Essential Facts About the American Health Care Act (“Trump-Ryan”)

As the House prepares to vote on the American Health Care Act (HR 1628 “Trump-Ryan”), following are the essential facts about how the bill would change the Affordable Care Act (“ObamaCare”):

  • Background on US healthcare: About half of all Americans have employer-provided healthcare, which is heavily subsidized by the tax code through exclusion of health benefits from the income tax.  20% of Americans have Medicaid, the state-administered and jointly funded (federal-state) program for low-income Americans.  14% of Americans — people 65 and older and people receiving disability benefits — have Medicare, which is national health insurance (funded through general tax revenues, payroll taxes, premiums, and cost-sharing).  About 2%, including military families, and some veterans, low-income Americans and Indian Tribes, receive government-provided healthcare.
  • ObamaCare, enacted in 2010, lowered the number of uninsured by expanding Medicaid and providing subsidies for purchase of private health insurance for people up to 400% of poverty (about $90,000 for a family of four). ObamaCare also protects Americans from denial of coverage due to pre-existing conditions or lifetime benefit caps; allows children to remain on family coverage until age 26; caps premiums for older Americans; and requires non-grandfathered plans in the individual and small group markets to provide essential benefits.
  • ObamaCare subsidies were used by 12 million people in 2016, below CBO’s original estimate of 21 million, with some insurance exchanges hindered by insufficient insurers and rising premiums. Some analysts believe that markets have been negatively impacted by insufficient young people enrolling, and older, sicker people using subsidies rather than Medicaid, because 19 States opted out of the expansion.
  • The American Health Care Act (“Trump-Ryan”) would:
    • enact major tax cuts primarily benefiting high-income Americans;
    • phase-out the Medicaid expansion for low-income Americans;
    • impose new caps on the entire Medicaid program (states would get capped Medicaid payments based on the number of enrollees in various categories, instead of the current system that guarantees matching federal funds for covered services);
    • significantly reduce subsidies for private health insurance;
    • allow insurers to charge older Americans under 65 up to 5 times as much as young adults (although a stability fund would be created to moderate this effect); and
    • increase amounts that could be set aside in deductible Health Savings Accounts.
  • Tax cuts in Trump-Ryan will cost $883 billion (70% going to people earning over $200,000 and 46% to people earning over $1 million); and Medicaid will be cut $800 billion.
  • The two largest tax cuts would eliminate a 0.9% increase in payroll taxes for couples earning over $250,000; and a 3.8% surcharge on several types of investment income.
  • ObamaCare enacted healthcare protections that bar insurers from denying coverage due to pre-existing conditions or lifetime caps, and require insurers to cover children up to age 26 – enabling insurers to cover the costs of these consumer protections through employer and individual mandates to purchase coverage or pay a penalty. Trump-Ryan replaces the “mandates” with a “continuous coverage” requirement allowing insurers to impose 30% premium penalties for a lapse in insurance coverage.
  • ObamaCare provides income-related subsidies for the purchase of private health insurance and ties the subsidy amounts to actual insurance costs to limit out-of-pocket expenses. Trump-Ryan replaces the income-related subsidies with flat age-related tax credits of $2000 to $4000, unrelated to income or the actual area costs of health insurance. The Trump-Ryan credits would phase out for individuals earning over $75,000 and couples over $150,000.
  • ObamaCare subsidies cost $673 billion over 10 years; Trump-Ryan tax credits would cost $361 billion.
  • ObamaCare bars insurers from charging older Americans more than 3 times the premiums for younger adults. Trump-Ryan permits insurers to charge 5 times more.
  • The net impact of Trump-Ryan changes is estimated to increase the number of uninsured Americans by 14 million in 2018, due mostly to repeal of the mandates; rising to 24 million by 2026, in large part from cuts to Medicaid.
  • Trump-Ryan would roll back ObamaCare regulations requiring plans to offer essential benefits, allowing insurers to offer less comprehensive but less expensive
  • Obstacles facing Trump-Ryan in the House: conservatives want the Medicaid expansion repealed more quickly, and oppose the tax credits for purchase of insurance; and moderates are concerned about the Medicaid rollback and affordability of insurance under the new tax credits.
  • If the House passes a version of Trump-Ryan, it will move to the Senate where the legislation would be fast-tracked and protected from filibuster by the Budget Reconciliation process, which means that only 50 votes are required for passage. However, the Budget Reconciliation fast-track rules limit the legislation to “budgetary provisions” so, for example, provisions focusing on private health insurance — without impacting the federal budget — cannot be included.  (See our blog on the Senate’s Byrd Rule.)

Estimates are from the nonpartisan Congressional Budget Office, the nonpartisan Joint Committee on Taxation, the nonpartisan Tax Policy Center, and the nonpartisan Kaiser Family Foundation.

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