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  March 19, 2017

Wealthiest U.S. Households Save Big Under GOP Health Care Bill

PERI's Peter Arno says the elderly, disabled, and the poor would be hardest hit by the repeals of Medicaid expansion and taxes on the rich that fund Medicare
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Dr. Peter Arno is an economist and Senior Fellow and Director of Health Policy Research at the Political Economy Research Institute at the University of Massachusetts-Amherst and a Senior Fellow at the National Academy of Social Insurance.


SHARMINI PERIES: It's The Real News Network. I'm Sharmini Peries coming to you from Baltimore.

The Republican American Healthcare Act, which is supposed to replace the Affordable Healthcare Act, barely passed the House Budget Committee on Thursday. The vote was 19 to 17 in favor with three Republicans defecting. Had one more Republican voted against it, it would have died in committee. Part of the reason for the growing Republican opposition to the bill is that earlier this week the non-partisan Congressional Budget Office estimated that 26 million Americans would lose their insurance coverage under the Republican bill over the next 10 years.

Joining us now to take a closer look at the Republican health plan is Peter Arno. Peter is Senior Fellow and Director of Health Policy Research of the Political Economy Research Institute at the University of Massachusetts Amherst.

Thanks so much for joining us Peter.

PETER ARNO: Thanks, a pleasure to be here.

SHARMINI PERIES: So, Peter it looks like more and more Republicans are defecting from the Trump-Ryan Healthcare Plan. Some because it is not conservative enough, but most republicans who object to this say that it is because many Americans would lose their insurance coverage. So, then, what are the main driving factors behind the Republican plan that would cause people to lose their insurance?

PETER ARNO: Well, as you said in the opening, the CBO, the Congressional Budget Office, did come out with their projections: 24 million would lose their coverage over then years. But, next year alone it would lead to 14 million people losing their coverage. There are a few main reasons why this drop in coverage would take place under this plan, which I prefer to call Trumpcare, myself.

And the most important reason is the $880 billion cut to the Medicaid program. And I'm sure many of you know the Medicare program is essentially for the poor and the disabled, some of the most vulnerable folks in our population. And, with an $880 billion cut, repealing the expansion of Medicaid that took place under the Affordable Care Act, this would lead to a large-scale reduction in the Medicaid program. And there are some other reasons.

The other big one is that under the Affordable Care Act, under Obama, we had what's known as an individual mandate. Which was necessary to, essentially, get people enrolled and stay enrolled, because they were required to get health insurance. Without that they would pay a penalty upon filing their tax returns.

Now, the Republicans have railed against the mandate since the introduction of the Affordable Care Act, and they replaced it with another kind of penalty. But the penalty they proposed in this bill is to say that anyone who goes without continuous coverage for two months, or 63 days, would, upon reapplying for insurance, face a 30% surcharge on their premiums.

So, that would ultimately drive out healthier individuals from the market and who would be unwilling to pay for the surcharge, driving up premium costs for those that remain. Those are the essential factors, I think. There are other more smaller factors involved but those are the key pieces I think that's driving this bill to essentially unravel the gains made under the Affordable Care Act.

I'll make one last point on that, which is that before the Affordable Care Act, there were 50 million Americans without health insurance. In 2016 that number had dropped to about 27 million. And the CBO projects that by 2026 we'll be back to over 50 million to 52 million people without health insurance. So, it's a train wreck of a bill and I think even some of the more moderate Republicans have come to realize that they did not think it would be quite this bad.

SHARMINI PERIES: Now, President Trump and the Republican Party argue that their plan would increase competition between the insurance companies and that this would lower premiums and thus increase insurance affordability. Why does this argument not seem to work in this case according to most estimates? This is what many sources are saying. In theory, more competition should lower insurance, so why does it not work or calculate in this case?

PETER ARNO: Well, I've seen no evidence, frankly, in this bill that would demonstrate that there would be increasing competition among the insurers. That's point number one.

And the CBO and other independent estimates from some other analysts suggest that the costs are going to rise. They say, "Oh costs will stabilize," but, one of the main reasons that they say that the premiums and the costs to the individuals will stabilize is because they're taking away some of the guidance in the Affordable Care Act that require certain minimum standards that insurers must have. So, without those minimum standards what will happen is the insurance companies will offer poorer, less developed benefit plans. Skimpy plans that they are fine as long as you don't have to use them. But, it's like with most insurance. It's great when you don't have to use it.

So, an estimate came out yesterday, I think it was from the Centre for American Progress, David Cutler, an eminent health economist, showing state by state how much costs would go up. And if you want to talk about the impact on the elderly, as I said earlier, the biggest impact here is on the poor, the disabled, and the elderly. And with the elderly, or those nearing retirement age, particularly those in the later 50s, early 60s, prior to eligibility for Medicare, the cost would rise dramatically.

So, the CBO gives an example a 64-year-old with income under $26,500. Now under the Affordable Care Act, the premium for that person would be about $1700 per year. Under the Trumpcare bill that $1700 would rise to $14,600. And so, how will this affect everybody else? Well, a) that will be more than half of that person's income. So, obviously, it's going to lead to people in that age group, in that income bracket, to not be able to afford insurance, and become uninsured. So, you get sicker people leaving the insurance pool, the sicker older people leaving the pool, leaving healthier younger people. So, now they say, "That will drive the prices down." Sure, it drives the prices down by kicking out the old sick people, simple as that.

SHARMINI PERIES: Yeah. And so, then what does this proposal on the part of the Republicans do to Medicare and Medicaid altogether?

PETER ARNO: The Medicare is very interesting because I think it's not as well know. People think, "Oh, once you have Medicare you're fine. It has nothing to do with them." But it affects Medicare in a number of different ways. And one of the most cynical ways that I'm not sure people understand well enough is that it cuts two basic taxes that provide revenue to the Medicare program. These two taxes are surtaxes and they're only for the wealthy.

So, there's 0.9% surtax on those individuals with incomes above $200,000, or if they're a couple $250,000, and there's a second tax is a 3.8% tax on investment income; capital gains, dividends, interest, again for people only income above those thresholds, $200,000 for individual, $250,000 for a couple. And so, the Republicans, of course, wanted to take those taxes out and they're gone. They're not in the bill. So that reduces the revenue going into the Medicare fund and the CBO and others have projected that this will reduce the solvency of the Medicare trust fund by about least three years.

And if you want to look at it a different way: 0.4% of households with incomes over $1 million a year would reap 80% of the benefits of repealing these two taxes. Sorry to throw out all these numbers, but they're kind of interesting. The top .01% of income earning households, and those are folks earning over $3.4 million a year, would save, from this bill, $196,000 a year in tax cuts.

So, what you'll have, if you want to strip away a lot of the other things about it, is cutting coverage to 24 million people; poor people, people with disabilities, and giving tax breaks to the wealthy, the very wealthy. So, it hurts Medicare by reducing it's funding, reducing its fiscal solvency, and gives that money back to the wealthy. That's as simple as I can say it.

SHARMINI PERIES: All right, Peter, I thank you so much for joining us today and also for the insights you've given us. We look forward to following up with you very soon. Thank you so much.

PETER ARNO: Thank you. Bye, bye.

SHARMINI PERIES: And thank you for joining us here on The Real News Network.




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