The American Health Care Act

By Eleanor Wertman, MPH

REPUBLICANS' REPEAL AND REPLACE PLAN

On Monday, March 6th, House Republicans released a proposed bill, the American Health Care Act to dismantle key provisions of the Affordable Care Act, also called Obamacare. The Congressional Budget Office (CBO), a nonpartisan group that offers objective estimates of the potential budgetary effects of legislation, said that 24 million people would lose coverage by 2025 under the new plan. The bill's key provisions seem designed to benefit wealthy consumers while leaving low income individuals responsible for a higher proportion of their healthcare costs. 

As currently drafted, the bill would end federal funding for Medicaid expansion by 2020, change Medicaid's federal financing structure to a per capita payment cap, end federal funding for Planned Parenthood, end income-based subsidies for people buying insurance through the exchanges by 2020, and allow insurers to charge older adults five times more for insurance than younger adults (with an option for states to allow even higher rates). All of these provisions will reduce healthcare access and increase the burden of healthcare costs for low income people

Republicans have proposed using tax credits as a way to offset healthcare costs. For the majority of Americans, tax credit amounts will depend on people's age, with younger people receiving smaller credits than older people. Individuals making more than $75,000 and households making more than $150,000 will still receive age-based tax credits, but their credits will be incrementally reduced based on their income. An initial analysis of the tax credit plan by the nonpartisan Henry J. Kaiser Family Foundation estimates this arrangement will generally reduce the value of tax credits for older and lower-income people, as well as people who live in areas with high premium costs. For example, a 27 year old Durham County resident making $20,000 a year is eligible for an average of $4,900 in subsidies under the ACA but would receive a credit of only $2,000 under the American Health Care Act. A 40 year old Durham County resident with a $30,000 annual income would go from receiving a subsidy of $4,660 to a tax credit of $3,000. By contrast, 60 year old Durham County resident currently receiving no subsidies for healthcare would instead receive $1,500 a year in tax credits.

The Republican plan also offers people the option to contribute more pre-tax dollars to health savings accounts to cover anticipated healthcare expenses. However, health savings accounts work best for relatively healthy and wealthy people, who can afford to set aside money to save for their healthcare expenses.

Rich individuals are not the only ones who stand to benefit from this bill; insurance companies will also make more money. The ACA ended insurance companies' tax breaks for executive salaries over $500,000. However, the current version of this bill would reverse this tax, providing a windfall to insurance companies while low income people shoulder an increasing proportion of health care costs. 

In short, the proposed bill withdraws funding from healthcare for lower-income Americans, offers tax credits to people who do not need them, establishes a healthcare savings vehicle that caters to the wealthy, and offers a windfall to insurance companies in the form of tax breaks. 

WHAT DOES THE REST OF CONGRESS THINK?

This bill is extremely vulnerable. The Republicans' repeal and replace plan immediately attracted criticism from both sides of the aisle. Even before the bill was released, four Republican Senators wrote a letter refusing to vote for a bill without adequate protection for individuals covered by Medicaid expansion. Some Republicans have also resisted calls to end federal funding to Planned Parenthood. More conservative Republicans have critiqued the plan as "Obamacare Lite" and expressed concerns that the bill is unlikely to reduce healthcare costs. Democrats have slammed the bill for its benefits to the rich, its negative effects on low income people, and the lack of CBO oversight in its initial drafting.