The GOP’s leaked Obamacare replacement is terrible for the needy.

The GOP’s Leaked Obamacare Replacement Is Terrible for the Needy

The GOP’s Leaked Obamacare Replacement Is Terrible for the Needy

Moneybox
A blog about business and economics.
Feb. 24 2017 7:22 PM

The GOP’s Leaked Obamacare Replacement Is Terrible for the Needy

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This guy.

Chip Somodevilla/Getty Images

On Friday, a draft of the House Republicans' Obamacare replacement plan—which may or may not have broad support in the caucus—leaked to the press and it bodes horribly for America's needy. This is not a surprise, as the document sprung from the cold, granite hearts of the congressional GOP—members of which literally think that leaving more Americans uninsured would be a victory for liberty. But it's worth noting nonetheless.

Jordan Weissmann Jordan Weissmann

Jordan Weissmann is Slate’s senior business and economics correspondent.

To begin, the plan would roll back the Affordable Care Act's Medicaid expansion starting in 2020 and slap spending caps on the program. This is a noteworthy problem for low-income families, as Medicaid is a program specifically designed to provide them with insurance. Second, the plan would replace Obamacare's premium subsidies, which are more generous for poorer families, with a new system of subsidies (or refundable tax credits, whatever you want to call them) that will rise with a person's age. Though I'm sure these numbers are nowhere near final, they'd be worth the following:

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  • Under 30: $2,000
  • 30 to 40: $2,500
  • 40 to 50: $3,000
  • 50 to 60: $3,500
  • Over 60: $4,000

The bright side of this approach is that the subsidies would be available to everybody, whereas Obamacare's are only available to families earning less than 400 percent of the poverty line. The downside is that Bruce Springsteen is eligible for a bigger credit than a 27-year-old struggling to make ends meet as a home health aide. Republicans will probably argue that their plan will still make insurance affordable for lower-income Americans by eliminating Obamacare's insurance market regulations. But there are almost certainly going to be losers—a single 27-year-old making $20,000 would currently be eligible for about $2,500 in subsidies on average, according to the Kaiser Family Foundation's calculator, so they'd be looking at a 20 percent drop in assistance.

There is one major reason why you would structure premium subsidies by age instead of income. Since Obamacare's subsidies decrease with earnings, they theoretically discourage people from working or making more. A couple years ago, the Congressional Budget Office projected that this implicit tax would reduce the country's labor supply by 0.35 percent by 2025. Using an age-based scale fixes that problem.

But let's be serious. You're really going to structure a massive health insurance program to prioritize the old and wealthy over the young and poor in order to deal with a theoretical 0.35 percent decline in aggregate labor supply? That speaks to a fairly strange set of priorities.

It potentially gets worse, too. Obamacare's subsidies are designed to cap insurance premiums at a percentage of a family's income, so they grow with health care costs (they do start getting less generous if their total price exceeds a certain level of GDP). The GOP's subsidies, however, are set to increase each year by the CPI, plus 1 percent. That may well be lower than the rising cost of insurance, meaning the tax credits could become less useful over time. (Again, Republicans might argue that their formula will encourage insurers to keep premiums in check, but call me skeptical.)

Of course, one might argue that this proposed subsidy system is more a reflection of conservative philosophy than technocratic policy considerations. Which would figure. In Republican eyes, the neediest don't need the most help.