While the CBO and outside healthcare analysts have been in overdrive commenting on the new GOP health plan, it appears that some key points have been lost in the noise. Whether on Medicaid, total enrollment, or tax credits, it seems that many analysts overlook the large-scale implications of the bill. As written, the AHCA has the potential to be transformative – it would retain the goal of universal coverage, while shifting tax credits toward universal high-deductible insurance. If fully implemented, the AHCA could actually lead to gains in coverage – but the US healthcare market would transform toward high-deductible catastrophic coverage.
TrumpCare Key Changes:
- Covered Benefits: The AHCA does not change the essential benefits list, but Secretary Price is interested in reducing essential benefits to lower costs.
- Tax Credits: Tax credits will be less generous, but will cover the entire population, potentially leading to a shift toward catastrophic plans.
- Medicaid: The Medicaid expansion ends after 2019, but tax credits will be available to all lower and middle-income Americans.
- Employer Coverage: AHCA creates a strong incentive for employers to drop coverage, since most American workers will receive tax credits.
- Universality: AHCA provides tax credits to virtually all Americans without other coverage, cementing the goal of universal healthcare in the USA.
Universal Healthcare Now Possible
The only Americans excluded from the new AHCA tax credits are those already receiving healthcare from a government program (Medicare / Medicaid / VA) or from employer-based coverage.
TrumpCare offers $2k-4k per person depending on age, with $14k in tax credits per family. Most importantly, it enables insurance companies to claim tax credits on behalf of enrollees, enabling them to offer cheap or free plans to the public.Read that again. Much has been written on winners and losers with the proposed tax credit changes, but why aren’t the pundits discussing this?
Analysts on both left and right fear many will lose insurance. They need to read more carefully:
“Not later than January 1, 2020, the Secretary … shall establish a program … for making payments to providers of eligible health insurance on behalf of tax payers eligible for the credit…” (page 106 of ACHA bill).
Consider what this means – insurance companies will be paid between $2k and $14k per year for each enrollment. The tax credits act as both a government subsidy and a market-based incentive for Insurers to offer zero-premium insurance plans. In a similar situation among for-profit universities, tuition essentially matches federal loan programs, creating a no-money-down product for students. With the AHCA, insurers will be strongly incentivized by the market to offer $0 premium plans to maximize their signups of younger, healthier individuals.
Goodbye Employer-based Healthcare
The era of employer-based healthcare began with Detroit auto-makers and an economy that needed tons of human workers. In the current economy, automation is taking away jobs, and the employer-based healthcare burden handicaps companies against foreign competition.
The AHCA removes employer penalties for not providing insurance. Employers will be quick to drop coverage as a much larger range of working-age Americans receive tax credits through the GOP changes. The average employer contribution to an employee’s healthcare is around $4800, with the employee kicking in around $1200. Both the employer and employee would benefit if the employer dropped healthcare coverage, raised wages, and let the employee take advantage of the tax credit.
Example 1: Individual
A tax deduction of $1500 under ACA, versus a tax credit of $3000 under ACHA for the median-age American worker.
Example 2: Family
For family coverage, a tax deduction value of roughly $4500 under ACA compared to an ACHA tax credit of $9000 for a family of four with adults in their 30s.
Liberals have been saying the most obvious thing – that all of Obamacare’s healthcare gains among the poor and elderly will be lost. But that would be the case under any move toward universal healthcare. Even Bernie Sanders’ mission was to scrap all current entitlements, and replace them with a small healthcare tax. Conservatives have also admonished TrumpCare, looking myopically at the concept of universal healthcare as liberal and therefore, malignant. But here, market-based incentives are getting young people involved, not the penalties of Obamacare – so that hate is misplaced. With both gridlock-happy liberals and conservatives hating the ACHA, there must be something quite good about it.
The GOP’s Obamacare replacement would move the USA toward universal catastrophic healthcare coverage, by enabling insurance companies to sign up individuals to $0 monthly premium plans with high deductibles and limited coverage.