The process to repeal Obamacare was started before Trump even took office. In his first order he added his executive weight to the issue, so we can expect it to be a primary point of discussion in Congress.
So far the GOP has put forward an incomplete replacement plan. If nothing else, it outlines the GOP’s primary goals in health reform, and we can use it to extrapolate a few realistic expectations.
The Current Replacement Plan
Congress still has a way to go before truly repealing or replacing Obamacare. If you follow the Wealth Authority regularly, then you’ve seen a similar disclaimer: any predictions about the final state of reform are subject to substantial change. There will be a lot of negotiating before the bills are signed. That said, here is what the GOP has proposed so far:
- Obamacare tax structure will be maintained.
- Pre-existing conditions will still be protected by law.
- All state-level expansions to Medicaid and Medicare will be funded.
- At least 95% of federal funding for low-income insurance subsidies will remain.
- States that want to opt out of the current healthcare exchange can implement subsidized health savings accounts (HSAs) instead.
- Individuals can purchase policies from other state’s exchanges.
That’s actually a lot to cover. The biggest takeaway is that the tax hikes specifically tied to Obamacare will stay in place. That ensures that whatever final form replaces Obamacare, the 32 million Americans who rely on subsidies to have coverage will still have funding.
Now, that coverage may come in the form of an HSA instead of a standard policy, but the total amount of money assisting them with their healthcare won’t change. It also guarantees that newly added beneficiaries of Medicaid and Medicare will still be covered and funded.
Major Criticisms
This clearly incomplete proposal has drawn intense criticism from the left. Rather than chalk it up to standard obstructionism, we’ll address the major complaints in detail. The first, and most common, complaint is that 32 million Americans will lose health coverage if Obamacare is repealed.
This, of course, assumes that nothing at all will replace the program and everyone who is dependent on subsidized care will be completely abandoned. What is currently on paper puts this assessment to pasture. In an absolute worst-case scenario, 5 percent of those individuals could lose coverage. The more likely result would be a spike in overall coverage because more Americans would have access to cheaper insurance.
The second big criticism is that this plan is a tax break for the rich and a tax burden for the poor. In terms of the rich, it once again assumes that Obamacare will be repealed without replacement. Such a case would indeed represent a tax break for the wealthiest Americans, but again, the current discussion is to leave Obamacare-related taxes completely unchanged.
As for a tax burden on the poor and middle class, this is an obfuscation. If states adopt HSA programs, then the method of subsidizing health care changes. Instead of receiving tax credits, subsidized plans would receive tax-free savings credits.
Think of it this way. If the IRS changed how it operates so that it gives you cash for all of your deductions and then bills you fully for the taxes you owe, you are technically paying more in taxes, even though the net exchange is unchanged. In this same way, subsidized health care plans will have a net change of $0.
What You Can Expect Financially
If we avoid deliberate deception, the proposals thus far are pretty straightforward. Ultimately, the GOP wants to reduce regulation and increase options for health care. According to every economic model on the planet, increased options will boost buying power and ultimately make health insurance cheaper.
Making HSAs tax free expands on these principles, and even creates opportunities for financially savvy Americans to make their healthcare dollars work for them. As the plan stands, the average reduced cost in coverage will account for the 5 percent reduction in federal funding, freeing that money for better use. In the meantime, it’s a legitimate approach to reverse the pricing trends that were set in motion by Obamacare.
Trump has promised tax reform, but it is less likely to be implemented through healthcare reform. Separate tax breaks may exist in the future, but it is still very likely that the GOP will concede this point to the left to expedite the process and get rid of Obamacare sooner rather than later.
Regards,
Ethan Warrick
Editor
Wealth Authority
