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Today in Obamacare: the GOP’s latest plan gives the wealthy extra help to buy insurance

money scale medicine

Republican leadership on Thursday released a 19-page outline of how the party would like to replace Obamacare — including one change that sounds wonky but is a really huge deal.

Both Obamacare and the Republican replacement plans provide tax credits to help make insurance more affordable. But while Obamacare’s credits are based on income, meaning poorer people get more help, the Republican plan would base them on age. The result would be regressive: Wealthy people would get more help buying insurance, while poor people would likely get less assistance.

The Obamacare tax credits are income-adjusted, which means that people who earn less get more help. Under Obamacare, people who earn less than 200 percent of the poverty line (about $24,120 for an individual or $49,200 for a family of four) get the most generous help. They would get enough money so that a midlevel plan would cost no more than 6.4 percent of their income. People who earn more than 400 percent of the poverty line ($48,240 for an individual or $98,400 for a family of four) get nothing at all. There is no cap on what they have to pay for insurance.

The Republican plan is very different. It includes age-adjusted tax credits. Older people get more help, and younger people get less help. The idea is that older people need more support because they get charged higher premiums. But income does not matter at all. Under the Republican plan, it wouldn’t matter if a 30-year-old earned $15,000 or $150,000 — he would get the exact same tax credit.

Margot Sanger-Katz at the Upshot has a great piece today about how this would work in practice:

That means that the biggest financial benefits would go to older Americans, like, say, Secretary of State Rex Tillerson. If he didn’t have a job in the Trump cabinet and access to government coverage, a 64-year-old multimillionaire like him would get the same amount of financial assistance as someone his age, living in poverty, and he would get substantially more money than a poor, young person.

The Republican proposal from this week doesn’t put actual numbers to how much people in different age categories would get, but a bill Health and Human Services Secretary Tom Price authored in 2015 does:

  • $900 for children under 18
  • $1,200 for those between 18 and 35
  • $2,100 for those between 36 and 50
  • $3,000 for those 51 and older

These credits wouldn’t go especially far toward purchasing comprehensive coverage. A few months ago, I looked at how much a plan for a 55-year-old would cost where I live, in Washington, DC. The cheapest option was $8,316 per year, which works out to $443 per month after the Price tax credit — a hefty fee for a poor, older enrollee.

The plans under Price’s proposal would almost certainly be cheaper because they wouldn’t have to cover so many benefits. A 55-year-old under the Price plan might find lower premiums for plans that cover fewer benefits. But the plans that do offer comprehensive benefits would likely prove financially out of reach for many.

Why switch to age-based tax credits?

This is a question I’ve put to about half a dozen conservative health care experts over the past few months, in formal interviews and less formal conversations. I kept hearing again and again that this wasn’t really a matter of principle — it’s just easier. While there are some policy arguments for age-based credits, what experts found most appealing was that the structure is just way simpler to administer.

“It’s not a huge principle issue with me,” says Jonathan Goodman, president of the Goodman Institute for Public Policy Research, who has worked with multiple Republican legislators on replacement plans. “It’s like Social Security: We should all be in this together. If there’s a social reason to encourage people to have health insurance, let’s not discriminate on the basis of income.”

With an income adjustment, he argues, “enrollment becomes burdensome and complicated.”

When you look at the new Republican outline, you see similar language. “The credit is not based on income,” it says. “This will help simplify the verification process and expand access for Americans who have been left behind by Obamacare.”

There is a second, more policy-focused motivation for not tethering the tax credit to income. Giving people more help when they earn less could be a work disincentive, nudging people to work a bit less. I’ve heard anecdotal stories about this from a few Obamacare enrollees I’ve interviewed, who decided to take slightly fewer hours so they could qualify for Medicaid, which offers more generous benefits than the marketplace.

More broadly, a handful of economic studies have found that more expansive, income-tethered health benefit programs do seem to create a small but significant work disincentive.

But this just hasn’t been the main motivation I’ve heard when I’ve asked those who support and worked on the Republican plans about why they preference age-adjusted tax credits. The thing Republicans seem to find especially appealing is that it would be a much simpler plan.

A former Obama administration official thinks embracing “Obamacare” was a mistake

On Thursday, I sat down with Andy Slavitt, a former acting administrator of the Centers for Medicare and Medicaid Services. In other words, he ran Obamacare under President Obama for two years.

In our discussion, which you can watch in full above, Andy offered some interesting insights into how individual citizens can make their voices heard. One moment I found especially interesting was Slavitt’s reflections on the president’s decision to embrace the term Obamacare, which he looks back on as a strategic mistake:

I understand why he did it, but I think it’s a really bad thing as a country when we have a law owned by one party.

President Obama told me this, in a group of people at the Roosevelt Room one day: that the thing you’re going to have to come to grips with now is that we’ve given a name to the nebulous concerns that everybody has about their health care. So if a doctor closes his office and moves his block down the road, that’s our fault. Even if this person has insurance through the employer.

If he’s going to call it Obamacare, we should have done a better job on selling people on why it matters in their lives. Why removing that lifetime cap mattered to them, why reducing the “doughnut hole” mattered to them.

What I’m writing:

Kliff’s Notes: Today’s top 3 health policy reads

“California bill calls for state-run health care system”: “Sen. Ricardo Lara, D-Bell Gardens, said he intends to introduce a bare-bones measure and begin a conversation with stakeholders about the best way to move forward. ‘This is an issue that we need to lead on now more than ever given the rhetoric we hear in Washington,’” Lara said. “‘Dismantling the Affordable Care Act has been part of Trump’s agenda all along. As California leaders, we will be responsible for the delivery of healthcare for millions of people.’” —Taryn Luna and Jim Miller, Sacramento Bee

“GOP leaders seek financing for Obamacare replacement”: “Leadership is staying quieter about how to pay for it, working behind the scenes to build consensus around a controversial but lucrative idea: Taxing employer-offered plans above a specified threshold, which could bring in billions of dollars to pay for the health benefits.” —Paige Winfield Cunningham, Washington Examiner

“Mike Lee to GOP: Repeal Obamacare now, don't fear the 'boogeyman’”: “As fissures break out over the details of a replacement plan, conservatives such as Lee are pushing back, arguing that the baseline should be to pass the same repeal bill that Republicans already passed in 2015, which was then vetoed by former President Obama. The 2015 bill would have repealed the mandates, taxes, and major spending in Obamacare, and also denied federal funds to abortion provider Planned Parenthood.” —Philip Klein, Washington Examiner