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Obamacare repeal is class warfare

The poor aren't losing just to the rich.

President Trump Speaks At The White House After The House Voted On Health Care Bill Photo by Mark Wilson/Getty Images

Many liberals view the Republican health care bill, which passed the House on Thursday, as a deliberate act of class warfare — eliminating health care subsidies for the neediest Americans in order to finance tax cuts for corporations and the highest earners.

But there is another way of seeing the bill: not as a transfer from the poor to the rich, but from the poor to the middle class. It is perhaps the best way to understand why the bill cleared the House, and why some version of it could become law.

President Donald Trump and his party have sold their efforts to repeal and replace Obamacare on multiple middle-class grounds. They complain its taxes crimp growth and kills jobs. They have dubbed the current law the “Unaffordable Care Act” and emphasized its effects on family medical costs. In explaining his crucial vote for the bill on Thursday, Rep. Peter Roskam (R-IL), cited several of his constituents’ experiences under the law.

Susan from Lake Zurich,” Roskam said in a press release, “was forced to downgrade her coverage after her insurance company increased the premiums for herself and her son to nearly $1,200 per month.”

In that telling, the bill’s big winners are the middle-class families who saw health costs increase and were shut out from government subsidies under the ACA.

And from a certain point of view, it’s correct.

The bill takes from the poor

There is no disputing that the GOP’s American Health Care Act cuts taxes that primarily benefit high earners, while reducing government health care assistance to the impoverished. This is how Democratic economic policy guru Gene Sperling has criticized the bill, and how several of my Vox colleagues have summarized it.

Avik Roy, a leading conservative health wonk, warned in a Forbes column on Thursday that the House bill “would price millions of lower-income Americans out of their coverage,” a result he warned could “damage the credibility of free-market health reforms for a generation.”

This analysis from the Tax Policy Center shows that shift vividly. (It’s from an early version of the bill, but experts think these broad effects aren’t likely to change much in revised estimates):

Tax Policy Center

That frame illustrates the difference between the policy environment today and the one that would exist if the AHCA passed. By its measure, the bill amounts to a reverse Robin Hood situation. The poor lose and the rich win.

The AHCA would repeal several taxes, including a surcharge on investment income, that mostly affect corporations and high earners. It would also reduce spending on Medicaid, which benefits the poor, and, on average, on health insurance subsidies for the lower-middle class. It gives new insurance subsidies to some upper-middle class Americans.

But those tax breaks for the rich aren’t randomly chosen — they’re specific tax increases Democrats used to help fund the benefits of the ACA when they passed it in 2010. Republicans opposed those increases at the time, and they’ve been fighting them ever since.

It’s unfair to call the AHCA a disguised effort to cut taxes on rich people; it’s more fair to call it the extension of a prolonged conservative effort to block or repeal those taxes, which, yes, mostly affect the rich.

Many AHCA supporters framed the vote on Thursday as an initial victory over those tax increases. Thomas J. Donohue, the president and CEO of the US Chamber of Commerce, said in a statement that the bill would “pull back on job killing tax hikes that have been stifling economic growth across the country.” That’s consistent with the Chamber’s past statements on the ACA and, in particular, its tax increases.

Some in the middle class will be better off if the AHCA becomes law

For many individual, middle-class Americans — those with preexisting conditions or chronic illnesses that require lifetime treatments — the changes to insurance regulations under the AHCA could prove financially devastating. But on a broader level, thinking of the country in big income brackets, the bill delivers wins for many in the middle class.

The AHCA continues to deliver government subsidies for Americans who buy health insurance on the individual marketplace, though for many people, those subsidies would be smaller. In some cases — for individuals earning between $50,000 and $75,000 a year — it delivers subsidies where Obamacare did not.

As the Congressional Budget Office explained in its first assessment of the bill — which, again, is unlikely to change much in the revised estimate due next week:

For many lower-income people, the new tax credits under the legislation would tend to be smaller than the premium tax credits under current law. In an illustrative example, CBO and JCT estimate that a 21-year-old with income at 175 percent of the FPL in 2026 would be eligible for a premium tax credit of about $3,400 under current law; the tax credit would fall to about $2,450 under the legislation (see Table 4). In addition, because cost-sharing subsidies would be eliminated under the legislation, lower-income people’s share of medical services paid in the form of deductibles and other cost sharing would increase. As a result, CBO and JCT estimate, fewer lower-income people would obtain coverage through the nongroup market under the legislation than under current law.

Conversely, the tax credits under the legislation would tend to be larger than current-law premium tax credits for many people with higher income—particularly for those with income above 400 percent of the FPL but below the income cap for a full credit, which is set by the legislation at $75,000 for a single tax filer and $150,000 for joint filers in 2020. For example, CBO and JCT estimate that a 21-year-old with income at 450 percent of the FPL in 2026 would be ineligible for a credit under current law but newly eligible for a tax credit of about $2,450 under the legislation. Lower out-of-pocket payments toward premiums would tend to increase enrollment in the nongroup market among higher-income people.

Back to rich people: Looking at the bill through the lens of a pre-2009 world, high earners aren’t benefitting from the AHCA’s tax cuts. They’re just returning to the rates they had before the ACA.

The poor, of course, aren’t going back to what they had before the ACA — they’re getting a worse deal. That’s because the AHCA doesn’t just phase out the expansion of Medicaid that Obamacare delivered. It cuts further, reducing future Medicaid benefits and allowing states to implement work requirements to qualify for health care if you’re poor.

“Relative to 2009, this is cutting the bottom to pay for the middle,” says Jason Furman, a former chair of the Council of Economic Advisers under President Obama, who has written extensively about the economic and health policy effects of Obamacare. “Relative to post-2010, this is cutting the bottom to pay for the rich.”

Helping the middle class is better politics than helping the poor

From a policy perspective, Furman says, “It is far more valid to think of this relative to current law” — by which he means, as a transfer from poor to rich. Politically, though, the poor-to-middle-class view helps explain some things.

If you listened to Trump and congressional leaders on Thursday, you heard a lot about how Obamacare is, effectively, dead — how its benefits aren’t actually helping middle-class Americans, but its tax increases are sticking around to haunt the economy.

Republicans say the AHCA would simply be sweeping away that carcass and starting fresh — with a big emphasis on the benefits it would bring to the middle class. Their arguments Thursday hardly mentioned the rich, or, really, the very poor.

The easiest way to maintain those arguments is by treating the tax changes in the AHCA not as a new cut for high earners, but the righting of a brief policymaking error.

That tactic may not prove persuasive enough to lead the bill through the Senate, where Republicans have been far more vocal with concerns over cuts in aid to the poor — but in the House, it was just enough.

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