How the New US Tax Plan Will Affect Health Care
The new Republican tax bill, which the House passed this afternoon and the Senate is expected to approve tonight, is complex, but what it will mean for health in the United States is simple: less.
It will mean less health insurance for individuals; less coverage for elderly and poor Americans; less revenue for doctors, hospitals, and myriad health care businesses; and, quite possibly, a less-healthy, less-productive workforce.
The tax bill will be the most important health care legislation enacted since the Affordable Care Act (ACA) in 2010. The law’s two major health-related aspects are the elimination of the penalties paid by people who fail to have health insurance as required by the so-called individual mandate, and the bill’s overall impact on the federal deficit — which will increase by an estimated $1.45 trillion after allowing for predicted economic growth.
According to the Congressional Budget Office (CBO), the repeal of the individual mandate penalties could result in as many as 13 million fewer Americans having health insurance. About 5 million are projected to be people who previously bought health insurance as individuals either within or outside the ACA’s marketplaces. Some will choose not to buy insurance because the penalty has disappeared. Others, especially higher-income individuals who don’t qualify for subsidies under the ACA, will drop insurance because of increases in average premiums predicted by the CBO. These premium increases will occur because, with the repeal of the mandate, many young, healthy people will exit markets, leaving a sicker, more costly insurance pool behind. Older individuals will be most affected. For example, a 60-year-old not receiving subsidies could face premium increases of $1,781, $1,469, $1,371, and $1,504, respectively, in Alaska, Arizona, Nevada, and Maine.
Increases in the federal deficit will prompt efforts to reduce federal spending. Because Medicare and Medicaid together accounted for about $1.25 trillion in federal spending in 2016, about 30% of the federal budget, they will be the major targets for deficit reduction. There is no guarantee that such efforts will succeed, but if they do, reforms could take a number of directions. For Medicare, this could include increasing the eligibility age from 65 to 67 or beyond (resulting in fewer covered elderly), caps on spending per beneficiary (possibly reducing covered benefits), or increases in cost-sharing that would lead to beneficiaries using fewer services. For Medicaid, reforms would likely lead similarly to fewer people covered, reduced benefits, and/or higher cost-sharing.
For conservatives who have long sought to reduce the generosity of entitlements in the United States, these changes would be a welcome way to reduce the size of government. There is no question that American health care can be reduced through carefully planned and implemented reforms in our delivery system. Precipitous cuts, however, could be damaging.