3 Big Winners in the GOP Health Care Plan – and 3 Big Losers
Policy + Politics

3 Big Winners in the GOP Health Care Plan – and 3 Big Losers

© Joshua Roberts / Reuters

President Trump and House Speaker Paul Ryan (R-WI) are promoting the Republican plan to replace the Affordable Care Act in the face of mounting opposition.

The plan -- which scraps most of the mandates and tax subsidies in the 2010 Affordable Care Act and replaces them with a new system of tax credits based on age and income -- has drawn sharp fire from conservatives who have dismissed it as “Obamacare lite” and from Democrats who warn that it would result in millions of Americans losing their health insurance.

Related: Conservatives Don’t Like What They See in the Obamacare Replacement Plan

The fate of the plan is highly uncertain at this point. Members of the Freedom Caucus, the Republican Study Group and other conservative factions could block passage in the House unless Trump and Ryan can somehow bring them to heel. And an alliance of arch-conservative and moderate Republicans in the Senate could torpedo the legislation if it makes it that far.

If the Republicans succeed in repealing and replacing a major federal health care program -- for the first time in history -- there will be numerous winners and losers in their wake. Paul B. Ginsburg, director of the Center for Health Policy at the Brookings Institution, said that generally speaking, wealthier, healthier and younger people would do well under the House GOP plan, while older, poorer and sicker people would be worse off.

“I think the people that lose the most are low income people in general, but particularly those who are older but under 65” and not eligible for Medicare, he said in an interview. “And I think that health care providers will have significant losses that line up with the losses of coverage by the low income people.”

Related: Obamacare Repeal Won’t Be Cheap, GOP Plan Could Cost $700 Billion

Here are the likely winners and losers in the Republican’s current health care plan:

1. Winners: Upper-middle income Americans.

Millions of people who made too much money to qualify for tax credit subsidies under Obamacare would qualify under the GOP plan, which is based more on age than income. Tax credits under the GOP plan would start at $2,000 a year for a person under the age of 30 and rise to a maximum of $4,000 for a person 60 or older. The benefit begins to phase out for individuals with incomes over $75,000 and married couples with incomes over $150,000.

More importantly, middle and upper income Americans would enjoy major tax relief because the Republicans intend to repeal Obamacare taxes that raised the rate on the federal payroll tax and on capital gains.

2. Winners: Young adults.

The GOP plan would be a boon for the nation’s Millennials, who no longer would be subject to the mandate that they purchase health insurance or pay a penalty. They would be free to either purchase cheaper insurance policies offering less coverage or buy nothing at all until they need it.

The individual mandate was necessary under Obamacare to bring younger, healthier people into the insurance pool to help offset the cost of older, sicker people. And insurance companies had no choice but to charge younger people rates fairly close to what they were charging older people.

But with the GOP plan, insurers could boost their premiums on older Americans to as much as five times what they charge younger people – a move that could have the effect of bringing down Millennials’ premiums and copayments.

3. Winners: States that shunned expanded Medicaid coverage.

A 2015 Supreme Court ruling allowed states to decide whether to take advantage of expanded Medicaid for the poor under Obamacare, and many red states rejected the offer to signal their opposition to the Affordable Care Act. But lawmakers from those states have long complained of the inequity of the federal government picking up 90 percent of the cost of the additional coverage in the states that accepted the plan while the other states received nothing.

Related: Fiscal Cost of House GOP Obamacare Replacement Remains a Mystery

For those 19 states that did not expand Medicaid, the new House GOP bill would provide $10 billion spread over five years. States could use that money to subsidize hospitals and other providers that treat poor patients.

1. Losers: The insurance industry.

Insurers would celebrate the repeal of some of the Obamacare taxes that have added to their operating costs. That includes a two to three percent tax on health care premiums. But they would continue to be saddled with mandates and rules that have constrained their profitability.

Those mandates include a requirement that they insure people with pre-existing conditions; a ban on one-year or lifetime limits on benefits; a requirement that their plans cover 10 essential categories of benefits; and a cap on how much customers can be asked to pay for coverage through deductibles and co-payments. Moreover, with fewer people able to purchase health insurance with diminished tax credit supports under the GOP plan, the individual health care market will become more unstable, likely resulting in more major insurers pulling out of the market.

2. Losers: Low income Americans.

The existing law is designed to help low income people the most, by limiting the availability of tax credit subsidies to people with income levels between 138 percent and 400 percent of the federal poverty levels. That means that only Americans with annual incomes of between $12,070 and $48,284 a year currently qualify for Obamacare tax subsidies. And their premiums for more modest health insurance policies and out of pocket costs are capped at roughly 10 percent of their annual income, to make the coverage affordable.

Related: GOP Obamacare Replacement Plan Has Major Gaps in Cost and Coverage

All of that would change under the House GOP law, because the tax credits would no longer be tied to income but to a person’s age, with the tax credits highest for older Americans, even those with substantial incomes. 

The proposed legislation would effectively slash subsidies that currently help many low-income people buy health insurance. And it would not take into account that health insurance costs vary by region of the country. According to a Kaiser Family Foundation calculation, a typical 60-year-old person in Nebraska who currently qualifies for a $18,470 subsidy to help purchase insurance coverage, with additional subsidies to cover out of pocket costs, would receive a subsidy of only $4,000, with no additional assistance, under the GOP plan.

3. Losers: Medicaid beneficiaries.

Currently, 31 states and the District of Columbia have signed up for an expanded Medicaid program under Obamacare in which the federal government pays about 90 percent of the bill for health care coverage to roughly 10 million low income adults who previously didn’t qualify for the program. Ryan and other conservatives have long attempted to rescind the program and cut back on Medicaid spending more generally, in the face of resistance from some Republican as well as Democratic governors.

The GOP replacement plan would eliminate Medicaid expansion by 2020.  States could continue to provide coverage if they choose, but they would receive far less federal assistance to do so. Moreover, Congress would also convert traditional Medicaid into fixed  per capita payment to the states. Those steps taken together would almost certainly slash enrollments in Medicaid, which currently total about 70 million, and reduce the benefit level over time.

Edwin Park, vice president for health policy at the Center for Budget and Policy Priorities, recently issued an updated analysis of the plan’s proposed changes to the Medicaid program and determined that the American Health Care Act would cost states $370 billion in federal aid over ten years.