Trump won an important political victory last week by
getting the House to pass a bill repealing and replacing ObamaCare. The victory showed that Trump and his
staffers are able to put together the political power and intelligence to get
the fractious Republican congressmen to agree on something that can get the
necessary number of votes. The bill is a
mess, but it is a political victory.
The reasonable, responsible thing for America to do is pass single-payer,
government-funded healthcare, Medicare for all, as Trump recognized by his comment
during his
dinner
with Australian Prime Minister Turnbull.
Trump probably personally favors this solution, but he can’t possibly
pursue it with the Republican Party he leads.
ObamaCare is bad. It
expands coverage, but it is a mishmash drafted by healthcare and insurance
industry lobbyists. It has turned out
not to be so profitable for health insurance companies, but they have the
option to drop out if it’s not profitable, which they are doing in droves. ObamaCare is somewhat responsible about
trying to provide funding for the new services, but it fails in the long
run. The
Congressional Budget
Office estimated that in 2016 federal subsidies for all types of health
insurance coverage for people under age 65 (i.e., excluding Medicare) amounted
to $660 billion, or 3.6% of GDP. The
amount would rise to $1.1 trillion by 2026.
For the ten year period from 2017 to 2026, the total federal subsidy for
medical care for people under 65 would be about $8.9 trillion. Of that subsidy, $3.8 trillion is for
Medicaid, and $3.6 trillion is for the tax deductions for healthcare insurance
provided by businesses.
The main point of these figures is that ObamaCare is not
self-funding; it results in a huge deficit funded either by higher taxes or
borrowing from the Chinese. Since higher
taxes seem unlikely, China is picking up the tab for much of the medical
treatment provided in the US. The
Chinese are buying lots of expensive homes and cars for American doctors.
It’s hard to tell from this
FactCheck.org
report, but it sounds like about 6 million people with pre-existing
conditions were covered by ObamaCare, who might otherwise have been denied
insurance. On the other hand,
Kaiser
and
HHS
say about 75 million people are enrolled in Medicaid; so, Medicaid is a much
bigger, more expensive program. I found
it strange that the Democratic arguments against the Trump repeal and replace
of ObamaCare were focused much more on pre-existing conditions than on Medicaid. In addition, it sounds as if the Trump bill
uses its Medicaid cuts to give a huge tax cut to millionaires. It seems to me that this is a much more
important issue.
These
articles
in Forbes and
MarketWatch
so far seem some of the clearest on the tax implications of the Medicaid
changes. It looks like the TrumpCare
bill eliminates a Medicare tax, not a Medicaid tax. The Medicare tax imposed by ObamaCare is a
3.8% tax on net investment income for people earning over $200,000 (single) or
$250,000 (married). Plus, ObamaCare
created a 0.9% Medicare tax on salary or income above those same amounts. Apparently TrumpCare would eliminate these
taxes, reducing taxes (and revenues) by about
$900
million over a decade, i.e., about $100 million per year. One advantage of putting these tax provisions
in the healthcare bill may be that it will help a tax bill pass under the reconciliation
process in the Senate, thus blocking a filibuster. It may also make tax cuts look smaller by
dividing them up between the healthcare and tax bills.
In any case, the Medicaid provisions, which are the basis
for including the tax cuts, seem much more important for the economy and for
the population at large than the pre-existing condition provisions. Nearly half of all births in the US are paid
for by Medicaid,
according
to Kaiser. Maybe the Democrats
thought the pre-existing condition issue would be more attractive to the
general public, but relatively few people will be affected by it. More than 6 million people may have
pre-existing conditions, but they probably have other options than ObamaCare,
and can get insurance through another program. The 75 million people on
Medicaid have fewer options.
