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Yet again, Republicans taking healthcare from poor to give tax breaks to rich: Information, explanation, and how to take action
Republicans are hard at work rewriting our tax laws, and they claim they’ve got some great things in store for us. But do you really trust what they tell you? Let’s pry open their plan and see what it really does to hard-working American families. We’ll tell you a spoiler up-front: We’ve already been here a few times. Remember the failed Republican health care bills that would have taken health care insurance away from the poor, sick, and elderly to fund tax cuts for the rich? Well, that’s exactly what the budget and tax reform effort does (and more).
CUTS TO MEDICARE AND MEDICAID:
Remarkably, the Republican tax plan starts with Medicare and Medicaid, which are major funding sources they want to exploit. You may remember the president promising emphatically and repeatedly that he would not cut these programs. We even compiled a 2-minute video to remind everyone. Well, that was then, and this is now. Under Trump's own proposed budget, Medicare would be cut by $47 billion over 10 years. Medicaid would be cut by $1 trillion. Additional cuts to Social Security would be possible. The House and Senate plans are even more brutal on Medicare ($487 billion and $473 billion) and are similarly heartless with regard to Medicaid. Further unspecified cuts totaling up to $1 trillion could be made to these programs. These cuts are nicely summarized by the Center on Budget and Policy Priorities here. But that's not all. The AARP reports that the House budget has instructions for raising the Medicare eligibility age from 65 to 67 and turning the program essentially into a voucher system. (A voucher would be like a small refund of all the money you've paid in over your lifetime, so that you can go out and buy your own healthcare insurance on the private market. Good luck with that!)
REPEAL OF THE INDIVIDUAL MANDATE:
Senate Republicans announced Tuesday (Nov 14) that they want to repeal the health insurance individual mandate under their tax reform bill. Sounds good, doesn't it! Under the ACA, you have to pay a penalty to the government if you do not carry health insurance. Experts all agree that an individual mandate is necessary to get healthy people to pay into the system (by buying insurance) so that funding is available to pay the claims of unhealthy people. This is what keeps insurance rates from skyrocketing. It may seem unfair, but remember we all eventually get sick and die. Ideally, we are all both on the giving end and (eventually) on the receiving end of this equation. It is actually unfair for people to game the system by not contributing to it when they're healthy and then exploiting it when they're sick. The individual mandate prevents this unfair practice and pumps needed revenue into the system from those who insist on exploiting it.
What would happen if the individual mandate were repealed? According to the CBO, millions of healthy people would decide not to buy insurance, and that would cause premiums to be about 10% higher for most years, for the rest of us who do buy insurance. As a result, many millions more would be priced out of the market A total of 13 million Americans would lose coverage, including 5 million from the individual marketplace ("Obamacare"), 5 million from Medicaid, and the remainder from employer-sponsored group insurance.
Who would be priced out of the market? The primary impact would be on those carrying employer-sponsored insurance and those in the individual marketplace who do not receive premium subsidies (because their income does not fall between 100% and 400% of the Federal Poverty Level -- $12,000 to $48,000 for an individual). However, those who do receive premium subsidies (about 8 in 10 Americans in the individual market) are shielded from premium increases and would not be forced to drop coverage. The brunt of the impact would be felt by those 2 in 10 Americans above the $48,000 income level (individually), as well as those Americans who buy insurance through their employer. That's right: The GOP would be aiming these premium hikes squarely at the middle and upper income classes. High-income earners could easily afford these premium increases and would be richly compensated by tax savings elsewhere. However, the middle class would suffer.
It gets even worse: Remember all those people who would bail from the market simply because they don't think they "need" insurance enough to pay for it? One reason many of these people don't want to buy insurance is that they can get "free" healthcare at their local hospital emergency room, which can treat anything from a sore throat to a heart attack. Of course we all know that an ER is an extraordinarily expensive facility, but "free" is "free" to the medical freeloader. In the end, however, someone must pay.
According to a 2009 analysis by Milliman Inc., uninsured Americans only pay about 37% of their medical costs. Another 26% is paid by the taxpayer, charitable donations, and other sources. Hospitals are left holding the bag for the remaining 37%. So as not to lose money, they pass the loss along to all of their paying customers in the form of higher medical bills. Those bills are paid by insurance companies, which charge their subscribers higher premiums, plus a 25% overhead. In the end, those of us who buy insurance pay for 46% of the care of the uninsured through higher premiums, and those of us who pay taxes pick up another 8.2% of their care (via Disproportionate Share Hospital funding), for a total of over half of the original tab. Moreover, half of an ER bill is much greater than the entire cost of an office visit, had we simply paid for the "freeloader's" medical care in the first place.
In summary, those who pay taxes and buy insurance would suffer an unnecessary economic burden when people are allowed to consume medical services yet not participate in insurance pools: (1) We would end up paying for their medical costs anyway, in the form of higher tax burdens and insurance premiums. And (2) our insurance rates would become unnecessarily high when healthy people game the system and buy insurance only when it benefits them. This would price many millions of middle class Americans completely out of the health insurance market -- those who are on employer-sponsored plans or who are enrolled in the individual marketplace with incomes exceeding 400% of the Federal Poverty Level ($48,000 for an individual).
HOW THE RICH ARE DUPING US:
Health care, budgetary matters, and taxes are complicated and confusing. GOP Lawmakers (and the rich folks) who own them understand that. Just like unscrupulous telemarketers, they tell us what we want to hear, and we buy it. But let's see if their pitch on taxes, healthcare and the budget really makes sense:
First, why do Republicans want to end the individual mandate? It's specifically so that they can reduce the number of people who are insured through the individual marketplace, whether by allowing them to leave the market voluntarily or by pricing them out of the market involuntarily. All along, we have assumed this was an unintended consequence of Republican healthcare policy when, in fact, it has been their very goal. It doesn't even matter that it costs all of us more money. The reason they want to do this is to reduce government spending on subsidies. The fewer people who receive premium reduction subsidies, the greater the savings. The same is true of Medicaid spending. The more people who voluntarily leave the Medicaid rolls because of the repeal of the individual mandate, the less federal spending on the program. Those who have either employer sponsored plans or unsubsidized individual marketplace plans are simply collateral damage. By throwing 13 million people off their insurance, government spending would be reduced by $338 billion over 10 years, according to CBO estimates. That's approximately $1,000 for every man, woman, and child.
The nearly $2 trillion in cuts to Medicare and Medicaid, likewise, do not increase anyone's access to healthcare or improve their lives in any way. Much of this money represents lifetimes of contributions deducted from hundreds of millions of workers' paychecks, which were promised back to them in their senior years.
How does the GOP intend to use all of this money that will not go towards Americans' healthcare and retirement? One would think they might start paying down our staggering debt of about $20 trillion. Instead, they intend to use the savings to offset a whopping $1.5 trillion in tax cuts. According to Republicans, these tax cuts would come back to the government in the form of increased revenue from massive economic growth/expansion. This principle is called "trickle-down economics." It was invented by Reagan-era Republicans and implemented in the Reagan and George W. Bush Administrations. Both trickle-down experiments failed,only returning a small fraction of the cut in the form of increased revenue. The Reagan experiment was such a failure that both parties collaborated to partially reverse the 1981 tax cuts in 1982. Unlike the tax cuts of 1981 and 2001/2003, Trump's proposed tax cuts are not targeted towards consumers and would therefore fail even more spectacularly to return revenue. The proposed tax cuts would expand our national debt significantly. Our debt currently lies at $20 trillion, which is over $60,000 for every man, woman, and child in the US. We can't afford more debt.
Would this debt-exploding plan provide tax relief to the middle class? The short answer is "not so much." Among other things, "tax simplification" would mean the loss of deductions that are very important to many lower and middle income families, such as for medical expenses and state/local taxes. This would result in net tax increases for about 7% of taxpayers in 2018 and 24% in 2027. Most taxpayers, however, would see some savings in 2018 taxes (about $800 for those earning between $48,000 and $86,000 per year). Unfortunately those savings would be completely engulfed by spiraling insurance premiums from repeal of the individual mandate. By 2027, as the tax plan is fully implemented, tax savings for lower and middle income earners would mostly disappear as their tax deductions expire. Meanwhile healthcare insurance costs would continue to climb.
However, if you're a high income earner, you're in for a nice treat. The tax break for the top 1% (earning >$730,000) would be 2.4% of income in 2018 (a $37,100 bonus on average), increasing to 2.6% by 2027 (a $62,300 bonus). The tax break for the top tenth of 1% (earning >$3.5 million) would be 2.5% of income in 2018 (a $174,620 bonus), increasing to 3% by 2026 (a $320,640 bonus). Even better, the most important tax breaks (the ones carved out specifically for rich folks) would be permanent. Overall, almost 50% of the benefit of this tax plan would go to the wealthiest 1%, while the rest of America would get to split up the other half. And that's just for income tax. This tax bill would also eliminate taxes on capital gains for Wall Steet investors. And it would abolish estate and inheritance taxes, so that when Trump dies, his wife and children will save over a billion dollars.
In summary, these are the winners and losers:
[LOSE] Poor Americans (below 100% of the Federal Poverty Level, or $12,000 individually) who are on Medicaid would see dramatic cuts to the program, with unknown consequences. In exchange for losing their healthcare coverage or suffering diminished services, they would receive very little tax relief.
[LOSE] Poor Americans not on Medicaid would see huge premium hikes and would receive very little tax relief.
[BARELY WIN] Americans between 100% and 400% of the FPL, approx $12,000 - $48,000 individually) who buy their health insurance through the ACA marketplace would be insulated from premium increases, and they would receive small tax breaks of as much as a few hundred dollars initially. Eventually these tax breaks would diminish in size, perhaps paying for a pizza for the family every year. (Bon appetite!)
[LOSE] Americans between 100% and 400% of the FPL with employer-sponsored insurance would experience huge premium hikes that would more than consume any tax savings.
[MOSTLY LOSE]Middle class Americans earning more than 400% of the FPL would experience huge premium hikes. Tax savings might pay for a 10% premium increase initially, but the benefit would quickly fade while premiums would continue to climb, so that more would be lost in premiums than gained in tax cuts. Moreover, people at this income level would be paying for the "medical freeloaders" who are stiffing hospitals for emergency room visits.
[IT'S PAYDAY!] Upper income Americans would experience 10% higher insurance premiums, but they would be handsomely compensated by enormous tax cuts that would grow over time. Paying for people's emergency room visits would be a drag, but that would pale in comparison to the substantive income tax cuts, elimination of capital gains taxes, and especially elimination of estate and inheritance taxes.
[PROBABLY LOSE] Senior citizens may have to wait an additional 2 years to qualify for Medicare or may lose their benefits, instead receiving an annual check for pennies on the dollar for what they paid into the system. Whether their tax cuts will adequately compensate them for this loss depends on whether they are high income earners (most are not.) or have huge estates to pass along to their children.
(November 15, 2017) (updated Nov 16, 2017) (updated Nov 17, 2017)
PROGRESS OF THE BILL:
(From FactPower's Washington, DC source, Nov 16, updated)
- The House passed their version of the bill this afternoon. The vote was pretty much in the bag.
- The Senate is where we can apply real pressure, because over there things are a lot less solid.
- To recap what’s happening in the Senate at the moment:
The biggest story right now by far is Sen. Johnson’s “defection” yesterday. RonJohn came out against both the House and the Senate bills because they favor corporations over small business, and all of the allowances for pass-through entities (whose owners pay taxes on profits through the tax code for individuals).
Update Nov 17: Sen. Murkowski (R, AK) is a "NO," unless the Alexander-Murray market stabilization bill is passed first (which isn't likely).
Susan Collins and Bob Corker have also voiced concerns. Collins doesn’t want to see this bill touch health care and have tax increases on middle income families, and Corker doesn’t want to increase the deficit (something he’s said from day one of this process).
Senator McCain has also expressed reservations, saying he’d like to see the whole package before making a decision – signaling that this thing is far from over.
Jeff Flake has similar concerns to Bob Corker, and both of those guys have nothing to lose right now, so they’re the biggest wild cards.
Wednesday the Energy and Natural Resources Committee passed the portion of the tax bill that would allow oil and gas drilling in Alaska’s Arctic National Wildlife Refuge. This is a particular goal of Lisa Murkowski, which will be a big selling point for her, even if she finds other toxic parts of the bill.
The Senate won’t have a vote until after Thanksgiving. I assume they’re trying to wrap up the markup this week before they go on break so they can come back after the break and vote it straight onto the floor.