The Affordable Care Act’s (also known as Obamacare) days are numbered. Last week, both the Senate and House approved a budget resolution over the objections of the chamber’s Democrats ordering several congressional committees to draw up legislation repealing much of the law.
“Put this irresponsible and rushed repeal plan aside,” Democratic Minority Leader Sen. Charles E. Schumer said before the vote. “Work with us Democrats on a way to improve health care in America, not put chaos in place of affordable care.”
Good news, Chuck. The GOP’s replacement contains a lot that Democrats should be able to support.
Its series of age-based refundable tax credits for subsidizing individual health insurance, for example, represents a vast improvement over Obamacare’s complicated scheme of income-based subsidies.
For starters, the GOP alternative is simpler. Its tax credits are available to all Americans who purchase coverage on the individual market. And they go directly into consumers’ pockets rather than to insurance companies.
Obamacare’s insurance subsidies, by contrast, are only available to those who shop on the law’s exchanges. The nearly 7 million people who purchase individual coverage outside the exchanges get no help.
And those subsidies are paid to insurance companies. That’s needlessly complicated. Consumers can easily claim refundable credits on their tax returns. Obamacare’s subsidy regime required a complicated new regulatory infrastructure to determine whether a consumer is eligible for financial assistance — and then to send checks to insurance companies.
The eligibility rules for Obamacare’s subsidies are also needlessly complex. They’re tied to an individual’s income and the cost of a “benchmark” insurance plan — the second-lowest-priced silver policy sold on the exchanges. To claim a subsidy, an individual must estimate his earnings for the following year. If he guesses wrong, he must pay back the difference later. Millions of people have faced just this sort of record-keeping headache.
The Republican approach, on the other hand, pegs subsidies to age. The tax credit’s value grows as a patient gets older. That makes sense since insurance costs and health spending generally increase with age.
Rep. Tom Price, President-elect Trump’s nominee to lead the Department of Health and Human Services, in his “Empowering Patients First Act,” has called for this type of tax credit valued at $1,200 for those between 18 to 35 years of age, $2,100 for those ages 35 to 50, and $3,000 for those 50 and over.
Subsidizing health insurance with refundable tax credits shouldn’t be controversial. Liberal policy analysts — including Jason Furman, the Chairman of President Obama’s Council of Economic Advisers — have supported the policy in some form for years.
In other words, Democrats were for refundable tax credits before they were against them.
They now claim that tax credits at the levels proposed by Price are too meager to secure suitable coverage. After all, a $1,200 credit wouldn’t even cover one-third of the premium for the average bronze-level exchange plan for a 30-year-old in 2017.
Before Obamacare’s exchanges opened, however, low-cost plans were far easier to come by. In 2013, a 30-year-old Arizona man could purchase insurance for as little as $456 a year. Under Price’s proposal, he could claim his $1,200 credit, pay his premium, and sock away the remainder tax-free in a Health Savings Account for future health expenses.
Today’s sky-high premiums and deductibles are largely the results of Obamacare’s onerous regulations requiring insurers to accept all comers regardless of health status and preventing them from charging older customers more than three times what they charge younger ones.
Obamacare also stipulates that policies cover a slate of “essential health benefits,” regardless of whether a patient wants or needs them. This mandate alone has hiked premiums an average of 9 percent.
The GOP’s refundable tax credits would not cover the extravagant cost of an Obamacare-approved plan. But they don’t have to. Those costly policies won’t be around much longer. The less expensive ones available pre-Obamacare will no doubt take their place.
In other words, Schumer’s new catchphrase — that repealing Obamacare will “make America sick again” — is way off the mark. Repealing and replacing Obamacare with a plan that includes age-based tax credits will give Americans far more access to the affordable, quality coverage they deserve.