination and structural barriers to getting jobs that come with health care benefits: people like low-wage workers, mothers and caregivers, people of color, and people who have been incarcerated.

  • Giving $24 billion in tax breaks to high-income workers through health savings accounts: On top of the $350 billion this bill will give the wealthy through tax cuts, it will provide $24 billion in tax breaks over the next ten years to people with health savings accounts. Because the tax benefits of health savings accounts only go to people whose income is high enough to itemize their tax deductions, this $24 billion will go exclusively to wealthier households.

  • Planting a land mine to cut and privatize Medicare later: Though the plan does nothing to cut Medicare directly, the tax cuts will put the Medicare trust fund on course to run out of money in 2025, four years earlier than it would otherwise. As Paul Waldman writes in The Washington Post, "This is a feature, not a bug, of the Republican plan, because they look forward to using the depletion of the trust fund as a justification for cutting or privatizing the program."

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