Monday, March 13, 2017

Trumpcare is a De Facto Tax Hike for the Middle Class and an Eventual Tax Cut for the Rich

by Michael Dorf

The current House bill to repeal and replace the Affordable Care Act (ACA), which has the support of the White House and can thus fairly be called "Trumpcare," would, as widely acknowledged by the reality-based community, make health care less affordable for millions of the working poor and others who currently receive subsidies to purchase health insurance on the ACA-authorized exchanges. By greatly reducing such subsidies and scaling back Medicaid, Trumpcare would thus allow the repeal of the surcharge that the ACA placed on people with high incomes to pay for expanded coverage under the ACA: a "0.9 percent payroll tax on earnings and a 3.8 percent tax on net investment income (NII) for individuals with incomes exceeding $200,000 and couples with incomes exceeding $250,000."

But Trumpcare would not merely make health care less affordable for those with low incomes in order to benefit those with high incomes. It would also result in a de facto shifting of the financial burden from the wealthy to the middle class--including the vast majority of people with employer-based health insurance--people who may think that they will be unaffected by ACA repeal/replace because the ACA is mostly not about employer-based health insurance.

Why? Because people without health insurance still need health care. One impact of the ACA was a substantial reduction in people without insurance showing up in emergency rooms with conditions that could be treated by a primary-care physician or, worse, that could have been treated cheaply and effectively by a primary-care physician but were made worse, and thus more costly to treat, by the delay in treatment. Increasing the number of uninsured people will reverse that development, which, in turn, will require hospitals and doctors to cross-subsidize more uncompensated treatment for people without insurance or other means to pay from people who have insurance.

That, in turn, will lead hospitals and doctors to increase charges to insurance companies for treatment of people who do have insurance coverage. Patients would not necessarily see those increases directly, but higher charges to insurers means higher insurance premiums for employers, which means less money left over for salaries and other benefits. As a consequence, people with employer-based health insurance will take home less money than they would if the ACA were to remain on the books.

High earners with such insurance will receive a tax cut (the repeal of the surcharges imposed by the ACA) that may leave them on-net better off (and the wealthier they are, the more better off they will be), but people who were not subject to the surcharges--that is to say, individuals earning less than $200,000 per year and couples earning less than $250,000 per year--will not receive any compensating financial benefit.

Thus, Trumpcare is essentially a transfer program from the working poor and middle class to the well-to-do. And that's to say nothing of the costs to lives and health.


David Ricardo said...

This is exactly correct, but the shift of health care costs to the middle class and those with employer group plans may be even stronger than Mr. Dorf reports. Not only will group premiums paid by employers increase, raising personnel costs and lowering salary increases and new hires, the actual out of pocket costs to employees covered in group plans will like rise.

This is because almost all employers share premium costs with employees and of course employees have co-pays and deductibles. As health care costs rise for reasons outlined by Mr. Dorf the result will be higher deductibles, higher premium co-pays and higher treatment co-pays for those on employer sponsored group plans. For the higher income groups those cost increases will be more than offset by the lower taxes, for the middle income groups, nope.

Of course, these higher costs do not take into account the 'freedom' benefits so strongly touted by Speaker Ryan. Such benefits as the freedom to enroll in 'zombie plans' (it's called insurance but the deductibles and co-pays and limits on services covered are so strict one never gets any benefits) and equally important the freedom to go without health care especially for the low income working class will in the minds of Republicans more than offsets the higher costs to middle income families.

Finally, it may not be correct to call this 'Trumpcare' as Trump had no input into the plan, no understanding of the plan and the fact that the plan goes against his call for universal coverage which he put forth in the campaign. Trump will, as has been noted by many commentators, support any plan which can be called a repeal of ACA regardless of what it does or what it does not do. Since the strongest advocate of the plan is Paul Ryan, in large part because the plan implements his Ayn Rand view of things (yes, Republican governing philosophy is based on fiction, isn't that obvious) maybe it should be called Randplan. But that doesn't work because Sen. Rand Paul (R,Ky.) would take huge offense since he supports an even more punitive measure. So it looks like we are stuck with Aynplan. A fictional health care program in honor of a writer of fiction.

Shag from Brookline said...

It might be correct to call this "TrumpScare."

David Ricardo said...

With the CBO report now in we know that this is not a health care bill. It is a tax cut for the wealthy/evisceration of Medicaid bill. The tax cuts for the wealthy will be close to $1 trillion over 10 years, and the reduction in health care support for low and middle income families will be about $1.3 trillion over 10 years. It should not take a detailed analysis to know that the removal of $1.3 trillion in federal spending from the health care sector will signficantly raise costs for the group insurance employer sponsored plans.

Congrats to Paul Ryan. He has birthed a 22 lb Butterball, large enough to feed the entire family.

Joe said...

The CBO determined some impressive number of million dollars will be taken off the federal budget eventually. Expect this to be used by Spicer etc.

Paul Krugman, so those who wish can simply ignore ["Paul Krugman notes the clocks were just put ahead an hour" ... hey now! it's 7:48 here #MAGA], notes the GDP sum over the same period would be 230 TRILLION. But, the additional people off health care and reduction of a federal program (as John Oliver noted last nite, this excites Paul Ryan in a bit of a creepy way) is what matters.

Anyway, as we know consumption of butterball turkeys is of questionable morality.

David Ricardo said...

The numbers are not impressive in context. To save the net amount, about $34 billion per year, getting rid of 24 million currently having insurance is a savings of about $1,400 per dis-enrollee per year. So is's not about money.

It's about the sheer joy and pleasure people like Paul Ryan get from granting freedom from health insurance and quality health care for 24 million oppressed souls, men and women who are forced to have health care against their will. Couple that with giving $1 trillion in tax cuts to the wealthiest Americans and you get the Republican dream scenario.

Shag from Brookline said...

The CBO report might suggest calling Ryan's plan "LibertarianCare" providing access to medical care/insurance for those who can afford it. It's Marie Antoinette-ish, or updated, it's AYNal. It has been reported that an internal Trump Administration study indicates even more uninsured than the CBO report. AARP may come up with an ad aimed at its clientele depicting Socrates proposing a toast: "To your health." courtesy of Paul Ryan.