Wonkblog | Analysis
March 25, 2017 at 8:45 AM
Why were Republicans rushing to vote on a health-care plan that they'd barely finished drafting, that budget scorekeepers hadn't had a chance to fully evaluate, and that, insofar as people did know about it, was widely despised?
In part, it's because their plan was so unpopular and because it got more unpopular the more people learned about it. But it's also because only by rushing to reshape a full sixth of the American economy without knowing exactly how they would be reshaping it would Republicans be able to use health care to pave the way for the rest of their agenda, including tax reform. In other words, the GOP didn't want to let a detail like tens of millions of people losing their health insurance get in the way of two tax cuts for the rich.
Here's what we knew about the Republican plan. The latest version that the nonpartisan Congressional Budget Office had a chance to analyze would have, over the course of 10 years, cut taxes by $1 trillion, disproportionately benefiting the rich; cut Medicaid spending by $839 billion, exclusively harming the poor and sick; and cut the Affordable Care Act's health insurance subsidies by about $300 billion, mostly hurting older people of modest means. Add it all up, and the CBO estimated that 24 million people would have lost their health insurance as a result. Not only that, but premiums would have increased 15 percent to 20 percent more than they otherwise would have in the next four years before so many older people were priced out of the market that premiums would have started to come down, and deductibles, according to the Kaiser Family Foundation, would have been an average of $1,550 higher. In short: The GOP would have made insurance more affordable for younger people by making it unaffordable for older people and worse for everyone.
This wasn't just a matter of higher premiums and higher deductibles, though. Trumpcare also would have repealed the "essential health benefits" that plans are required to cover now. States would have been allowed to write their own rules, so, depending on where you lived, insurance companies might have been able to sell you "insurance" that didn't cover hospitalizations, prescription drugs, maternity care, mental health care and preventive care, and also imposed annual and lifetime limits on your benefits. People who couldn't afford insurance that actually, you know, insured them might have bought these skimpy plans with their skimpy tax credits — why not use them on a fake something instead of a real nothing? — but neither the CBO nor they themselves likely would have thought of this as being covered.
The surprising thing, then, isn't that as few as 17 percent of people approved of the American Health Care Act. It's that as many as 17 percent did.
But there's a reason the GOP was pushing a bill that would have taken everything people don't like about the health-care system and made it worse. That's the fact that it would have allowed them to pass two permanent tax cuts for the rich. Anyone, you see, can pass a tax cut that expires after 10 years. But if you want to make it last — and you don't have 60 votes in the Senate — then you need to find a way to pay for it (or at least look like you did). Taking health insurance away from poor and sick people would have done just that for the Obamacare taxes, which primarily hit people in the top 1 or 2 percent. Indeed, as you can see below in the chart from the Urban Institute, the combination of tax cuts for the rich and benefit cuts for the poor that was the GOP health-care plan would have been a reverse Robin Hood that redistributed income from people making $50,000 or less to mostly those making $200,000 or more.
Now, the crazy thing is that this first tax cut for the rich (in the form of Obamacare "repeal and replace") would have made a second one (this one coming in the form of "tax reform") look more affordable.
That's because, due to parliamentary rules, tax revisions can't lose any revenue outside the 10-year budget window if it's going to be permanent. The question, though, is lose revenue compared to what. If Republicans had repealed the Affordable Care Act's $1 trillion worth of taxes before they revised taxes, that's $1 trillion less they'd have to come up with to make it look like money wasn't being lost. Now, without those phantom savings, tax restructuring, Speaker of the House Paul D. Ryan (R-Wis.) admitted, will be "more difficult." Not that it was ever going to be easy. After all, the $1 trillion they were trying to save with a "border adjustment tax" seems to be on political life support, since every major retailer, including big GOP donors such as Walmart, is opposed to it. And, as you might have guessed, there aren't an extra $2 trillion of savings lying around for them to replace the ones they thought they were going to get from this and repealing the Affordable Care Act.
Which is to say that Republicans will either have to scale back their ambitions for how deeply they will cut taxes or how long they will. Whatever they choose, though, the top tax rate isn't going to stay under 30 percent.
And for the GOP, that's the real tragedy of 24 million people keeping their health insurance.