A draft bill to repeal and replace Obamacare has been leaked to the press. According to “The Hill”:
The bill would eliminate subsidies for people to obtain coverage, and federal funds for states to expand Medicaid would be phased out in 2020. The mandate for people to buy insurance would also be killed.
Peter Sullivan, “Leaked ObamaCare bill outlines GOP plan“, The Hill, 24 February 2017.
That’s the “repeal” part. According to “The Hill”, here is the gist of the replace part:
The plan calls for a tax credit, which would increase based on a person’s age, to help recipients afford insurance. The credit would be between $2,000 and $4,000. ….
In contrast to ObamaCare, the credits are not based on income, which Democrats argue means not enough help is given to low-income people to be able to afford coverage. Republicans say income-based credits discourage work.
The tax credits are per year, not per month, and they are flat, increasing only with age. (Note also, that tax credits are useless to the unemployed, or the very poor, who have little or no income tax to pay.) As an alternative to the individual mandate, the plan allows insurance companies to charge applicants an additional 30% on premiums if they wait until they are sick to sign up.
The plan will be paid in part by taxing the most generous employer-sponsored health insurance plans. Currently those plans are completely tax exempt, deductible from the income of both the employer and the employee. Ending this tax exemption is controversial among Republicans, many of whom regard it as imposition of a new tax.
Paul Krugman also received a copy of this draft bill. As you can imagine, nothing in it pleased him. He sees the work of Paul Ryan (the presumed author of the plan) as “basically a sick joke: flat tax credits, unrelated to income, that could be applied to the purchase of insurance”.
These credits would be obviously inadequate for the lower- and even middle-income families that gained coverage under Obamacare, so it would cause a huge surge in the number of uninsured. Meanwhile, the affluent would receive a nice windfall. ….
Suppose you want to make insurance available to people with pre-existing conditions. You can’t just forbid insurance companies to discriminate based on medical history; if you do that, healthy people won’t sign up until they get sick. So you have to mandate the purchase of insurance; and you have to provide subsidies to lower-income families so that they can afford the policies. The end result of this logic is … Obamacare.
And one more thing: Insurance policies must meet a minimum standard. Otherwise, healthy people will buy cheap policies with paper-thin coverage and huge deductibles, which is basically the same as not buying insurance at all. ….
So why do Republicans hate Obamacare so much? It’s not because they have better ideas; as we’ve seen over the past few weeks, they’re coming up empty-handed on the “replace” part of “repeal and replace.” It’s not, I’m sorry to say, because they are deeply committed to Americans’ right to buy the insurance policy of their choice.
No, mainly they hate Obamacare for two reasons: It demonstrates that the government can make people’s lives better, and it’s paid for in large part with taxes on the wealthy. Their overriding goal is to make those taxes go away.
Paul Krugman, “Death and Tax Cuts”, New York Times, 24 February 2017 (gated paywall).
Tags: Paul Krugman