GOP sticks two-pronged fork in #ACA: defund Medicare, cut taxes leaving no $$ for replacement [View all]

[CousinIT]

Repealing the Affordable Care Act (ACA) before a replacement plan can be enacted – even if the repeal is delayed – poses many extraordinary dangers. The Center for Health Policy published a detailed examination of these dangers last week, emphasizing that repealing the ACA before replacing it would cause significant disruption in the individual health insurance market and risk imploding the market altogether if no replacement emerges – all but ensuring that millions of Americans who purchase their own insurance (many of whom had insurance pre-ACA) will become uninsured.

But the effect on the individual marketplace isn’t the only consequence of repealing before replacing. Less discussed are the additional challenges created by the tax cuts that would be enacted if Congress models its ACA repeal on the legislation that was passed (but vetoed) early last year through the budget reconciliation process—a process that seems increasingly likely. These tax cuts would make it much more difficult to achieve a sustainable replacement plan that provides meaningful coverage without increasing deficits.

TAX CUTS WILL ACCELERATE THE EXHAUSTION OF MEDICARE’S TRUST FUND

Specifically, the reconciliation repeal bill from earlier this year eliminated $680 billion (over ten years) of taxes on high-income households and the health care industry (e.g., insurers, device manufactures, and drug companies). In addition to increasing deficits, by rescinding the 0.9% Hospital Insurance Trust Fund payroll tax on wages above $200,000, these tax cuts would also accelerate the exhaustion of Medicare’s Part A Trust Fund by four years, from 2028 to 2024.[1]

NOT ENOUGH MONEY LEFT FOR REPLACEMENT AFTER REPEALING THE ACA’S TAXES

Supposing the same repeal and delay bill is put forward, but with the repeal now set to take effect on January 1, 2019, it would net roughly $500 billion in deficit reduction over the ten-year budget window. Lawmakers would likely create an “ACA replacement fund” with the bill’s deficit reduction – a sort of piggybank that they could subsequently tap into to pay for a replacement plan. It’s unclear how well this approach adheres to Congressional rules, but it is similar to how the “Medicare Improvement Fund” or “SGR Transition Fund” banked savings from one bill to help pay for increased Medicare spending in the form of “doc fixes” down the line.

https://www.brookings.edu/blog/up-front/2016/12/19/paying-for-an-aca-replacement-becomes-near-impossible-if-the-laws-tax-increases-are-repealed/