Why Trumpcare Will Only Make the Rich Richer

Mar 09, 2017

House Republicans this week unveiled their long-awaited bill replacing the Affordable Care Act, also known as Obamacare. Blandly titled the American Health Care Act—or as many have already taken to calling it, Trumpcare—the House GOP bill is effectively a concession that the right lacks a workable health care vision of its own: The program they offer would retain the fundamental structure of Obamacare, albeit with an ugly and regressive twist. While it would dramatically fail to achieve President Donald Trump’s stated goal of “insurance for everybody,” it would be strikingly successful in redistributing wealth to make the rich even richer.

Among Obamacare’s numerous provisions, the most well-known (and beneficial) were those that expanded coverage. Between the Medicaid expansion and subsidization of the private insurance industry (together with various insurance regulations and mandates), the law effectively reduced the number of uninsured by an estimated 20 million (albeit still leaving some 29 million uninsured as of 2015).

Trumpcare would take us in precisely in the opposite direction. For the private insurance market, the GOP plan follows Obamacare in subsidizing the purchase of health insurance plans for those who are otherwise uninsured. However, while Obamacare provides income-based premium subsidies that are tied to the price of the plan (such that those with lower income receive bigger subsidies), Trumpcare would provide flat subsidies—which it calls refundable tax credits—to all but high-income earners. Older recipients would receive twice the subsidies of younger recipients, but the subsidy otherwise wouldn’t be tied to the actual price of the plan, making insurance unaffordable for many.

Moreover, the GOP plan would also eliminate Obamacare’s cost-sharing subsidies that lower out-of-pocket medical costs for millions, leaving even more people with insurance that they can’t afford to use and worsening the epidemic of underinsurance. And whereas under Obamacare, the government penalizes you for being uninsured, under Trumpcare the penalty would instead be inflicted by insurers: Those who fail to maintain continuous coverage would have their premiums jacked up by 30%.

Finally, Obamacare’s penalty for large employers that fail to provide insurance would end. All of which is to say that the old, the sick, and those with low incomes lose out, while big businesses that don’t provide healthcare to their employees benefit.

Trumpcare would more radically restructure Medicaid. Indeed, as health care lawyer Timothy Jost puts it in the Health Affairs blog, “the bill is not so much an [Obamacare] repeal bill as it is an attempt to change dramatically the Medicaid program.” First, beginning in 2020, funding for Obamacare’s Medicaid expansion would start to dial down. Second, the bill would fundamentally change the way Medicaid is funded. Currently, the federal government provides a set percentage of state Medicaid spending; if Medicaid spending rises, so does the flow of federal dollars to the state, which is how it should be.

Under Trumpcare, by contrast, federal Medicaid spending would be provided on a per capita basis, and so funding will not match growing healthcare needs and spending. Together, these provisions would gradually push participants out of the program. Even though Republicans have made the case that per capita caps might drive state Medicaid “innovation,” as a recent article in the New England Journal of Medicine asserts, “the historical experience in the United States suggests per capita caps would simply shrink the program.”

With one hand the GOP law would thus squeeze the poor, while with the other hand it would gently massage the rich. For as Jost describes, the bill includes an extensive array of tax cuts for the benefit of various groups that need (or deserve) no help: medical device manufacturers, tanning salons, pharmaceutical companies, health insurance executives (whose salaries would again be tax-deductible over $500,000), and the very well-off more generally (through the repeal of Obamacare’s tax on unearned income for the wealthy).

The bill would not be complete, however, if it lacked a line aimed at restricting reproductive healthcare: It includes a provision that would cut funding for large nonprofit reproductive health care-oriented providers that also provide abortions (in other words, Planned Parenthood).

Trumpcare is thus a curious beast. On the one hand, despite Republicans’ endless rancor over Obamacare, this is essentially a proposal to worsen that law, and not a revolutionary right-wing rupture with the status quo. Many of Obamacare’s protections would remain and subsidies (albeit less adequate and more regressive) to purchase private health insurance would still be available. On the other hand, Trumpcare would effectively redistribute wealth to the top by providing tax cuts for the health care industry and the rich, while simultaneously imposing subsidy and Medicaid cuts for the middle class and poor. Until the legislation is scored by the Congressional Budget Office, we won’t know the full extent of harm, but it seems highly likely that many millions will lose coverage (some of whom will lose their lives as a result).

That Republicans were unable to produce a bill that was a least a bit more original is the result of various historical and political factors. First, passing the bill in the Senate through the reconciliation process, which evades a potential filibuster, limits what Republicans can change. It is probably for this reason that many Obamacare insurance reforms (for instance, protections for those with preexisting conditions or prohibitions on lifetime benefit caps) are retained in the bill. Second, there is the pesky problem that Obamacare is, at its core, very similar to a Republican health care reform bill introduced in the Senate in 1993.

Third, free-market healthcare dystopias are unpopular among the U.S. population, which holds strikingly left-wing views on health care. According to a Gallup poll from last year, “58% of U.S. adults favor the idea of replacing [Obamacare] … with a federally funded healthcare system that provides insurance for all Americans.” Republicans thus find themselves in an admittedly thorny predicament: What do you do when your country wants a single payer health care system, and the Democrats already cribbed your plan?

As a result, the GOP may come to find that it may have, through its health care muddling, inadvertently pushed the country toward a reform that it loathes far more than Obamacare. For if Obamacare is felled—whether in word or in deed—and when Trumpcare flounders or implodes, a universal health care system will be the last option remaining.

Adam Gaffney is a writer on health care politics and policy, instructor in medicine at Harvard Medical School, and a pulmonary and critical care physician.

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