Timothy Jost is an emeritus professor at Washington and Lee University School of Law.
The American Health Care Act, introduced in the House Energy and Commerce and Ways and Means committees late Monday, was advertised as a bill to repeal and replace the Affordable Care Act. But the real focus of the legislation is not on health-care reform, not even on repealing the ACA as such. What the AHCA would in fact do is massively redistribute wealth from the poorest Americans to the wealthiest.
The AHCA repeals very little of the ACA, leaving all but three of the ACA’s 10 titles almost entirely intact. It leaves untouched most of the ACA’s insurance reforms, including its bans on preexisting-conditions exclusions, health status underwriting, and lifetime and annual coverage limits, as well as its requirements that health plans cover adult children to age 26 and, significantly, that individual market plans cover the ACA’s essential health benefits.
The AHCA does, of course, repeal some of the ACA’s insurance market reforms — most notably, the penalties for the individual and employer mandate. By 2020 it would also replace the ACA’s current income-based premium tax credits and cost-sharing reduction payments with fixed-dollar, age-adjusted tax credits.
But most ominously, the proposed legislation would repeal virtually all of the taxes created by Congress in 2010 to finance the ACA as of 2018. The ACA imposed taxes on insurers, pharmaceutical manufacturers and medical-device manufacturers, and imposed Medicare tax surcharges on Americans earning a quarter of a million dollars a year and more. The AHCA gets rid of them. The Joint Committee on Taxation estimates that the bill would cut taxes by almost $600 billion over 10 years. The Center on Budget and Policy Priorities notes that the AHCA’s repeal of Medicare taxes would give the 400 highest-earning American taxpayers a $7 million tax cut each.
At the same time, the reform legislation cuts federal support for Medicaid, the federal/state program that for more than 50 years has provided health-care access to the poorest Americans. It whittles back federal support for the ACA’s Medicaid expansions, which have assisted millions of working Americans living near the poverty level. And it goes further, ending Medicaid as an entitlement program under which the federal government matched state expenditures and changing it to a per-capita program under which federal contributions would be limited, shifting program costs to the states and ultimately reducing Medicaid coverage for the poorest Americans.
The private-insurance provisions of the bills demonstrate the same tendency to shortchange the poor in favor of the rich. The AHCA would end by 2020 the tax credits and cost-sharing reduction payments that the ACA offers to lower- and moderate-income enrollees. In their place, the AHCA would provide fixed-dollar, age-adjusted tax credits that are income-adjusted only insofar as they are phased out for higher-income taxpayers. An interactive map developed by the Kaiser Family Foundation shows that they would provide more generous assistance to younger, higher-income individuals than the ACA’s provisions did, but much less assistance to older, lower-income people. This effect will be considerable: The AHCA allows insurers to charge older individuals five times what they charge younger individuals, but older people get tax credits only twice as large as younger people do.
Republicans have claimed they are acting to save an individual insurance market on the verge of collapse under the ACA. But the AHCA would repeal the individual mandate, the key ACA provision for stabilizing the individual market risk pool. The AHCA offers in its place a continuous-coverage requirement that would impose a 30 percent premium surcharge for a year on individuals who failed to maintain continuous coverage. Paradoxically, this penalty may discourage a healthy uninsured person from applying after a coverage lapse, but not someone in ill health who really needs insurance — and who will cost the system more.
The main market-stabilization initiative in the new bill is $100 billion in grants to the states between 2018 and 2026. Whether the states will spend the funds wisely, and whether the billions will even be enough, is an open question. There remains a distinct possibility that the individual insurance market may yet collapse in many states.
In sum, the AHCA offers massive tax cuts for the wealthy, significant Medicaid cuts for the poor, a reshuffling of premium-assistance tax credits to offer more help to younger, higher-income individuals and less to the older and poorer — and it still may not save the individual insurance market. It’s a step back on every front. But what else would one expect from this Congress?
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