Shifting the Burden

On Sunday, Health and Human Services Secretary Tom Price appeared on Meet the Press, where he made an audacious promise. He said, “Nobody will be worse off financially” under the American Health Care Act (AHCA), the House health care bill that came out last week.

Sarah Kliff, who covers health care policy at Voxdid not mince words when appraising Price’s claim:

Let’s be clear: This is a lie. Price is making an impossible promise. Low-income Americans would receive significantly less help to purchase private coverage on the individual market, under the Republican plan in Congress right now. The plan would also end Medicaid expansion in two years, forcing many even lower-income Americans to lose health coverage.

There is nothing in the plan to suggest those low-income Americans would suddenly gain cheaper — or even comparable — coverage to make up for what they lose.

On Monday, the Congressional Budget Office (CBO) lent credance to Kliff’s assessment. The CBO projected that, in the short term, premiums would go up, followed by an eventual drop driven mainly by older Americans leaving a market that had become too expensive for them.

Of course, we didn’t need the CBO score to understand that Price was making an unkeepable promise. If we define “worse off financially” as “having to pay more money than you did before without a proportional increase in income,” then lots of people will be worse off. Every big policy change has winners and losers. Under Obamacare, young people paid more for insurance, while older Americans saw their premiums go down. Wealthier people paid more in taxes and got no assistance purchasing private insurance, while poorer Americans got subsidies to help buy insurance or were able to enroll into Medicaid. The AHCA reverses those tradeoffs. Younger people will have access to cheaper plans, while older people have to pay more. Wealthier people will have their taxes cut, and middle-class Americans who make between 400% and 600% of the poverty line will now get assistance buying health insurance, while many people making between 100% and 400% of the poverty line will see their assistance slashed. Enrollment into the Meidcaid expansion will be frozen after 2020. You don’t have to be a policy wonk to understand why Price’s claim fails to hold up. If the AHCA passes, lots of people will be worse off financially than they were under Obamacare.

It’s worthwhile to dwell on the issue of the subsidies people received under Obamacare vs. the tax credits they will receive under the AHCA. under Obamacare, people between 100%-400% of the poverty line were eligible to receive subsidies. These subsidies adjusted both based on income and on the price of health insurance plans within a person’s district. This way, an 40 year-old individual earning $30,000 in Alaska would receive more than a 40-year old earning $30,000 in Houston. Under the House bill, individuals earning $75,000 or less receive tax credits that adjust based on age. They do not take where a person lives into account how much a person makes or where they live. A 40 year-old making $30,000 in rural Alaska will get a $3,000 tax credit under the House bill. A 40 year-old making $70,000 in Houston will also receive a $3,000 tax credit.

In her article, Kliff highlights a useful tool, put out by the Kaiser Family Foundation, which compares the subsidies individuals receive under Obamacare to the tax credits they would receive under the House bill. The tool allows comparison along three factors: age, income, and location. In this scenario above, the 40-year old Houstonian earning $70,000 is better off financially than she was under Obamacare. She gets a $3,000 tax credit under the House bill, whereas she got nothing under Obamacare. The 40 year-old Alaskan making $30,000, though, is way worse off. With Obamacare, a 40 year-old making $30,000 living in Fairbanks North Star county in Alaska would earn an average subsidy of $11,520. Under the House bill, they would receive $3,000, a 74% difference.

I encourage you to go and play with the tool yourself. If you do, you will see plainly that the AHCA disadvantages many, especially the old and poor. Older people, even those making decent salaries, will often receive far less in tax credits than they did in subsidies. Those who are both old and poor will be devestated by this bill.

Here are three examples that illustrate ways in which this bill does not sufficiently replace the assistance many received under Obamacare.

Consider a 60 year-old making $40,000 in Pike County, Kentucky. Under Obamacare, that person would receive a $7,200 subsidy. Under the AHCA, they would get a $4,000 credit, a 43% difference.

There is the case of a 40 year-old making $30,000 in Apache County, Arizona. Under Obamacare, that person would receive a $6,540 subsidy to buy insurance. With the AHCA, they will get $3,000, a 54% difference.

Or, look at a 27 year-old making $20,000 living in Winnebago County, Wisconsin, one of the counties that swung narrowly for Trump in the 2016 election. With Obamacare, this person gets $3,320 in subsidies. With the House bill, they would get $2,000, a difference of 38%.

These examples were neither the most stark, nor particularly difficult to find. The pattern is clear: the less money a person makes, the less likely they are to get tax credits that match, or come close to the subsidies they received under Obamacare. The older a person is, the less likely they are to receive tax credits that match the subsidies.

Of course, there are some winners. Younger people who make decent salaries (say, $50,000) will get extra help buying insurance, a significant lightening of their loads. Any individual who makes between $48,000 and $75,000 will get help in the form of tax credits, where they received nothing before.

To many, this trade-off looks perverse, as it gives help to many people who could do without it, and cuts help to people who really do rely on it. It’s hard to know who this bill is really meant to serve, and it really only makes sense as an unburdening of the federal government. The AHCA shifts the load of insurance costs to consumers, especially to older poorer ones. It is not a return to the pre-Obamacare status quo, but it is a medium-sized step in that direction.


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