Cue the hourglass, because the Affordable Care Act (ACA) is running on borrowed time.
Holding true to promises they made during the campaign, President Trump and Republicans unveiled their healthcare plan nearly two weeks ago as part of their effort to repeal and replace Obamacare, as the ACA is more famously called. As you might have rightly anticipated, Trumpcare, as the American Health Care Act has been dubbed, has its critics.
Trumpcare's critics grow in number
The plan, which you can read about in greater detail here, has a number of components that are concerning to Democrats on Capitol Hill and certain individuals and families. Arguably topping the list are the changes Republicans are looking to make to Medicaid, the program that covers the medical expenses of lower-income individuals and families.
Trumpcare aims to make two significant changes to Medicaid. First, it would end states' ability to choose to expand their Medicaid programs beginning on Jan. 1, 2020. Some 11 million people gained coverage in the 31 states that chose to take federal funds and expand their coverage up to 138% of the federal poverty level (as opposed to 100% of the federal poverty level as with traditional Medicaid). Second, Medicaid funds would be parsed out to states on a per-capita basis. Combined, these two measures likely mean a reduction in Medicaid spending, which is important for a Congress that's looking to cut back on healthcare expenditures.
On the flip side, Trumpcare may make healthcare costlier or flat-out unaffordable for lower-income Americans. Removing Medicaid expansion funding and cutting Medicaid spending to a per-capita basis probably means cutbacks at the state level.
Another concern is Trumpcare abandoning an income-based healthcare subsidy in favor of an age-based tax credit. People in their 60s would qualify for double the tax credit ($4,000) of people in their 20s ($2,000) based on the bill.
However, based on an analysis run by the Kaiser Family Foundation, seniors between the ages of 60 and 64 (people ages 65 and up qualify for Medicare) could wind up forking over thousands of extra dollars under Trumpcare. The difference is that Trumpcare's $4,000 tax credit is significantly lower than what seniors were receiving in subsidies under Obamacare.
What's more, a provision in Trumpcare would allow insurers to charge older adults up to five times as much in terms of monthly premium compared to younger adults. Under the ACA, this ratio stands at 3-to-1. This concession to insurers likely means people in their 60s bearing more of the burden of healthcare costs.
Big-league benefits for these three groups
However, not everyone will be sad to see Obamacare go and Trumpcare replace it. As is the case with nearly all legislation (assuming Trumpcare is unaltered from its current form), there are winners as well as losers. Three groups in particular look set for "big-league" benefits, to echo the words of President Trump.
1. Young, healthy adults
One clear beneficiary of Trumpcare should be younger, healthier adults in their 20s. Republicans deciding to keep the ACA provision that allows kids to stay on their parents' health plans until age 26 is definitely a positive – but there's more to it than that.
First, younger adults should have more choices when it comes to purchasing health insurance. Though insurers will still be bound by 10 essential minimum benefits, and they'll still be required to offer coverage to consumers with pre-existing conditions, insurers would presumably have more leeway to pass along costs in the form of higher copays and deductibles. For younger, healthier patients who don't visit the doctor much, this could result in lower premiums, which would probably fit their budgets better.
Just as intriguing, the aforementioned Kaiser Family Foundation analysis of a 27-year-old earning $40,000 annually found that Trumpcare would yield a juicier subsidy. Trumpcare's age-based tax credit would give this younger individual $2,000, compared to the average of $103 in subsidies under Obamacare.
And, of course, the repeal of the Shared Responsibility Payment, or SRP (the penalty for consumers who did not buy health insurance under Obamacare), could be a positive for younger adults who were often hit hard by this penalty.
2. Healthy middle-class individuals and families
Another prime beneficiary under Trumpcare is middle-class individuals and families who would have otherwise just missed out on subsidies under Obamacare.
The ACA was set up to pay out subsidies based on income. The Advanced Premium Tax Credit allowed people earning between 100% and 400% of the federal poverty level to receive a credit toward their monthly premiums. The 400% federal poverty level for an individual is $47,520 in 2017. But if you made, say, $50,000, you were on the outside looking in and forced to pay full premium prices.
According to HealthPocket, the average 30- and 40-year-old are paying $365 and $411, respectively, for an unsubsidized silver level plan in 2017. This means someone making $50,000 a year between the ages of 30 and 49 would have to spend between 8.8% and 9.9% of their annual income just to stay insured. Mind you, this doesn't cover any costs of care, such as copays, coinsurance, and deductibles.
The SRP was also quite painful if these middle-class individuals and families chose to remain uninsured. In 2016, the SRP was the greater of $695 or 2.5% of household modified adjusted gross income (MAGI). This would work to a $1,500 penalty for an individual with $50,000 in MAGI. Eliminating the SRP and providing a universal tax credit with exceptionally high phaseouts and exemptions ensures that a majority of middle-class individuals and families will benefit.
3. The wealthy
However, the biggest beneficiary of all appears to be wealthier individuals. An assessment made by the nonpartisan Joint Committee on Taxation found that people making $200,000 to $999,999 per year are in line for a $274 billion tax break over the coming decade. Another $157 billion will be saved by those earning $1 million or more.
These massive savings are coming from the repeal of two key laws that were passed with the ACA: the net investment income tax (NIIT) and the Medicare surtax.
The NIIT is a 3.8% tax on investment income for individuals and couples making more than $200,000 and $250,000, respectively, in a year. The Medicare surtax is a 0.9% added tax on employees only (usually the 2.9% Medicare tax is split right down the middle between employees and employers) who are earning in excess of $200,000 per year. Trumpcare gets rid of both of these taxes, which will undoubtedly favor the wealthy.
Obviously, Trumpcare is still quite fluid at this point. Opposition among Democrats and within the Republican Party may elicit change before it gets put to vote. Nonetheless, it's pretty safe to say at this point that the GOP's healthcare plan will create some clear winners.
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