Here's how the GOP's new health care bill hits poor people the hardest
Congressional Republicans have cobbled together a replacement plan for the Affordable Care Act and President Donald Trump wants the American people to review it. "Our wonderful new health care bill is now out for review and negotiation," Trump tweeted on Tuesday.
But among health care and policy experts the reviews are already in, and critics agree this plan is two thumbs jammed directly into the eyes of poor people.
The basic outline of the reform could be summed up as follows: eliminate the Affordable Care Act's taxes on higher earners, as well as some of it's most important cost saving mechanisms, all while taking an axe to provisions designed to help poor and working-class people afford insurance.
The most notable example of this is the elimination of the Medicaid expansion going forward. Under the ACA, states could expand Medicaid to include anyone who earned up to 138% of the federal poverty line — $39,716 for a family of five in 2017— and the federal government would pick up 90% of the cost. But the new GOP plan eliminates those funds starting in 2020, promising to only help pay for people who would have been covered under the old baseline for Medicaid. Those who received coverage under the Medicaid expansion won't have it taken away — so long as they stay in the program.
That effectively kills the ACA's Medicaid expansion. If the bill were to pass, anyone between 100% and 138% of the federal poverty line would not be eligible for Medicaid unless they enrolled prior to 2020. For those who fall in that window and enrolled before that date, they can only maintain their coverage if they stay on Medicaid. That means if they get a job with employer-sponsored health care or a slight pay bump, but then lose that job later, they will lose their Medicaid eligibility unless they fall beneath 100% of the federal poverty line.
Jocelyn Guyer, the managing director at the consulting firm Manatt Health, told CNN that as many as half of Medicaid enrollees have a gap in coverage each year. Loren Adler, an associate director of Schaeffer Initiative for Innovation in Health Policy, a partnership between several major health care and public policy think tanks, estimated on Twitter that the changes in Medicaid would lead to more than 5 million people losing their coverage.
The other big way the bill hurts low-income people is by drastically reducing the amount of subsidies for lower earners who shop for health care in the individual marketplace.
Under the ACA, people who did not receive health insurance through their employer or through Medicaid had to shop for individual insurance on state-based exchanges. Those people were given a subsidy to help them afford that insurance based on what percentage of their income would have to go to health care costs.
Because the subsidies were based on the cost of your health care plan relative to your income they were tailored to make sure that the poorest people with the highest health care costs got the most subsidies.
The GOP plan scraps that whole system and replaces it with a schedule of tax credits doled out based on a person's age and family size. It does still take income into account, but only at the top end of the income scale with the size of the credit tapering off for people making more than $75,000 ($150,000 for a couple). Because that tax credit does not adjust for what portion of your income is spent on health care costs, the net effect is to shift money away from lower income earners with high costs to higher income earners who spend less of their money on health care.
The total amount of money being allocated for those tax credits is potentially lower than the amount spent on subsidies under the ACA.
The new plan is also likely to make health care more expensive for those shopping on the individual market. Under the ACA, people were incentivized to buy insurance using a tax penalty infamously known as the individual mandate. If someone did not have insurance for a significant portion of the year they would have to pay a hefty fine come tax season.
The idea behind the mandate was to get healthy people who might risk not having insurance into the marketplace. By adding more healthy people to the risk pool, the cost of insurance would go down for everyone.
Though Republicans have long derided the individual mandate, their new plan has a very similar mechanism in it, but one that is likely to be less effective.
Under their plan, insurers can charge people as much as 30% more for a health care plan if they have had a lapse in coverage of more than two months. That extra 30%, just like the individual mandate, is essentially a penalty for not having insurance. But unlike the individual mandate, this new penalty is based on the cost of your health insurance plan. As Vox's Ezra Klein pointed out, that means for people with expensive plans who go without coverage — usually older and sicker people — the 30% penalty will be considerable, maybe even more than the individual mandate. But for younger healthier people who have cheaper plans, the 30% premium will be lower, giving them less incentive to get insurance and enter the risk pool.
The result is more expensive plans for everyone in the marketplace, which will hit the lowest-earners the hardest, since they will be purchasing those plans with less generous subsidies.
In addition to less Medicaid and more expensive plans with less federal support, the GOP plan also allows insurance companies to offer less generous of plans to sick Americans, and lets insurance companies charge older Americans more, both of which are likely to hit poor Americans the hardest as quality plans become less affordable.
Top income earners, on the other hand, will enjoy a hefty tax cut, saving the top 0.1% of earners almost $200,000 per year according to some estimates. With that kind of spare change, I'll bet you can get a pretty great health care plan.