Editorial: Sabotage Obamacare to finance more tax cuts for the rich? No thanks
As Republicans try to rush a tax bill through Congress, some lawmakers want to use the measure to kill a key piece of the Affordable Care Act. Doing so would free up more dollars for tax cuts, but in the most shortsighted and cynical way: by inducing fewer low- and moderate-income Americans to sign up for health insurance. Oh and yes, it would cause premiums to rise even faster for those who get their insurance coverage through Obamacare.
Naturally, President Trump is all for the idea.
The part of the Affordable Care Act that’s in the crosshairs is the so-called individual mandate, the requirement that virtually all adults obtain comprehensive insurance coverage. Congressional Republicans loathe it because many of their constituents loathe it — it compels them to buy a product they might not want to buy.
Yet the mandate plays an essential role in the law, prodding younger, healthier people to buy coverage in the same risk pool as older Americans and people with preexisting conditions and costly medical needs. Without the mandate, insurers serving the state Obamacare marketplaces — exchanges like Covered California that sell policies to people not covered by a large employer’s plan — would increasingly be left with high-risk, high-cost customers, driving premiums higher and higher.
Without the mandate, insurers serving the state Obamacare marketplaces would increasingly be left with high-risk, high-cost customers, driving premiums higher.
That’s why doctors, hospital executives and virtually everyone else in the healthcare industry have warned Congress not to single out the individual mandate for elimination.
But some lawmakers see ending the mandate through the tax bills currently moving through Congress as a double-your-pleasure kind of opportunity. It would wreak havoc on the state Obamacare exchanges (which the Trump administration is already doing its level best to do), giving new life to the efforts to replace Obamacare. And, in the view of Congress’ official bean-counters, it would help raise the money for more tax cuts.
The Congressional Budget Office and the Joint Committee on Taxation estimated last year that getting rid of the mandate would save the federal government more than $400 billion all told by 2026. That’s counterintuitive, given that raising premiums in the exchanges would only increase federal spending on subsidies for the lower- and moderate-income people who buy coverage there. It also would eliminate the tax penalties the Treasury collects from those who go uninsured.
Nevertheless, the congressional actuaries predicted that ending the mandate would cause droves of low-income Americans not to seek coverage, trimming Medicaid enrollments to the tune of almost $300 billion. Nearly $100 billion more would be saved, they project, on subsidies for low- and moderate-income people who could buy through the exchanges but go uninsured instead.
Meanwhile, the actuaries projected that federal tax revenue would go up $35 billion as employers dropped health coverage for about 2 million people and paid higher taxable wages. By 2026, they estimated, 15 million fewer people would have insurance coverage.
Granted, some of those people would be choosing not to carry insurance. Yet the fewer people who are insured, the harder it will be to make systemic changes in healthcare incentives and economics and rein in the treatment costs that are helping to drive up insurance premiums.
If the notion of reducing health coverage to fund tax cuts sounds familiar, that’s because the main Obamacare “repeal and replace” bills in the House and Senate would also have freed up billions of dollars for tax cuts by capping Medicaid spending at an artificially low level. In other words, they would have cut services to the poorest Americans to put more coins in the pockets of everyone else. The House bill also would have eliminated almost all the taxes used to fund the Affordable Care Act, resulting in lower tax bills for high-income Americans and several sectors of the healthcare industry.
The “repeal and replace” effort died in the Senate this year, leaving Republicans to look for ways to inflict death on Obamacare by 1,000 cuts and executive orders. The idea of killing the individual mandate through the tax-cut bill has been floating around Washington for several weeks, gaining a key advocate Monday when Trump threw his support behind it on Twitter. (Where else?) He urged lawmakers to kill the mandate and use the money for more tax cuts — specifically, to reduce the individual income tax rate on top earners from 39.6% to 35%, “w/all the rest going to middle income cuts.” Not that there would be anything left; judging by CBO estimates, the windfall for the highest-income taxpayers would eat up all the savings. And under this plan, like the last one, that windfall would come at the expense of lower-income Americans and their healthcare.
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